The EU's chief Brexit negotiator Michel Barnier has told member states that there could be a short no-deal period at the beginning of January even if a deal is reached with the UK in the coming days, RTÉ News understands.
This would be because both sides would have run out of time to implement their own legal procedures even to bring the treaty into force provisionally on 1 January.
A senior source told RTÉ News that a no deal interregnum would be "probably the most likely" scenario unless agreement is reached in the next few days.
Another senior source said that, despite that, member states expected the talks to continue until the end of this week, if not beyond.
European Commission President Ursula von der Leyen has expressed satisfaction over the talks to agree a post-Brexit trade pact, saying there was progress as negotiators entered the "last mile".
"First of all there is movement. That is good... We are talking about a new beginning with old friends," she told a conference organised by the Organisation for Economic Cooperation and Development (OECD).
"We are on the very last mile to go. But it is an essential one. We want a level playing field, not only at the start, but also over time," she added.
Mr Barnier had made his remarks during a briefing of EU ambassadors in Brussels this morning.
Under EU law the European Parliament must ratify the treaty for it to come into effect on 1 January.
However, there has been widespread speculation that if negotiators need more time to conclude a deal, the treaty could be applied provisionally from 1 January, with the European Parliament ratifying it later.
"The very end will be when we reach an agreement both on fair and free competition, and second reciprocal access to water and the markets", Chief EU Negotiator @MichelBarnier said this morning as he arrived to brief EU envoys on #Brexit talks | https://t.co/3L4uoLrmo6 pic.twitter.com/rryiGjCHgR— RTÉ News (@rtenews) December 14, 2020
This morning Mr Barnier said that there could still be a no-deal situation happening on 1 January even if both sides agreed that the treaty could apply provisionally in order to buy more time to negotiate.
"If it drags on beyond the next few days [a short no-deal period] becomes a very likely scenario," said a well-placed source. "Probably the most likely scenario".
This would be because even provisional application requires a range of procedural measures.
They include ensuring the text is legally coherent, known as "legal scrubbing" before it is translated into 23 languages.
Member states then have to approve the text before it goes to the European Parliament for ratification.
Meanwhile, Mr Barnier told member states that talks on fisheries remain "extremely difficult" despite progress on fair competition and dispute resolution.
He is understood to have told EU ambassadors that the UK had accepted the principle that the EU had the right to take retaliatory measures if it believed the UK had gained a competitive advantage by diverging from EU standards.
It is our responsibility to give the talks every chance of success.— Michel Barnier (@MichelBarnier) December 14, 2020
Never before has such a comprehensive agreement (trade, energy, fisheries,transport, police & judicial cooperation, etc) been negotiated so transparently and in such little time. [1/2]
However, that right would not be "autonomous" or automatic, and the EU would have to enter into a dialogue with the UK before taking action.
According to one senior source, this suggests there has been movement on both sides.
Working out how the UK will be entitled to diverge from EU standards while giving the EU reassurance that its companies will not be undercut as a result has gone to the heart of the eleventh-hour negotiations between both sides.
However, it appears that the principle of the right retaliation balanced by dialogue ahead of any such retaliation have been accepted by both sides.
"It's the operationalisation of that principle that is now under discussion," a senior source told RTÉ News.
It is understood Mr Barnier did not elaborate on when the negotiations might conclude.
One source said they would continue through the rest of this week, "then we will see where we are," the source said.
The two teams of negotiators have concentrated on the level playing field issues over the weekend, with little movement on the fisheries question.
However, Mr Barnier is said to have described the talks on fisheries as "extremely difficult."
In particular, the UK has proposed new ownership rules around British fishing vessels after Brexit, as well as a new requirement that fish caught in British waters would have to be landed in the UK.
Currently much of the fish caught in UK waters by EU boats is landed in EU coastal states such as France and Spain.
Mr Barnier is today briefing member states and the European Parliament following the decision yesterday by Ms Von der Leyen and British Prime Minister Boris Johnson to keep the talks alive.
He will meet his opposite number David Frost later as both sides try to conclude a future relationship agreement in the coming days.
A spokesman for Mr Johnson said Britain continues to be hopeful that it can secure a trade agreement with the European Union but there are still gaps on key issues.
"We remain hopeful of reaching an agreement ... No deal is a possible outcome ... But we've been clear that we will continue to work to reach a free trade agreement," the spokesman told reporters, repeating that fisheries and fair competition guarantees were areas where gaps between positions remain.
