EU leaders stuck on key issues in 'tense' UK talks

"There are no new issues and nothing has disappeared either," said an official in describing the state of talks.

"For now I can only state that we have made some progress, but a lot still remains to be done," European Council president Donald Tusk told the press late in the night.

"It's not only drama, real differences remain," one EU leader said later in the small hours of Friday.

Incorporating the UK's demands in the EU treaties at a later stage is still an issue for some countries.

Converging ideas

The emergency brake that would allow non-eurozone countries to raise concerns and delay decisions made by the 19-member currency bloc is another topic where member states and the UK disagree.

The key question is how many non-eurozone countries can trigger the brake - one or several.

Curbing social benefits is also a hurdle, with an issue being the duration of time that member states would be able to use a so-called safeguard mechanism that would allow them to restrict access to their welfare system for EU workers.

According to an EU official, here the ideas are "really converging". Other sources said the UK would want to see it in place for 7+3+3 years (seven years with a possibility of two renewals), which is unacceptable for some eastern European countries. They want to reduce it to three or four years, according to a diplomat.

Another issue is the indexation of child benefit for EU workers whose children live in their home country. Here, member states clash on retroactivity - whether the measure should apply only to newcomers or also to people already working in the UK.

The phrase "ever closer union", which is in the EU treaty since 1957, is another point of disagreement. The UK would like to clarify it is not a legally binding call for further integration.

'Auto-destruction clause'

The phrase "ever closer union" in the EU treaty, which the UK would like to clarify is not a legally binding call for further integration, is another point of disagreement.

"Here the legal reality clashes with the political reality," a source said.

All experts agree the phrase isn't a legal commitment to further integration, but for some countries, it a political commitment, another source explained.

Belgium refuses a "Europe a la carte" in which other countries have the possibility to free themselves from this political commitment.

Belgium, supported by France, is also asking for a so-called "auto-destruction clause" in the agreement. All reforms agreed would become null and void in case of a No vote at the British EU referendum.

The aim is again to prevent other countries to benefit in the future from the concessions made to Britain.

Bilateral meetings

EU Council chief Donald Tusk sat down with Cameron and European Commission president Jean-Claude Juncker after leaders wrap up a working dinner on the migration issue, and decide how to proceed further.

He later met French president Francois Hollande, Czech prime minister Bohuslav Sobotka, and Belgian prime minister Charles Michel. Each of these three leaders were representing all other EU leaders on one issue, respectively financial governance, social benefits and treaty change.

Tusk's team will have to come up with new ideas, but negotiations on the proposals will take time.

"We have to see how to square the circle," said an EU official.

Bilateral discussions among leaders, including Cameron, were due to start again in the morning. The 28 leaders, along with European Parliament president Martin Schulz, will reconvene at around midday on Friday to try to strike a deal before the end of the day.

"The discussion is starting, the stage has been set," a French diplomat said during the night.