An arrangement to avoid a hard border between Ireland and Northern Ireland cannot be extended to the whole of Britain, as London has proposed, according to the EU.
Britain's proposal would see the UK staying tied to the EU's customs union for up to another year after an almost two-year Brexit transition period.
EU chief negotiator Michel Barnier told a news conference that the British proposal was "fairly paradoxical".
"Our backstop cannot be extended to the whole UK. Why? Because it has been designed for the specific situation of Northern Ireland. What is feasible with the territory the size of Northern Ireland, is not neccessarily feasible with the size of the whole UK."
Barnier also commented on remarks by British Foreign Minister Boris Johnson, obtained by Buzzfeed.
Johnson said in the audio: "Imagine Trump doing Brexit. What would he do? He'd go in bloody hard."
In response, an exasperated Barnier had this to say: "We respect the British red lines. I would like that Britain respects its own red lines, too."
Barnier's comments underlined that both sides remained apart on key issues.
But what is going to happen if the UK crashes out of the EU without agreeing on the borders?
"In that case I would expect a very negative economic shock to the UK", said Zsolt Darvas, analyst at the Brussels-based Bruegel think tank.
"In that case there would be a sudden disruption of various value chains, And if all of these European value chains were suddenly disrupted, there would be a very negative impact on the UK, I would imagine a very deep recession."