Welfare reform: Villiers says DUP's 'fantasy' budget would be helpful
The Secretary of State said it would be "helpful" if Northern Ireland politicians could agree a provisional budget.
The Stormont administration is facing a multi-million pound shortfall due to the continuing failure to implement welfare reforms.
The DUP is to table a 'fantasy' budget to executive colleagues later this week in a bid to break the deadlock.
Theresa Villiers said agreement would buy more time to resolve the crisis.
It is estimated Northern Ireland will lose out on around £600m this year if welfare reforms are not introduced.
Ms Villiers, who met business leaders in Belfast to discuss the economic impact of the crisis, said a provisional budget was better than no budget at all.
"Failing to agree a budget of any kind would mean we face those emergency budget measures which could detrimentally start to impact on public services.
"I think agreeing a budget on a provisional basis would be helpful," she said. "It at least gives a little bit more time to see these matters resolved."
The DUP are proposing the 'fantasy' budget in an effort to clear an imminent legislative requirement to sign off on an agreed spending plan for the rest of the year.
Sinn Fein has not ruled out backing the plan, which will be based on the assumption that the Stormont House Agreement has actually been implemented.
Currently, the executive would not have the money to see through many of the funding commitments in the provisional budget.
However, funds could become available if the welfare reform dispute is resolved.
The failure to agree has left the executive facing a funding gap of hundreds of millions of pounds this financial year.
The defeat of the Welfare Reform Bill in the Assembly last month, due to a Sinn Fein/SDLP veto, has endangered other political and economic developments.
These include the devolution of corporation tax powers, access to £2bn of increased borrowing powers from the treasury, a major civil service redundancy scheme and new structures to address the legacy of the Troubles.
If executive ministers fail to set a budget for the second half of the financial year, then a senior civil servant will be forced to take over departmental purse strings at the end of July.