Twelve people died and 23 were badly burned in the La Mon bombing
The bombing of the La Mon hotel, an escalating protest for political status by republican prisoners and doubts over a proposal by US businessman John De Lorean - historian Dr Eamon Phoenix examines government papers released after 30 years.
The year 1978 in Northern Ireland was marked by political stalemate as the United Unionist coalition insisted on a return to the old Stormont and the Labour secretary of state, pugnacious ex-miner Roy Mason, signalled a shift away from Sunningdale-type powersharing.
The SDLP and the Irish government suspected that Mason, like the Tory opposition under Mrs Thatcher, were promoting 'integration' by the back door.
The year was still young on the evening of Friday, 17 February, when three members of the IRA attached two massive firebombs to the security grilles of the La Mon House hotel near Belfast.
Roy Mason said the La Mon bombers may have "found sanctuary" in the Republic of Ireland
A warning came too late and a huge fireball engulfed the dining room where 400 people were attending a function.
Twelve died and 23 were horribly mutilated.
The atrocity unleashed a wave of revulsion throughout Ireland, though relations between Mason and Jack Lynch's Fianna Fail government were not improved by the secretary of state's claim that the bombers might have found sanctuary in the south.
The British were angry over Lynch's demand for an "ordered withdrawal" from the north and his hint at an amnesty for republican prisoners.
The La Mon bombing was followed by a determined military offensive against the IRA. In February, Gerry Adams was charged with IRA membership. He was cleared six months later.
In June 1978 the Provisionals ambushed an RUC patrol near Crossmaglen, killing one constable and kidnapping Constable William Turbitt.
In retaliation, loyalists kidnapped Fr Hugh Murphy, an RAF chaplain, from his home at Ahoghill.
The kidnappers said that they would return the priest in the same condition as the missing RUC man.
Following appeals from Protestant churchmen, including Rev Ian Paisley, Fr Murphy was released unharmed.
Constable Turbitt's dead body was later found in south Armagh.
During the year the republican 'dirty protest' in the H blocks against the abolition of special category status escalated.
Archbishop O'Fiaich made a high profile visit to the Maze in August and branded conditions there as 'inhuman'.
Rev Ian Paisley appealed for loyalists to release a kidnapped priest
The British government was, however, determined to stand firm.
Any concession, Mr Mason told Prime Minister Jim Callaghan, would push them down "the slippery slope towards political status". It was a view supported by all parties at Westminster.
As the campaign intensified, the IRA shot dead Albert Miles, deputy governor of the Maze at his north Belfast home in November.
1978 was the year that allegations of RUC ill-treatment of suspects at Castlereagh holding centre reached crisis point, fuelling a damning report by Amnesty International in June.
As a result, the government was forced to establish the Bennett Inquiry which confirmed maltreatment and forced London to introduce safeguards.
In November, a leaked military intelligence report saw no prospect of the ending of the the IRA campaign in the next five years but rejected the view that IRA members were "mindless hooligans drawn from the unemployed and unemployable".
Unemployment remained a major problem, running at 11.4% as against only 6.1% in the UK. This year saw the publication of a major fair employment report which showed that Catholics were under-represented in the manufacturing sector and public service.
A secret Stormont report described Belfast as "an ailing city", blighted by violence, poor housing and marked population decline, especially in loyalist areas.
In August, Mason announced that US businessman, John De Lorean was to establish a sports car plant in west Belfast, though doubts were expressed as to its viability.
The death toll from the Troubles was 81 with 755 shootings and 633 bombings.