Taoiseach 'hopeful' deal can be struck in coming days
Taoiseach Micheál Martin said he was hopeful the British and EU negotiators can strike a post-Brexit trade deal in the coming days but that significant challenges still remained on the key sticking points.
Speaking on RTÉ's Morning Ireland, he said: "I'm hopeful but I don't want to understate the very significant challenges that face both the UK side and the European Union side on this level playing field issues and the fishery issue. They are significantly difficult issues.
"The real end deadline is New Year's Eve but I think both sides are very possessed of the need to get outcomes to these negotiations in the next number of days," he added
Mr Martin said both sets of negotiators are conscious of the enormity of the breakdown of talks and will try to tie down the outstanding issues, particularly the level playing field and fishing industry issues.
He said that it would be a terrible pity to lose all that has been agreed already and that there is a "need to stand back from high principles" as, he added, the issue of standards could be agreed to prevent undue advantages in the future.
He said Mr Barnier wants "a genuine constructive trading partnership" between the EU and the UK going forward.
The phone call between Mr Johnson and Ms von der Leyen yesterday was described as positive and followed intense negotiation over the weekend on the question of fair competition between both sides, known as the level playing field.
Both sides are said to be working on a formula that would allow the EU to retaliate if the UK, over time, diverges from EU standards in a way that would give British firms a competitive edge as they continue to trade into the single market.
It has been reported negotiators have been working on a mechanism that would allow for a period of consultation on any trade distortion that might come about before the EU would be entitled to impose tariffs, or take other action.
If a mechanism can be found, then both teams will still have to address the question of fisheries. As such, the talks this week could go on for several days.
Britain's business minister said the sides are still apart "on certain matters" but Mr Johnson does not want to walk away yet.
Speaking on Sky News, Alok Sharma said: "We will continue discussing, we are of course apart on certain matters but as the prime minister said, we don't want to walk away from these talks.
"People expect us, businesses expect us in the UK to go the extra mile and that's precisely what we're doing."
He added: "Any deal that we get with the EU has to respect the fact that we are a sovereign country, an independent country and that's the basis on which we will do a deal if there is a deal to be done."
The Business Secretary also urged people not to engage in bulk buying ahead of a possible failure to reach a trade deal.
With supermarkets stockpiling ahead of 1 January, he said: "I'm very confident that actually the supply chains will still be in place.
"I would say to everyone just do your normal shopping as you would do and I think we will find we are going to be absolutely fine."
Former Taoiseach Bertie Ahern said final stages of negotiations on Brexit are not so much based on economics, but on politics.
Speaking on RTÉ's Today with Claire Byrne, Mr Ahern said it is an 800-page document and it is down to a handful of items and "they've cracked most of the nuts on this, in the 800 pages... it's not so much the economics now, it's the politics."
He said the "tariff free access means is not paying your taxes and the EU is right to say that the UK cannot have an unfair advantage by not paying their taxes on anything they buy and sell".
He said "on that issue, the EU will rightly stick to their ground".
Sinn Féin leader Mary Lou McDonald said while securing a Brexit deal remains a challenge, it is doable and that a deal is "absolutely possible".
Asked if a #Brexit deal can still be achieved, Sinn Féin leader @MaryLouMcDonald tells @MorningIreland "It can be done, but it's down now to a political decision". She calls on the EU side "to hold the line, to hold their nerve" and ensure any deal is fair. pic.twitter.com/59DtpwqUL4— RTÉ News (@rtenews) December 14, 2020
Speaking on RTÉ's Morning Ireland, Ms McDonald said last night's soundings appeared "more thoughtful, considered and calm" and that a deal at this stage will be a political decision rather than on the basis of technical matters.
She said it is a crunch point and the stakes are very high, so both sides will push out their advantage.
Ms McDonald said that the EU negotiators need to "hold their nerve and not lose focus" and ensure a deal is equitable and delivers on the EU's key interests.
Northern Ireland Secretary Brandon Lewis said the fact that negotiators have agreed to continue talking shows both sides can see there is a route to a deal.
"Where there is a possibility of a deal, it is right that we should try and find a way through that. I think the fact that we're still talking ... highlights and shows that there is still the view that there is a pathway to an agreement.
"We have all been clear about where the issues have been but the fact that everybody is still talking shows that both sides can see that there is a route and we've got to work through some of the details to see if we can achieve that over the next couple of weeks," he said.
Additional reporting Reuters, PA