EU summit to urge UK to make a move

"We have seen some progress, but there is still a lot of distance to be covered and on main issues there is still a lot of work to be done," said one senior EU official on Wednesday.

EU countries want to secure a level playing field for European businesses to prevent the UK from undercutting them in future.

They also want to see "a very robust dispute settlement system" - as one EU diplomat put it. Even more so since the UK's adoption of its internal market bill, which breaks the already agreed divorce deal, raised questions about London's trustworthiness.

The EU also wants to see a resolution on the fishing quotas, a crucial issue for coastal EU countries even if not crucial economically for the EU as a whole.

"In the end the only thing that makes things possible is if we see UK movement on level paying field, state aid, governance and fish," said an EU diplomat.

"We really need some movement before we can enter into, with confidence, a last phase of negotiations," the diplomat added.

One option is a set of tools that would make sure the EU (and the UK) can protect its companies by fast arbitration, and if necessary, retaliation if the other undercuts them, instead of the UK aligning its rules and standards to that of the EU's.

It also includes an independent body in the UK overseeing state subsidies to companies.

EU Commission president Ursula von der Leyen and European Council president Charles Michel spoke with British prime minister Boris Johnson on Thursday evening.

Johnson had set mid-October as a deadline for reaching an agreement, but the EU leaders will say they are ready to continue talks.

The UK had hoped some EU countries, more exposed to trade with the UK, would push other member states into a deal with the UK, but EU officials said the bloc remains united. "Nobody contested where the UK should make a move. […] There are not two camps," said one source.

EU sources said the UK needs to make a move before details of any compromise on a level playing field, or state aid can be worked out.

Budget deadlock

Meanwhile, European Parliament president David Sassoli is expected to urge EU leaders on Thursday to be more flexible on greater EU funding for European programmes and on the rule of law - two issues which have stalled talks on the budget between the parliament and member states.

The €1.8 trillion long-term budget and coronavirus recovery fund - only agreed by EU leaders after a lengthy summit in July - needs the approval of MEPs, but negotiations are deadlocked.

The parliament has requested more funding for certain programmes, and a stronger link between EU funds and EU values, ie a sturdier rule of law mechanism.

EU leaders do not want to re-open the budget discussion, and are reluctant to give more money to the EU pot, instead suggesting some rearrangement of way funds are accounted, and using margins left in the budget to pay for the parliament's requests.

The issue is not on the summit's agenda, but Sassoli's comments are likely to prompt a discussion.

EU leaders will also discuss the Covid-19 situation in member states, and the bloc's vaccine strategy.

They will also talk on agreeing to the 55-percent reduction in greenhouse gases by 2030 - and how to achieve it.

Meanwhile, Greece and Cyprus are also likely to raise the issue of Turkey, which was discussed two weeks ago at the previous summit, but the two member states are expected to argue that Turkey has since escalated the situation in the eastern Mediterranean.