'Progress on deal' ahead of May-Juncker Brexit talks

This image is for use with this specific article only.** Flags flap in the wind outside the EU headquarters in Brussels on Monday

Summit chair Donald Tusk said on Monday he had been planning to distribute his draft negotiating guidelines to member states on Tuesday, had the European Union executive's negotiator Michel Barnier given the crucial signal that Britain had made "sufficient progress" on three key elements of the divorce.

"We had an agreement this morning", Irish Prime Minister Leo Varadkar said, expressing disappointment at the last-minute glitch. But it was later rejected by the DUP which says it cannot allow any divergence in regulation between Northern Ireland and other parts of the UK.

But differences remain over the EU's demand for the European Court of Justice to retain jurisdiction over cases involving EU citizens in the UK.

After talks over lunch, May and EU Commission President Jean-Claude Juncker acknowledged that some issues remained unresolved.

But the EU has insisted that "sufficient progress" must first be made on three issues: that Britain pay a substantial "divorce bill", that rights of European citizens in the United Kingdom are guaranteed and that there is no reinstatement of a border infrastructure between Northern Ireland, which will leave the EU with the rest of Britain in March 2019, and the Republic of Ireland.

"We have been down this road too many times before", he said. But the border issue has proved more intractable.

Britain says it wants to maintain a "frictionless" flow of people and goods with no border posts.

RTE have reported on a leaked proposal for "regulatory alignment" between Northern Ireland and the Republic, but Downing Street insists the UK's "territorial and economic integrity will be protected". Both sides insist they want an open border with no checkpoints or guards, but no format for achieving this has yet been devised which satisfies all interested parties.

The guidelines, which are likely to include a commitment to the two-year, status-quo transition period May asked for, will then be scrutinized closely in European Union capitals. But then Northern Ireland's Democratic Unionist Party, which props up May's minority government, announced it wouldn't support any deal that made special rules for Northern Ireland.

DUP leader Arlene Foster has said her party "will not accept any form of regulatory divergence" that separates Northern Ireland from the rest of the UK.

Mayor of London Sadiq Khan said there were "huge ramifications" for the city if news of the deal turned out to be accurate. "The economic and constitutional integrity of the United Kingdom must not be compromised in any way".

Chief European Parliament Brexit official Guy Verhofstadt, who had put the odds of agreement Monday at "50/50", warned that unless all issues are solved "there will be no green light in October 2018".

With the clock ticking down to the March 2019 exit date, May is under pressure to start talks on its future trade ties by the end of the year to remove the cloud of uncertainty for companies that do business in the EU.

European Council President Donald Tusk cautioned that time was running short.

"Despite our best efforts.it was not possible to reach a complete agreement today", Juncker said at a joint news conference with May, adding that she was a "tough negotiator".

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