Britain and the EU are stuck in a 'disturbing' deadlock over the Brexit divorce bill

Brussels: Britain and the EU are stuck in a "disturbing" deadlock over the Brexit divorce bill, although a breakthrough remains possible in the next two months, EU negotiator Michel Barnier said Thursday.

The stalemate will stoke fears swirling in London and Brussels of a breakdown in talks that could see Britain leaving the European Union in March 2019 without an agreement to soften the blow.

Wrapping up a fifth round of talks with Britain's David Davis, Barnier said he could not recommend to EU leaders at a summit next week that negotiations move on from divorce issues to talks on a post-Brexit trade deal.

The Frenchman reserved his most cutting comments for the issue of financial commitments, saying Britain had still not spelled out what Prime Minister Theresa May promised in a key speech in Florence, Italy, last month.

"We are at a deadlock on this question which is extremely disturbing," Barnier told a press conference with Davis at the European Commission headquarters in Brussels.

Speaking a mix of French and English, Barnier said the "constructive" talks had clarified some points but that there had not been any "great steps forward" on central issues.

The leaders of the other EU 27 countries have demanded there be "sufficient progress" on the Brexit bill, the rights of EU citizens living in Britain, and on Northern Ireland before moving on to discuss a post-Brexit trade deal.

Barnier said on the bill in particular there had been no actual negotiations with Davis, only narrow technical talks on the details.

"I am not currently able to recommend to next week's European Council to open discussions on the future relationship," Barnier said.

But he added: "I remain convinced that with political will, decisive breakthroughs are within reach in the coming two months."

The EU negotiator also warned against the possibility of a so-called "Hard Brexit" after May admitted this week that her government was setting aside money for a "no-deal scenario".

"A no deal will be a very bad deal," Barnier said.

Davis, a key figure in the Leave campaign in last year's Brexit referendum, said he still hoped EU leaders could decide to shift to the next phase when they meet next week.

"I hope the member states will recognise the progress we've made and take a step forward in the spirit of the prime minister's Florence speech," Davis said, adding that it was "in the interests of Europe and the UK."

Davis called on EU leaders to give Barnier a mandate next week to "explore ways forward" on May's proposal for a two-year transition period after Brexit, even if trade talks are not opened.

The possibility of Britain leaving without a deal has suddenly become a reality in recent days, as the failure of negotiators to reach a breakthrough has rattled nerves and markets.

EU President Donald Tusk warned on Tuesday that the bloc may rethink whether a Brexit deal is possible if there is no progress by the end of the year.

Tusk also ruled out the possibility of moving onto the trade talks phase at the October 19 summit, though he said he hoped to be able to by the next summit in December.

"If it turns out that the talks continue at a slow pace, and that 'sufficient progress' hasn't been reached, then -- together with our UK friends -- we will have to think about where we are heading," he said.