The UK prime minister has until a crucial summit in December to save the Brexit negotiations with Brussels.
Theresa May won a modest reprieve in the stalled talks on Friday. EU leaders signalled they are ready to move the negotiations forward in the coming months.
The leaders held open the hope of reaching a deal at the next regular summit in December.
They also ordered EU negotiators to start preparing for what Brussels will want during the period of transition.
What will May do now?
She faces a delicate political balancing act.
Weakened by events, she must try to meet EU demands for more concrete pledges on the UK’s divorce bill.
The risk is this will stoke a backlash from Brexit campaigners at home, some of whom would prefer she walks away from the talks.
What has May said?
That she cannot provide a specific financial pledge until she knows the shape of the future relationship.
The EU is insisting the two sides agree on an exit bill, the rights of EU citizens in a post-Brexit world and Irish border issues before delving into future ties.
Asked whether she had improved on an offer of around 20 billion euros, May said she had repeated commitments she made in a speech in Italy last month.
She said then the bloc would not be out of pocket when it came to its budget, which runs until 2020.
What did the EU’s other leaders say on Friday?
That they would begin preparations to move into “phase two” of the Brexit negotiations in December.
This is a step forward. It means London can discuss its future trade relationship with Brussels.
However, they also made it clear there will have to be developments before the end of the year on settling the bill that the EU says the UK owes.
This is estimated at around 60 billion euros.
A positive tone
All the EU leaders worked hard to strike a positive tone at the summit. May used a dinner date late on Thursday to appeal to the other 27 leaders to help her silence critics at home by offering a signal that the talks could move on.
Many were upbeat.
Analysts think this may be enough for May to calm immediate concerns at home after Brexit campaigners urged the British prime minister to signal her readiness to leave the EU without a deal and to rely on World Trade Organisation rules.
What did the final text say?
“The European Union notes that, while the UK has stated that it will honour its financial obligations taken during its membership, this has not yet been translated into a firm and concrete commitment from the UK to settle all of these obligations.”
An EU official says it took just 90 seconds for the 27 other leaders to adopt their Brexit conclusions at the end of the meeting, underlining how united they are.
Reaction from the business community
Uncertainty over the final shape of a Brexit deal has unsettled businesses on both sides of the Channel.
Terry Scuoler, CEO of the UK manufacturers’ association (EEF) welcomed the warmer words from EU leaders.
However, he said industry needed “more than a hint of progress”.
What they are saying
“What I made clear to my EU counterparts in relation to financial contributions is that nobody need be concerned for the current budget plans and that we will honour the commitments we have made during our membership,” – Theresa May told a press conference before returning to the UK.
“I think it is very clear that additional steps need to be taken,” – German Chancellor Angela Merkel says movement on the financial settlement is crucial for progress in December.
“A lot is in the hands of Theresa May,” – French President Emmanuel Macron takes a tough line.