Are Brexit talks at the final hurdle? UK and EU 'have almost solved TWO out of the three sticking points with just fishing rights left' - as Lord Hague claims Boris Johnson 'has convinced the EU he is crazy enough to go for a No Deal Brexit'

Michel Barnier has told EU ambassadors the UK is willing to give ground on the crunch issue of the 'level playing field', with fishing rights now the major obstacle to a trade deal. 

The EU's chief negotiator suggested a post-Brexit trade agreement between Britain and Brussels could be struck this week if the UK compromises on fish. 

However, the bloc's insistence that fishing matters must be linked to trade could yet scupper the chances of an accord being reached. 

It came as Lord Hague said Boris Johnson had persuaded the EU he is 'crazy enough' to walk away from trade talks without a deal.

The Tory former foreign secretary said the Prime Minister had 'mounted an effective, thoroughly convincing and true demonstration of his own readiness' to accept a chaotic split from the bloc on December 31. 

As a result, Mr Johnson has created the circumstances in which a mutually beneficial deal could still be done, Lord Hague argued, because Brussels believes the PM will quit the talks if the terms are not acceptable.   

Referring to Mr Johnson's meeting with EU chief Ursula von der Leyen last Sunday, Lord Hague said: 'It is an advantage at such a moment if your counterpart believes you are crazy enough to cause a lot of damage rather than settle for a poor outcome.' 

Michel Barnier, the EU's chief negotiator, is said to have told ambassadors the UK is now willing to move on the crunch issue of the 'level playing field' on rules 

Lord Hague said Boris Johnson had 'mounted an effective, thoroughly convincing and true demonstration of his own readiness' to accept a chaotic split from the bloc on December 31

The former foreign secretary said the PM's apparent willingness to accept a chaotic split from the EU on December 31 had led to an improvement in the state of the trade talks

What are the sticking points in Brexit talks? 

FISHING

The UK has insisted that it will take back control of its coastal waters from the end of the transition period.

But the EU was demanding its fleets maintain previous levels of access - with Emmanuel Macron under particular pressure from the French fishing industry.   

Initially the UK said it wanted to reclaim 80 per cent of the EU quotas from January 1.

However, Brussels suggested that only 18 per cent should be restored.

The two sides are thought to be close to a 'landing zone' that includes a transition period, perhaps of five or seven years. However, there is no settlement yet.

LEVEL PLAYING FIELD 

The EU has insisted the UK commits to 'level playing field' provisions, guaranteeing that it will not undercut businesses with lower environmental standards and regulation.

State aid has emerged as a particular issue, especially as coronavirus puts swathes of the economy unviable. 

But the UK says it must regain sovereign powers to decide on rules, even though it has no plans to lower standards or warp competition by subsidising the private sector. 

It appeared this area was close to resolution last week, before France reportedly laid down a series of extra conditions including huge punishments for breaking the rules.

Although the UK is happy with 'non-regression' - meaning current standards are accepted as a baseline - it has dismissed demands to obey rules made by the bloc in future. 

GOVERNANCE

The enforcement of any deal, and who decides whether rules are broken, has been one of the flashpoints from the start.

Breaking free of the European Court of Justice was among the biggest demands of Brexiteers from the referendum. 

But the EU has been pushing to keep control of the governance, as well as insisting on tough fines and punitive tariffs for breaches.

The situation has been inflamed by the row over the UK's Internal Market Bill, which gives ministers the power to override the previous Brexit divorce terms to prevent blockages between Britain and Northern Ireland.

Critics say that demonstrated why the enforcement mechanisms must be potent - which is why ministers had considered it important the issue was resolved. 

Mr Barnier is said to have told a private meeting of ambassadors that a deal could be hammered out in the coming days but only if the UK gives ground on fishing.

He told the briefing that Britain had now accepted the need for a 'rebalancing mechanism' on rules which could resolve the 'level playing field' row. 

The mechanism would allow tariffs to be imposed on the UK if it departs too far from EU rules and regulations.

However, Lord Frost, his UK counterpart, is said to have demanded that the EU drop its insistence on linking fishing rights to trade in return for the concession, but Brussels turned him down. 

That means that while progress appears to have been made on the rules issue, the negotiators still appear to be some way from fully resolving it. 

The UK does not want fishing to be linked to trade because it fears the EU could use a fishing dispute to suspend parts of the trade deal.  

An EU diplomatic source told The Telegraph: 'He was a lot less gloomy than I was expecting. If both sides can come out of their trenches on fish, Barnier said there could be a deal this week.' 

Another diplomat said 'there might now be a narrow path to an agreement' if the 'remaining hurdles' can be cleared in the next few days.  

The two sides have been deadlocked on three issues for months: Fishing rights, the 'level playing field' and the governance of the deal.  

The EU wants the UK to stick to rules made in Brussels in the future to ensure there is fair competition between businesses in Britain and those on the continent. 

Any move away from those rules by the UK could result in the EU imposing tariffs. 

The 'level playing field' issue is heavily linked to the issue of governance which relates to how the terms of the deal would be enforced, with the EU wanting the ability to impose tariffs should Britain break its commitments. 

A breakthrough on rules would likely pave the way for a breakthrough on governance, leaving fishing rights as the one remaining major bone of contention. 

Lord Hague today said there had been a 'slight improvement in the atmosphere of the talks' in recent days and that Mr Johnson is responsible. 

Writing in The Telegraph he argued the PM's apparent willingness to end the 'standstill' transition period on December 31 without a deal had forced the EU to adopt a more realistic negotiating stance. 

'It is time to acknowledge the crucial role played in producing that improvement by the convincing performance of the Prime Minister himself,' Lord Hague wrote. 

'That is not to say that the Government's overall approach, which has included digging a hole of potentially breaking international law and then digging itself out of it, has always been convincing.

'Nor that the state of preparations for all the consequences of no deal at ports is yet strong enough to be reassuring. But Boris has mounted an effective, thoroughly convincing and true demonstration of his own readiness, personally and politically, to walk away from an unsatisfactory deal.'

Lord Hague said he still believes a no deal split would be 'disastrous' for both the UK and the EU. 

But he insisted that in a 'tricky negotiation, the other side has to know you are ready to ditch the whole thing'. 

Lord Hague said of Ms von der Leyen's dinner with Mr Johnson last weekend that the President of the European Commission will have 'looked into his eyes and seen that he is adamant that he is prepared to leave with no deal'. 

'It is an advantage at such a moment if your counterpart believes you are crazy enough to cause a lot of damage rather than settle for a poor outcome,' he said.

Mr Johnson has warned there is a 'strong possibility' of Britain and Brussels failing to agree a deal which would force the two sides to trade on basic World Trade Organisation terms from January 1 and see tariffs imposed on goods.