The Director of Public Prosecutions (DPP) in Northern Ireland has decided to take no further action against the unnamed officer, who was arrested after a Royal Ulster Constabulary officer was shot in January.

He was hit in the chest when police chased the undercover soldier's car along the Crumlin Road to Carlisle Circus in north Belfast.

Assistant Chief Constable Bill Stewart appointed a senior detective to head an inquiry into the incident and he reported to the DPP earlier this year.

Alan White, a spokesman for the DPP in Northern Ireland, said they had now decided not to proceed because there was "insufficient evidence to provide a realistic prospect of conviction".

Tension was high

Carlisle Circus is situated in a volatile part of the city where the loyalist Shankill abuts the republican Cliftonville district.

It has never been made clear what the soldier was doing in the area at the time but tension was high in the city following a spate of tit-for-tat sectarian killings sparked by the murder of loyalist paramilitary leader Billy Wright.

A number of shots were fired, leaving the policeman badly wounded.

He has since made a partial recovery but his career in the force was ended as a result of his injuries.

A spokesman for the RUC Police Federation, Alan Burnside, told BBC News Online: "We are not happy, not so much that they are not going to prosecute, but that it happened at all.

'Must not happen again'

"It has happened before - the Army has killed a police officer before - but we hope it never happens again."

Mr Burnside said he understood officers became suspicious of the soldier's car but when they approached she was not sure whether they were real policemen and opened fire, believing her life was in danger.

He said he believed there was nothing to be gained from a prosecution and added: "We have shot innocent civilians on occasion so we know the sort of problems she faced."

Mr Burnside said: "Other soldiers might have been more cautious in those circumstances but she was slightly less cautious. But there was no evidence she was negligent."