* Londonderry builds tourist boom on hard-won peace
* UK City of Culture celebrations to end with Turner prize
* Community relations hit all time high as Belfast struggles
By Conor Humphries
LONDONDERRY, Oct 16 (Reuters) - While cars burned on thestreets of Belfast this summer in its worst year of rioting fora decade, Northern Ireland's second city of Londonderry wasfilled with tourists as its once bitterly divided populationcelebrated a stunning rejuvenation.
Some 40 years after Londonderry became the centre of the"Troubles" when British troops shot dead 13 people at a civilrights protest on what became known as Bloody Sunday, Catholicsand Protestants watched calmly as some of the city's mostentrenched taboos were broken.
The transformation offers a striking example for the Britishprovince of how sectarian enmities can be overcome and holdslessons in particular for Belfast, a city where entrencheddivisions have done much to undermine the progress made since a1998 peace deal intended to end the long years of violence.
"It would be hard to destabilise this city at this point,"said Willie Temple, a pro-British Protestant in Londonderry whobecame an activist to defend his community at the height of theunrest in the 1970s. "People have seen the benefits of peace."
There has been tension in the city since Protestant settlersarrived from England and Scotland in the 17th century, addingthe London prefix to the Gaelic name Derry as they consolidatedtheir hold on the north of the country.
Catholics have continued to use the name Derry to show theirresistance to British rule, but even that dispute has faded inrecent years and many Protestants now use Derry in casualconversation.
TIT FOR TAT
Efforts by Irish nationalists to fight what they saw asdiscrimination against Catholics and end rule from Londoncontributed to three decades of tit-for-tat killings as theBritish army struggled to control the city.
This summer, the army barracks that once struck fear intonationalists became the headquarters of Londonderry's year as UKCity of Culture, hosting an Irish dancing marathon.
The annual August parade to mark a Protestant victory in a17th century battle once sparked riots, but passed withouttrouble for the first time as tourists took pictures. Its piperslater opened a traditional Irish music festival.
"I don't think this could have happened even five yearsago," said John Lafferty, a retired supermarket worker walkingpast the scene of the Bloody Sunday shootings, now a touristattraction. "There is a different mindset now."
The city of 100,000 has received tens of millions of poundsof investment from the government and the European Union toredevelop the barracks, spruce up its squares and build a bridgeacross the river than separates the Catholic and Protestantcommunities.
Bookings at the city's hotels have risen 40 percent fromfive years ago and there are plans for two new hotels in thecity centre. More than 400,000 people visited in one week inAugust for the Irish musical festival, the Fleadh Cheoil.
"There's a feeling of confidence," said Aran Mcelenny, whoworks for a local estate agent. "It's just a completelydifferent place to what it was before."
The scenes in Londonderry have contrasted with Belfast'syear of riots, sparked by a decision to restrict the flying ofthe British flag from City Hall, which enraged young pro-BritishProtestants.
They rioted again at the time of traditional Protestantmarches in the summer, some of which were blocked byauthorities. Irish nationalists responded by staging their ownpitched battles with police.
When a similar situation gripped Londonderry in the late1990s, city businessmen stepped in to hold talks, building thefoundations of a cross-community infrastructure.
The groups have regular meetings about potential flashpoints and keep an emergency mobile phone list so leaders fromboth sides can hold instant talks when problems arise.
"The secret is direct dialogue, people talking rather thanorganisations talking," said Temple, the Protestant communityworker.
The situation in Belfast has deteriorated to the point wherea commission set up by the province's power-sharing governmentto regulate parades has become a major source of politicalantipathy, with unionists demanding it be scrapped.
"Belfast could learn from this city," said Michael Doherty,an important player in the inter-community talks from theCatholic side in Londonderry. "They haven't given themselves theopportunity to build trust."
But Londonderry has natural advantages over Belfast, whosemuch larger population of 280,000 is spread across a patchworkof Catholic and Protestant areas.
A census last year showed Belfast had a small Catholicmajority for the first time, heightening fears among Protestants that their political power is waning.
In Londonderry, by contrast, the Protestants have longaccepted their role as a minority of around 25 percent, whichactivists say has increased pressure on them to compromise.
But as ever in Northern Ireland, there is a complication. Asformer leaders of the nationalist Irish Republican Army haveincreased their cooperation with pro-British politicians, asmall minority of so called "dissident" militants has emerged,with the Londonderry region as a stronghold.
There have been several bomb threats against the police andthe organisers of the City of Culture, but the security forceshave succeeded in preventing any attacks.
"There is a severe threat in Northern Ireland," saidregional police chief Stephen Martin. "(But) this has been atremendous year for the city."
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