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Britain and EU fail to reach Brexit deal despite 'significant progress'

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**This image is for use with this specific article only.**  Flags flap in the wind outside the EU headquarters in Brussels on Monday, December 4, 2017. **This image is for use with this specific article only.** Flags flap in the wind outside the EU headquarters in Brussels on Monday, December 4, 2017.
**This image is for use with this specific article only.**  European Commission President Jean-Claude Juncker greets British PM Theresa May prior to a crucial Brexit meeting at EU headquarters in Brussels on Monday, December 4, 2017. **This image is for use with this specific article only.** European Commission President Jean-Claude Juncker greets British PM Theresa May prior to a crucial Brexit meeting at EU headquarters in Brussels on Monday, December 4, 2017.
By Erin McLaughlin, James Frater and Lauren Said-Moorhouse CNN

BRUSSELS (CNN) -- Britain and the European Union failed to reach a highly anticipated Brexit deal on Monday despite "significant progress" on key outstanding issues, both sides announced in Brussels.

Negotiators had earlier appeared close to reaching an agreement on the Irish border, the complex and historically sensitive issue that had emerged as a final stumbling block.

But after details of a draft deal leaked, the Democratic Unionist Party, a small but hardline grouping from Northern Ireland that props up the minority government of British Prime Minister Theresa May, said they would not support it.

After talks over lunch, May and EU Commission President Jean-Claude Juncker acknowledged that some issues remained unresolved. Both said they were confident of a deal soon that would allow talks to progress to a future trading relationship.

Juncker said that it was not possible to reach deal on Monday despite "significant progress" made in recent days. "This is not a failure, this is the start of the very last round. I am very confident that we will reach agreement in the course of this week," he said.

May said meetings had been "constructive" but differences remained on a "couple of issues." May said she remained confident an agreement could be reached in the coming days.

'Critical moment' in talks

Britain has been desperate to secure an agreement from the EU that it would move on to discussions about trade.

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 UK 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.

The dismantling of a so-called "hard border" was a key plank of the Good Friday Agreement, which brought peace to Northern Ireland after years of sectarian conflict. The Irish government was determined to secure a cast-iron guarantee from the UK that there would be no return to border controls after Brexit.

Substantial progress on the divorce bill and on EU citizens was made last week but wrangling on the Irish border continued through Sunday night and into Monday.

It appeared on Monday morning that a deal on the Irish border was close.

Donald Tusk, President of the European Council, scrapped a scheduled trip to Israel, citing a "critical moment" in the negotiations. An EU official said the trip was abandoned so that Tusk could be available for "consultations on draft guidelines" for potential trade discussions.

Philippe Lamberts, leader of the Greens in the European Parliament, told CNN that the British government had made a key concession: Northern Ireland would continue to be aligned with EU laws and regulations that, if they diverged, would require checks at the border. The concession was first reported by the Irish public broadcaster, RTE.

After details of the draft deal leaked, DUP leader Arlene Foster gave a TV statement in which she said that her party "will not accept any form of regulatory divergence which separates Northern Ireland economically or politically from the rest of the United Kingdom."

Leo Varadkar, the Irish Prime Minister, said he was "suprised and disappointed" that an agreement was not concluded. He said that the British and Irish governments had agreed the draft wording of a deal on the Irish border on Monday morning. "That's the agreement we had, I believe it stands," Varadkar said at a news conference in Dublin, adding that he was prepared to give May more time. "I trust her," he said.

Repercussions in UK

Even if the DUP came on board with an eventual deal, there could be other consequences for May. The suggestion that Northern Ireland would enjoy a special status withing the UK has infuriated leading figures in areas of the UK that voted to remain in the European Union in the 2016 Brexit referendum.

Nicola Sturgeon, the First Minister of Scotland, wrote on Twitter: "If one part of the UK can retain regulatory alignment with EU and effectively stay in the single market (which is the right solution for Northern Ireland) there is surely no good practical reason why others can't."

Mayor of London Sadiq Khan said there were "huge ramifications" for the city if news of the deal turned out to be accurate.

He said on Twitter: "Londoners overwhelmingly voted to remain in the EU and a similar deal here could protect tens of thousands of jobs."

The UK still hopes that the EU will deem sufficient progress to have been made in order to give the go-ahead for negotiations to move on to a second phase of negotiations at a summit next week. This phase would focus on a future trade relationship between the UK and EU and transitional arrangements.

CNN's Hilary McGann, Bianca Nobilo, Carol Jordan and Matt Wells contributed to this report from London.

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