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The latest round of talks “did not go well” after Brussels shifted position to appease France over rules on state aid subsidies and standards. British negotiators were thrown when the EU side introduced “new elements” that further complicated sealing a deal.
It was hoped agreement might be reached this weekend but a UK government source said: “At the 11th the EU is bringing new elements into the negotiation. A breakthrough is still possible in the next few days but that prospect is receding.”
Earlier, the UK had been “broadly hopeful” an agreement could be reached.
The EU sent more officials over to London in a sign that every effort was being made to end the deadlock.
But Government sources said the late change of tactics was a “big step” backwards and had destabilised the talks.
France has also been furiously opposed to Britain’s plans to take back control of fishing waters.
French officials have been behind a push for EU negotiator Michel Barnier to walk away from the negotiations at the end of the week unless Boris Johnson makes significant concessions.
One EU diplomat warned that several other leaders were queueing up to vote down any unacceptable compromises made by Mr Barnier.
The insider said: “Leaders always have the possibility to reject the outcome, and if the mandate is not adhered to they have every right to do so.”
In a sign of rowing tensions between EU states, Ireland accused EU hardliners of making a “very dangerous” threat to pursue a no-deal.
Irish foreign minister Simon Coveney warned there was no guarantee Downing Street would return to the negotiating table in the new year.
He claimed a no-deal outcome would leave Dublin in the “crossfire” as Brussels and London’s relationship is plunged into an acrimonious “blame game” over the failed trade talks.
He said: “The Irish government will be doing everything we can to try to find a way with the EU and UK teams to get a deal that Ireland can live with.
“This means getting a fair deal for both sides on fisheries, which has proven really, really difficult.
“Closing out a negotiation as complex as this one is never going to be easy.”
Meanwhile, German Chancellor Angela Merkel was said to be ready to agree to a compromise to cement her legacy before leaving office next year.
And Stefaan De Rynck, a key aide to Mr Barnier, said: “We are at the end of a marathon run. I cannot guarantee that we’ll reach the finishing line with an agreement.
“It’s certainly my feeling both sides are committed to finding a deal. Significant divergences remain. As of today the outcome is uncertain.”
Next week Mr Johnson will overturn a vote by peers after they tried to block his “safety net” laws to stop the EU carving up the UK if trade talks collapse.
MPs will restore powers to the UK Internal Market Bill that enable the Government to breach the Brexit divorce deal if an agreement has not been reached.
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