British Prime Minister Theresa May is trying to walk away from a deal which would ensure a hard border never again emerges on the island of Ireland.
n agreement on Brexit was all but ready to be signed off on this week when the British side baulked at the prospect of an unlimited guarantee of no border between the Republic and Northern Ireland.
Instead, Mrs May insisted the so-called 'backstop' must be a "temporary solution".
The idea of applying a time limit was shot down by EU negotiators and European Council President Donald Tusk said no deal was "more likely than ever before".
However, both British and EU officials agreed the talks ahead of tomorrow's crucial summit had been "put on hold" but had not "broken down".
Meanwhile, DUP leader Arlene Foster has refused to rule out collapsing the British government if her "blood-red lines" on Brexit aren't met.
On a visit to Dublin, Ms Foster called for "calm heads" ahead of this week's EU summit - but said she was "very clear" in her demands.
However, Taoiseach Leo Varadkar warned a failure to reach a deal would be "catastrophic" for Britain.
Mr Varadkar said such an outcome would be "really bad for Ireland, relatively bad for the EU, but quite a disaster for the United Kingdom".
In a further blow, he also warned it could be December before the outcome of the negotiations are clear.
"Nobody knows for sure. The date on which the UK leaves the European Union is the end of March next year. Any withdrawal agreement requires parliamentary approval."
"In order to meet that timeline we'd have to have a deal before the end of this year.
"The initial target was October, that's now slipped to November," he said, adding that if it can't be done next month there is a regular meeting of EU leaders scheduled for December.
There is significant frustration in Dublin and Brussels at the manner in which the British side acted over the weekend, but sources said there is "no desire to get into a war".
The EU sees Theresa May as its best chance of securing a deal and therefore does not want to do anything which could precipitate a leadership heave within the Conservative Party.
One EU source suggested last night that while Mrs May does not command a majority of MPs for her Brexit plan, if one is agreed she may be able to tell the country she is the only person with a plan to get them past March 29.
Having agreed last December and March to work out a way of keeping Northern Ireland within the customs union in order to avoid a hard Border, Mrs May now wants the whole of the UK to abide by EU customs rules for a defined period of time. A date of December 2021 has been proposed.
It is understood EU negotiators, led by Michel Barnier, have said such a move would still require some acknowledgement of the special circumstances in Northern Ireland.
Tánaiste Simon Coveney met with EU foreign ministers in Luxembourg yesterday where he insisted the backstop "cannot be time-limited".
In Dublin, Mr Varadkar said: "We're always open to compromise. As the European Union, of course we are. But there are some fundamentals that we can't compromise on and that is the need for the United Kingdom to honour the commitments it made last December, which is that we will have a withdrawal agreement and as part of that there must be a legally operable and legally binding assurance that no matter what happens, that no hard Border will emerge on the island of Ireland."
Mrs May admitted: "The EU still requires a 'backstop to the backstop' - effectively an insurance policy for the insurance policy.
"And they want this to be the Northern Ireland-only solution that they had previously proposed.
"We have been clear that we cannot agree to anything that threatens the integrity of our United Kingdom. And I am sure the whole house shares the government's view on this."
Tying Britain to the EU on customs would limit Mrs May's power to strike new trade deals around the world - a key goal of those who voted to leave the EU.
Questions were being asked last night about the surprise visit to Brussels on Sunday afternoon by British Brexit Minister Dominic Raab. Initially, it appeared his presence signified an important breakthrough in the talks.
However, well placed sources in Brussels said Mr Raab's intervention was to seek to stall the talks so Mrs May could get through a difficult cabinet meeting fixed for this morning.
Reports from London were that some ministers were threatening resignation if the prime minister conceded too much ground.
Some sources in Brussels were still insisting progress can happen this week.
Mr Tusk said that while preparations for a 'no deal' scenario are being ramped up, that "must not, under any circumstances, lead us away from making every effort to reach the best agreement possible". He has invited Mrs May to address her other 27 EU leaders tomorrow evening.
Meanwhile, Mr Varadkar and Fianna Fáil leader Micheál Martin met last night to discuss a political truce until a Brexit deal is nailed down.
Mr Martin has made what he described as a "very reasonable offer" to continue propping up the Fine Gael minority Government into the new year.
Fine Gael is cautious about the proposal but has moved to shore up support among Independent TDs, including Michael Lowry.
The party leaders agreed last night to select two teams that will meet in the coming days to kick-start negotiations on a new confidence-and-supply arrangement.