New British proposals for avoiding extensive border checks on the island of Ireland after Brexit are "a step in the right direction" and "make finding a compromise possible," a European Union source close to the negotiations told Reuters on Thursday.
Brexit talks are entering a frenzied fortnight designed to produce an EU divorce deal with Britain and a blueprint for future ties.
Avoiding erecting an elaborate border between EU-state Ireland and Britain's province of Northern Ireland after Brexit is the main potential deal-breaker.
Britain wants to regulate the border through a broad agreement on post-Brexit trade ties with the EU.
The bloc says an emergency fix — or "backstop" - is needed in case these broader trade talks fail or take longer after Britain leaves the EU next March and the status-quo transition period runs its course at the end of 2020.
Both sides are readying concessions on the Irish backstop.
Ireland's Foreign Minister Simon Coveney said on Thursday Dublin was not aware that Britain had tabled its planned formal new "backstop" proposal.
EU diplomats and officials have also said they have not seen any formal new written text from London. But the comment suggesting the EU would engage with the new proposal taking shape in London sent the pound rising against the dollar.
EU diplomats and officials described the emerging new proposal under which Britain would agree to an indefinite backstop solution, something missing in London's previous proposal rejected by the remaining 27 EU states last June.
But Britain would stick to its line that, in case a backstop is triggered, the whole of the United Kingdom would stay in a customs union together with the EU. That would mean having the same external tariff on some goods, as the EU currently has with Turkey.
Under the British proposal described by EU sources, that would remove the need for customs checks on goods and agriculture on the island of Ireland.
The EU has previously had an issue with that as it fears Britain could use the special access of Northern Ireland to the bloc's single market to push goods that would not have to conform with high EU norms and could hence be sold cheaper.
For the other type of checks, the regulatory ones, Britain would agree to simplified, light controls on goods going from the British mainland to Northern Ireland that would be carried out away from the actual border as much as possible, according to EU sources describing the emerging proposal.
That, in turn, is a difficult one for Britain where Prime Minister Theresa May's government relies on the support of the Northern Irish Democratic Unionist Party, which vehemently opposes differing rules on its soil from the rest of the United Kingdom.
"This is a step in the right direction, it makes finding a compromise possible," one EU source close to the negotiations told Reuters.
Ireland's Prime Minister Leo Varadkar arrives in Brussels to meet European Union officials later on Thursday.