By Gabriela Baczynska and John Chalmers
BRUSSELS (Reuters) - The European Union and Britain have made better progress towards a trade deal in the last few days but there is still a lot of work to do for an agreement to be in place by the end-year deadline, the bloc's chief executive said on Friday.
Diplomats briefed earlier by the EU's executive, which is negotiating with Britain on behalf of the 27 member states, said Brussels and London remained at odds over fishing rights, fair competition guarantees and ways to solve future disputes.
However, European Commission President Ursula von der Leyen sounded a more optimistic note on the last-ditch talks at a news conference, pointing to progress on the question of ensuring a level playing field for state aid.
"After difficult weeks with very, very slow progress, now we've seen in the last days better progress, more movement on important files. This is good," she said.
"Within the frame of the level playing field, progress for example has been made with state aid, but there are still quite some metres to the finish line so there's a lot of work to do."
Three senior EU diplomats told Reuters that, at the briefing for ambassadors, the Commission stressed that talks were still snagged on the three core issues, but there was now momentum that made them hopeful a deal could be clinched on time.
"There really was a feeling that we are seeing a lot of momentum and that somehow we will find a way," one said.
POSITIVE TEST
The chief Brexit negotiators suspended direct talks on Thursday after a member of the EU team tested positive for COVID-19, but officials continued working remotely to clinch a trade deal that would come into force in just six weeks.
UK sources who work on state aid said Britain had offered to set up a regulator for corporate subsidies, something the EU has long asked for. But the sources said that, without knowing what London's state aid regime would look like in the future, it was hard to work out rules to guide such a regulator.
One EU diplomat said the British proposal fell short of the bloc's demand for a body independent from the government and with a clear mandate.
Britain's transition out of the EU following Brexit ends on Dec. 31 and quotas and tariffs would hit bilateral trade from 2021, unless the estranged allies overcome their differences and seal a new partnership agreement that would also regulate ties from energy to transport to security.
Any agreement must still be approved by all EU countries, as well as the European Parliament, to come into effect.
With most deadlines missed and time running out, France, Belgium and the Netherlands have asked the Commission to update emergency plans in case talks fail and there is an abrupt split in trading ties.
However, a senior diplomat said the Commission told envoys it would only spell out contingency plans when it was clear whether the two sides were heading for a deal or a 'no deal'.