The bloc's Brexit negotiators told national diplomats in Brussels late last night that a divorce deal was almost there.
Reuters UK Bureau chief Guy Faulconbridge this morning tweeted the news, hours after the Irish PM said he was hopeful a deal could be done in two weeks.
The Pound got a boost against the Euro and the Dollar at the latest revelations.
During talks with Brussels boss Donald Tusk last night, Mr Varadkar said it could take time to get a proper trade agreement in place, but was hopeful that a deal to sign off on the Northern Ireland border CAN be done in a fortnight.
"I think we are entering a critical and decisive stage of these negotiations and there is a good opportunity to clinch a deal over the next couple of weeks," he said positively.
Theresa May faces a crunch summit with the other leaders of the 27 countries on October 17 and 18, and the clock is ticking to get an agreement signed off in time for our EU exit next March.
Issues over the Northern Ireland border and what our future trade relationship with the bloc will look like have been hampering progress for months.
If an agreement is reached at the October summit, Mrs May will take her deal back to MPs to vote on in the Commons within weeks.
If a deal isn't signed by then, an emergency Brexit meeting in November has been pencilled in.
Nothing will be sealed unless a backup plan for the Northern Ireland border can be reached.
The EU want to keep Northern Ireland under the bloc's customs rules after we leave, but the Prime Minister has ruled out this because it would effectively split up the UK with a border in the Irish sea.
The DUP have said their lines are "blood" red on this – and they would withdraw their support for the PM if she betrayed them.
It is understood that Mrs May is working on new plans – which could include a temporary all-UK customs union with the EU after we leave. But this could hamper Britain's ability to do trade deals with other countries outside the bloc.
What is the Northern Ireland border and how is it holding up Brexit talks?
Currently the border between Northern Ireland and the Republic is open with no checks on goods or people.
Ireland and the UK are in a "common travel area" of passport-free movement.
And as they are both in the EU single market, there is no restriction on goods and no tariffs.
Leaders in London, Belfast, Dublin and Brussels are keen to avoid a "hard border" after Brexit — when the UK has vowed to leave the single market and customs union.
This would mean border checks being reintroduced to monitor movement between jurisdictions operating under the two different regulatory systems.
There were fears this could have jeopardised the Good Friday Agreement peace deal.
Irish PM Leo Varadkar said he could block Brexit talks unless the UK signed a formal agreement not to have a hard border.
If this happened Ireland’s businesses could be left paying tariffs on imports and exports with its biggest single trading partner, Britain.
Some had suggested moving border checks across the Irish Sea — but Unionists and Brexiteers rejected that, saying it undermines the integrity of the UK.
Northern Ireland parties including representatives from Sinn Fein and Alliance will meet Mr Barnier and Guy Verhofstadt today for talks in Brussels, and the DUP and UUP will have similar talks next week.
But no new checks will be accepted by Theresa May's DUP allies, Nigel Dodds said today.
"It's important … that there are no economic barriers put up, tariffs, checks or anything else between one part of the United Kingdom and the other."
And Irish Foreign Minister Simon COveney said that any agreement can't rely on the devolved Government because they are not currently sitting.
"Any agreements that are made and signed off on are between the British government and the European Union and that will be a legal text of a treaty that has to be fully legally operable, whether or not there is devolved government in Northern Ireland," he said this morning.
"In other words, in all scenarios, Brexit has to work."
Not delivering Brexit would be 'greatest' risk says Liam Fox – and deal can be tweaked later
NOT delivering on the Brexit promised to the British people would be the "greatest political risk" to take.
The International Trade Secretary insisted that "we must leave on the 29th of March" and admitted he thought it would be possible to get a changed deal later on.
He told Bloomberg: "Not to deliver Brexit is the greatest political risk we could run.
"We should try to get as much of a final deal as we can get by the 29th of March, but it’s self-evident that if it’s a bilateral treaty, it can be revised later on."
Negotiations are at a crunch point, with less than six months to go until Britain formally quits the EU at the end of next March.
On whether Theresa May has made too many concessions to Brussels, Mr Fox said: "We all had our own reservations about it, but that is the collective decision.
"Whilst I may be very sympathetic with those who take an ideologically purist position, we are also politicians whose job is to be able to deliver."
He said that Brexiteers looking to change our EU exit didn't get that Mrs May has no majority in the House of Commons.
The PM's Chequers plan has been slammed by leavers and remainers alike, but she insists there's no other deal on the cards which would keen Northern Ireland and the rest of the UK together.
"We have no majority in the House of Commons — and even if we did, that doesn’t guarantee that we have got a Leaver majority. And the reality is that we will have to get any deal through the House of Commons in the end."
What happens next with Brexit?
TODAY: Talks between the EU negotiator Michel Barnier and Northern Ireland parties Sinn Fein and Alliance get underway in Brussels.
MONDAY: Mr Barnier meets with DUP politicians over the Northern Irish border. British officials work on the wording of their new offer to avoid a hard border.
OCTOBER: Theresa May attends an EU Council summit where a Brexit deal is hoped to be thrashed out. Officials are still working towards this deadline.
NOVEMBER: If no deal is reached in October, an emergency summit has been pencilled in for a weeks later. Both sides say this is the last chance to secure an agreement.
DECEMBER: The PM will take her deal back to MPs to vote on in the House of Commons. It's expected to be a vote between her deal and no deal at all, but some MPs want to force her to renegotiate, and others are demanding another referendum.
MARCH: Britain formally leaves the European Union, and if a deal is done, the 21-month transition period will begin.
This morning the Irish European Affairs Minister Helen McEntee said the "will was there" between both sides and she was confident that new plans to deal with the thorny issue of the Irish border would soon be revealed.
She told Radio 4's Today programme: "We have less than two weeks before the next European Council meeting, whatever the deal is, should be brought forward to Michel Barnier so we have time to look at it.
"I have confidence on the basis I think the Prime Minister wants to reach agreement."
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