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UK, EU head to Brexit breakthrough as Irish hurdle remains

UK and European Union negotiators have reached an outline deal on the divorce bill that Britain will pay when it leaves the bloc, clearing a hurdle in talks and leaving the thorny issue of the Irish border as the last major obstacle.

[BRUSSELS] UK and European Union negotiators have reached an outline deal on the divorce bill that Britain will pay when it leaves the bloc, clearing a hurdle in talks and leaving the thorny issue of the Irish border as the last major obstacle.

While European national governments haven't signed off on it, negotiators have reached a preliminary agreement on the financial settlement, according to a person familiar with the situation. EU leaders have the final say on whether the offer on the divorce bill is high enough to unblock talks.

UK officials, who asked not to be identified, said a final deal hasn't yet been reached but the Department for Exiting the European Union said in a statement that "intensive talks" are ongoing to "build on recent momentum."

For months, talks have been all but deadlocked, meaning negotiations haven't even started on the crucial terms of trade that will apply when Britain leaves in just 16 months time. Once the divorce bill has been settled, one more major hurdle - and a more complex one - remains before negotiations can move on. The UK has until Monday to come forward with a proposal for how a hard frontier can be avoided on the island of Ireland when it becomes home to the UK's new land border with the EU.

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Prime Minister Theresa May and European Commission President Jean-Claude Juncker meet Monday for a lunch that's tipped as the setting for an agreement on the divorce. That would allow leaders at a summit in mid-December to declare that "sufficient progress" over separation terms has been made so that talks can start on the future relationship between Britain and its biggest trading partner.

The pound strengthened after the report.

The divorce bill is a result of budget payments the UK signed up to while an EU member as well as other liabilities such as pensions that stretch into the future. While it's unpopular with voters and rejected by some members of May's own party, the Irish border issue is even more sensitive and will require political will and trust on all sides.

Ireland wants to avoid any kind of border on the island after Brexit and the European Commission is backing its stance. A policed frontier and customs controls will be needed somewhere, as the UK is leaving the single European market that allows the border now to be almost invisible. A return to checkpoints would stir memories of decades of violence and also harm the island's economy.

Dublin has an effective veto at this stage of negotiations and could stop talks moving on from the divorce issues to trade at the December summit if it's not satisfied with Britain's proposal on how to avoid a border.

Irish Foreign Minister Simon Coveney said UK and EU teams are discussing possible wording of a commitment on the border issue that would allow talks to move forward to trade.

May has to come up with a solution that's acceptable to Dublin but also to the Northern Irish DUP party whose votes she needs in Parliament to govern.

Ireland would like the north to keep the same rules as the Republic after Brexit, but that would inevitably mean setting up a border between Northern Ireland and mainland Britain. The DUP's raison d'etre is keeping Northern Ireland integrated in the UK, and it rejects any kind of arrangement that would separate it from the mainland.

The Daily Telegraph reported that the agreement in principle on the divorce bill would amount to between 45 billion euros and 55 billion euros (S$72 billion to S$88 billion), citing people it didn't identify on both sides of the talks. The figure had been left vague on purpose, the paper said.

The Financial Times cited unidentified diplomats as saying that Britain has accepted liabilities of as much as 100 billion euros which will be spread over decades and net payments may end up being less than half that amount.

Payments would not be made as a lump sum, but spread over a number of years as they come due, the FT said, with contributions to the pensions of former EU employees, for example, continuing to be paid annually until the last recipient has died.

Two European government officials familiar with the talks told Bloomberg the bloc expects an offer of around 40 billion euros, without elaborating on whether this figure would suffice. Another EU government official said the range cited by the Telegraph is within the EU's expectations.

The UK has been constructive on the financial settlement, according to another person familiar with the situation. They all asked not to be named, as the talks haven't been finalized and the matter is sensitive. EU officials have said the European side may help camouflage the bill, aware that it's politically sensitive for May at home.