The already slim chance that a Brexit deal would be agreed this month receded still further on Monday as another EU meeting ended without a breakthrough.
The European Union’s chief divorce negotiator warned ministers from member states that no deal has been sealed yet on Britain’s departure from the bloc.
At the start of another week billed as crucial for an accord, Michel Barnier briefed the 27 other members as time runs down before Brexit day on March 29.
Officials say if no divorce terms are agreed this week it will be hard to arrange an extraordinary EU summit this month to sign the withdrawal agreement. This in turn would dramatically curtail the time Prime Minister Theresa May will have to get any agreement past a rebellious British parliament.
As fears rose that the saga will end with Britain crashing out without a deal, the pound dropped to 1.283 dollars against 1.297 at Friday’s close.
“Michel Barnier explained that intense negotiating efforts continue, but an agreement has not been reached yet,” the European Council of member states said. “Some key issues remain under discussion, in particular a solution to avoid a hard border between Ireland and Northern Ireland,” it added.
Analysts from the Eurasia Group said they “remain cautious about the likelihood of a deal this week and an extraordinary European Council later this month.”
If there is no deal in November, the crisis could drag on until a regular EU summit on December 13.
The withdrawal agreement must include a “backstop” to prevent the return of a hard border between Northern Ireland, part of the UK, and the Republic of Ireland if the sides fail to find a free trade pact.
Barnier met one-on-one with Irish Foreign Minister Simon Coveney, then was to head to Strasbourg, for meetings with EU parliamentarians.
“Negotiations are at a very critical and sensitive stage,” Mr. Coveney said before leaving for Brussels.
“We want an agreement to be reached as soon as possible but urgency is required,” he said, stressing the need for a “legally operable backstop.”
Ms. May has drawn the fury of her Northern Irish allies, the Democratic Unionist Party — which opposes the backstop — and of eurosceptics in her own party.
The DUP props up her government but fears that Northern Ireland will be left partially under EU regulation, diluting UK sovereignty, under Ms. May’s current plans.
‘Looking increasingly pessimistic’
As the sterling fell, Neil Wilson, chief market analyst for Markets.com said “the runes look increasingly pessimistic” for a Brexit deal by December.
Belgian Foreign Minister Didier Reynders and other EU ministers set a cautious tone as they arrived for the briefing by Barnier. “We have time but not so much,” Mr. Reynders told reporters.
“It’s difficult to make real progress, but before Christmas I’m hoping it’s possible,” Mr. Reynders said, as the EU awaits a “positive signal” from London.
Martin Callanan, Britain’s junior minister in the Department for Exiting EU, also voiced caution. “We can’t rush it,” Mr. Callanan told reporters. “This is an agreement that will endure for many years. We have to make sure we get it right.”
But he also said the deal must be agreed in time for the British and EU parliaments to approve it by March 29.
Prime Minister May will host a weekly cabinet meeting on Tuesday, amid reports that she has a draft withdrawal agreement to show her ministers. The agreement will finalise the country’s exit bill of around £39 billion ($50 million), guarantee citizens’ rights and launch a 21-month transition, during which London will follow EU rules.
During the transition, British and European negotiators will launch more ambitious talks to agree the future trading and legal relationship.
Former British foreign secretary Boris Johnson slammed Ms. May’s plans, saying she was “on the verge of total surrender” to Brussels and urging her ministers to mutiny.
Jo Johnson, Mr. Johnson’s Remain-backing brother, resigned as transport minister on Friday, branding May’s proposed withdrawal deal a “terrible mistake”.