By Maggie Taggart BBC Northern Ireland arts correspondent

There was a feeling of shock, of disbelief even, when the announcement came to the Imagine Belfast office that its bid in the Capital of Culture contest had failed.

A fax was delivered saying Belfast had not been shortlisted, despite having been heavily tipped by pundits and bookies over the last few months .

They had planned a breakfast party and insisted that they didn't mind if they won or lost, but in the event, few had an appetite for the croissants, and the champagne glasses waiting on trays behind the scenes, remained unfilled.

The newly arrived Minister for Culture, Angela Smith, had known in advance and broke the news to the chairman of the campaign, but she said she had not been able to influence the judging panel which rejected Belfast's bid.

'Pipe dream'

However, some are more cynical saying the Labour government could afford to ignore a Northern Ireland city's bid, because it doesn't need to canvas for votes in the province.

On the streets, the general opinion was that, although it would have been very nice for Belfast to have been selected, in reality it was considered a pipe dream.

People pointed to the continuing trouble in east Belfast, bomb alerts and van bombs, and the unstable political climate now that the assembly has been suspended.

Others, who had been critical in the past, maintained the bid was fundamentally flawed and never had a chance in the first place.

Divided city

They think it was ridiculous for Belfast to hold itself up as a potential Capital of Culture, when it patently has a problem even getting through a day without a bomb scare.

There was also a whisper that the judges had a problem with a city which is obviously so divided.

Although one of the aims of the bid was to break down both the physical and psychological barriers between communities, the judges may have preferred to focus on cities which do not have those huge problems to overcome .

The singer Brian Kennedy, who was at the bid party, said he was very disappointed but that Belfast was used to knocks and would overcome this one.

Financial relief

He said he could already detect a mood of recovery among the disappointed arts community.

Politicians and civil servants are saying they want to act quickly to sustain the goodwill and optimism which was beginning to develop, albeit a little late in the day.

Sceptical ratepayers in Belfast, on the other hand, may be heaving a sigh of relief that their city council will not be asking them to stump up many millions of pounds for the ambitious plans which they had promised to undertake if it became the European Capital of Culture for 2008.