Merkel warns of no-deal Brexit danger as Europe meets

Brussels - Germany's Chancellor Angela Merkel has warned that Europe must be prepared for a no-deal Brexit, as EU leaders sought to unblock stalled divorce talks with Britain.

Prime Minister Theresa May arrived in Brussels Wednesday to present her take on how to save the talks on Britain's scheduled exit from the union on March 29.

Negotiations are at an impasse over the issue of a legal backstop to keep open the border between British Northern Ireland and the Irish Republic, an EU member.

Before setting off to join her colleagues, Merkel said that while there is "still a chance" for an accord, Berlin had already "begun to prepare appropriately" for the possibility of a no-deal Brexit.

Her warning comes after European Council President Donald Tusk, the summit host, said he would ask May to offer new "concrete ideas on how to break the impasse" when she arrives in Brussels.

And he added that he had "no grounds for optimism" based on a report from EU negotiator Michel Barnier and on May's appearance in the British parliament on Monday, where she stood her ground.

Neither side has shown much sign of flexibility, but Barnier is willing to add a year to the 21-month post Brexit transition period -- taking it to the end of 2021, two diplomats said on condition of anonymity.

"The aim is to gain more time to negotiate the agreement on the future relationship and thus further reduce the probability of having to resort to the backstop," one of the diplomats said.

Irish Foreign Minister Simon Coveney told the BBC that Barnier is proposing an extension, but did not say for how long, and another diplomat warned that the idea "was not really on the table and poses a political problem for the UK."

In any case, a longer transition would not in itself resolve the backstop issue which must be included in the withdrawal treaty and ratified before the end of March to avoid the damaging "no deal" scenario.


- Tricky divorce -


Even the choreography of Wednesday's summit opening highlights British isolation.

May will meet one-on-one with Tusk in Brussels at 5:45 pm (1545 GMT) before briefing her 27 European colleagues, but then the rest of the EU leaders will leave to discuss Brexit over dinner without her.

Tusk has made it clear that if May and Barnier do not signal concrete progress towards a draft deal he will not call a November summit to sign it.

Instead, the matter could either be pushed back to December or -- more dramatically -- the EU could use the November weekend to meet on preparations for a "no-deal" Brexit.

Previously, both sides had agreed that Britain crashing out of the Union on March 29 next year with neither a divorce agreement nor a road-map to future ties would be an economic and diplomatic disaster.

"There are still several weeks of space left, according to what the British are telling us, and they are the ones with calendar problems," said a senior EU diplomat.

But with the row over the Irish border, fears of a debacle are mounting.

At a three-hour British cabinet meeting on Tuesday morning, which included ministers with reservations about her strategy, May said a deal was possible if they all stood together.

Addressing MPs in the House of Commons on Monday, May had said a deal was "achievable" while sticking to her principles on the Irish border issue.

But a senior European official said the speech had only underscored for Barnier the uphill struggle he faces to get an agreement.


- No deal plans -


To solve the Irish question, Britain has proposed staying aligned to the EU's customs rules until a wider trade deal can be signed that avoids the need for any frontier checks.

But her own eurosceptic Conservative MPs are demanding this "backstop" arrangement be time-limited, something the EU will not accept.

May said the EU was also insisting on its own "backstop" in case the London proposal did not work, which would see Northern Ireland alone stay aligned to the customs union and single market.

She says this would threaten the integrity of the United Kingdom -- and it is strongly opposed by her Northern Irish allies from the Democratic Unionist Party (DUP).

How does a country leave the EU?

Economists fear "no deal" Brexit would greatly disrupt trade, travel and manufacturers' supply chains in Europe, push Britain into recession and even have global consequences.

Europe's biggest auto firms on Wednesday warned that a no-deal Brexit would "threaten their very business model" by disrupting component distribution.

By Martin Trauth and Dave Clark