* UK, EU to hold intense negotiations
* Oct. 31 deadline nears
* Irish border key to deal
* Parliament could still stand in Johnson's way
(Recasts)
By Gabriela Baczynska and Jonas Ekblom
BRUSSELS, Oct 11 (Reuters) - The European Union and Britain
agreed on Friday to hold intense talks over the next few days in
a bid to secure a deal over Britain's departure from the bloc,
but arrangements over British-Irish border controls remain at
issue, the EU said.
A flurry of activity has brought the fraught bargaining
process to a new level as Britain's scheduled departure date of
Oct. 31 grows ever closer, but it is still uncertain whether the
two sides can make a breakthrough before then.
Some officials expressed guarded optimism, while financial
markets and institutions banks were buoyed by the latest
pronouncements. Sterling jumped to a three-month high.
EU chief negotiator Michel Barnier and his British
counterpart Stephen Barclay held what both sides called a
"constructive" meeting in Brussels on Friday morning.
That followed a statement from the British and Irish prime
ministers on Thursday that they had found "a pathway" to a
possible deal.
After Barnier briefed ambassadors from the 27 countries that
will remain in the EU, the European Commission said the two
sides had agreed to intensify discussions over the coming days
and the Europeans would take stock again on Monday.
"The EU's position remains the same: there must be a legally
operative solution in the Withdrawal Agreement that avoids a
hard border on the island of Ireland, protects the all-island
economy and the Good Friday (Belfast) Agreement in all its
dimensions, and safeguards the integrity of the Single Market,"
the Commission said in a statement.
The 1998 Good Friday Agreement ended three decades of
sectarian and political conflict in Northern Ireland that killed
more than 3,500 people.
A diplomat and an EU official said Barnier had told member
states that Britain had changed its position to now accept that
the proposed replacement to the so-called "backstop" cannot
erect a customs border between EU member Ireland and the British
province of Northern Ireland.
"On customs, they admitted that the solution cannot result
in the creation of a border in Ireland," the diplomat said,
adding that this was the reason Barnier gave national envoys in
Brussels to justify going into intensified talks with Britain
over the weekend.
Separately, two senior EU diplomats told Reuters the
possible solution could include two elements: keeping Northern
Ireland inside the United Kingdom's customs regime and, at the
same time, ensuring that customs and regulatory checks were
carried out together.
Under an earlier British proposal, the regulatory border
would run in the Irish Sea between Northern Ireland and mainland
Britain. The sources said they understood that customs checks
could be carried out there as well under the plan now under
discussions.
That marked a change from the latest EU-UK discussions when
London proposed dispersed customs checks across the whole island
of Ireland, which the bloc rejected as unworkable and not
offering enough protection to its single market.
One European diplomat indicated to Reuters however that
there was not too much hope on the EU side that a divorce deal
could be sealed before the end of the month.
"It's a tunnel with a very small light at the end of it," a
second diplomat said.
Barnier told reporters as he left his meeting with Barclay:
"Brexit is like climbing a mountain. We need vigilance,
determination and patience."
In Paris, French President Emmanuel Macron, asked by a
Reuters reporter if there was a "glimmer of hope" regarding a
Brexit agreement, replied: "Let us wait for the next few hours."
EU ministers convene in Luxembourg on Tuesday for a last
preparatory meeting before an EU summit next Thursday and
Friday.
DOWN TO THE WIRE
The pronouncements came at the end of a tumultuous week in
which Brexit negotiations have shifted wildly, starting with a
public row between London and Brussels. Both sides have appeared
anxious to avoid taking the blame should the deadline for
Britain's departure arrive with no deal secured.
But to get a deal done, Prime Minister Boris Johnson must
also sell any deal to the British parliament, which he suspended
unlawfully last month and where he has no majority. Parliament
has passed a law saying that Britain cannot leave the bloc
without a deal.
Johnson, the face of the 2016 Brexit referendum campaign,
insists the country will leave on Oct. 31 with or without an
agreement but he has not explained how that will be possible
without defying parliament.
The Brexit issue has deeply polarised the country and many
businesses fear they will be hit badly by a disorderly break
with the EU in just a few weeks a time. A no-deal Brexit could
also hurt global growth, roil financial markets and could even
split the United Kingdom.
Big investment banks said on Friday they had become more
optimistic on the prospects for a Brexit deal following the
upbeat meeting between Johnson and Irish Prime Minister Leo
Varadkar.
The latest developments pushed sterling to a three-month
high, taking its rally since Thursday to more than 3%, its
biggest two-day gain since mid-June 2016, before the Brexit
referendum.
Shares in companies exposed to Britain's economy also surged
with Royal Bank of Scotland up around 15% on the day and
housebuilders such as Persimmon, Barrett and
Taylor Wimpey all up about 10%.
The yield on 10-year British government bonds was on track
for its biggest three-day rise since 2017.
(Reporting by Gabriela Baczynska and Jonas Ekblom, Additional
reporting by Guy Faulconbridge, Elizabeth Howcroft, Josephine
Mason and David Milliken in London and Michel Rose in Paris,
Writing by Angus MacSwan; Editing by Jon Boyle)