Divorce talks through the night as EU seeks 'progress'

British Prime Minister Theresa May may rush to Brussels in the early hours of Friday to meet commission chief Jean-Claude Juncker to seal an accord although EU officials said they were "not there yet."

Despite frantic telephone diplomacy on Thursday May's office was more cautious about the chances, having been stung already this week when a Northern Irish party rejected a first attempt at a deal.

The frenetic talks come ahead of a Sunday deadline for Britain to finalise its divorce terms from the European Union so they can be approved by member states in time for an EU leaders' summit on December 14-15.

"We are making progress but not fully there yet. Talks are continuing through the night," Juncker's spokesman Margaritis Schinas said on Twitter.

"Tonight more than ever, stay tuned."

European Council President Donald Tusk was also set to make a statement giving a "situational update" on Brexit at 0650 GMT on Friday, before heading to Hungary, adding to the fevered speculation about a deal.

Juncker spoke first with Irish Prime Minister Leo Varadkar then May on Thursday night in a bid to break a deadlock over the wording of a deal on future arrangements for the Irish border.

'Not there yet'

The EU insists on making sufficient progress on the Irish border, on Britain's divorce bill, and on the rights of European citizens in Britain before unlocking the second phase of negotiations.

Those would deal with a transition period for around two years after Britain leaves the bloc on March 29, 2019, and a future EU-UK trade deal.

But talks between May and Juncker in Brussels on Monday broke up without a deal after the pro-British DUP party in Northern Ireland that props up the British leader's government objected to a clause in the deal.

The wording had said that British-ruled Northern Ireland would be in "alignment" with EU rules to avoid a hard border with the Republic of Ireland, as Dublin insists.

"Discussions about taking forward the Brexit process are ongoing," a spokesman for May's Downing Street office said, while a government source added: "We're not there yet."

DUP chief whip Jeffrey Donaldson said: "Discussions are ongoing."

The European Commission had earlier Thursday set a deadline of Sunday for May to reach a deal on divorce terms so they can be approved by member states in time for the summit.

'Totally and utterly incompetent'

Earlier Thursday, Schinas dismissed British newspaper reports that the Sunday deadline could be extended into next week as "not correct"

But EU sources have said it was still possible that European leaders could agree at the summit next week that there had been "sufficient progress", in order to give May a win.

Scotland's nationalist leader showed little patience, accusing the British government of being "totally and utterly incompetent" on Brexit.

First Minister Nicola Sturgeon said "the real lesson" of the past week was that Scotland "will always be at the mercy of reckless decisions taken by Tory governments at Westminster" unless it becomes independent.

"The sooner we are in control over our own future here in Scotland the better, and this week has proved it," she added.

Eurogroup chief Jeroen Dijsselbloem offered some calming words, saying Britain's City of London financial hub centre "will not fall apart" after Brexit even if it loses the right to allow banks to trade freely across the bloc

Dijsselbloem, the Netherlands finance minister who chairs meetings of his counterparts in the 19-country eurozone, said that some businesses would nevertheless have to relocate.

"I don't believe that the City will fall apart and that everyone will flee. I don't think that's how it's going to work," he told a European Parliament committee.

His reassurances come at a time when Britain's finance sector is anxious about losing the "passporting" rights which allow large international banks to trade throughout the EU while being based in Britain.