The Irish police have foiled a potentially large bomb attack by the Real IRA in Northern Ireland.

Armed Police south of the borer raided isolated premises just north of Dundalk in County Louth at 6.30pm on Saturday night.

The police discovered a bomb-making factory and arrested two men aged 23 and 52. A large bomb was near completion, and police believe the dissidents planning to bomb a civic landmark or institution in the North, this week.

Police found a small trailer with a triangular advertising billboard concealing two large gas cylinders that were a foot wide and six foot high.

The cylinders were modified and bolted to the floor. A large hole was found in each one to allow explosives to be inserted easily inside the cylinder.

The Irish police surveillance unit was monitoring the premises over the course of the last week. Police were also satisfied that dissidents were searching for a potential target in recent days.

The 23-year-old suspect is the son of a prominent dissident republican. The authorities believe this was the work of a group of dissidents that formed a splinter group after they fell out with the Real IRA commander, Michael McKevitt and his operational commander, Liam Campbell in Portlaoise prison last year.

Police believe that there are multiple splinter groups that are highly active and intent on causing maximum damage to the security services and the peace process in Northern Ireland.

Minister for Justice Dermot Ahern praised the police for smashing the terrorist bomb factory. Ahern said that dissident groups are intensifying their campaign, but the police services North and South were strengthening their resolve and working closely together to combat the dissident threat.

Ahem said that he expected the Independent Monitoring Commission to issue a report this week that would reinforce the message that the dissident threat was "severe."

The security services are on the highest state of alert since the Omagh atrocity in 1998. Ahern said the Real IRA threat "throwbacks to a dreadful time on this island which the vast majority of people have democratically put behind them."