UK Deal Over EU Membership Remains Illusive - Analysis

The UK's attempts to reach a deal with partners in the EU on how to reform its role inside the regional bloc were dragging into the afternoon on Friday, with key differences remaining on the areas of restricting welfare benefits and regulating the financial sector in London.

Poland's secretary of state for European affairs, Konrad Szymanski, told reporters that ministers were working hard to find an agreement over how Britain might index child benefit payments to living standards for EU migrants working in the UK but with children living abroad.

Complicating things further, Greece is piling pressure on its partners to continue keeping their borders open to the flow of refugees entering its shores from war-torn nations in the Middle East or risk vetoing the deal with Britain. Any deal needs total unanimity from all 28 members of the EU.

"We are close of course but we are not at the end of the story," Szymanski said. "I have not had any weekend plans since the beginning of the summit so I am prepared to stay here."

On the issue of a possible Greek veto he said: "I hope that in the parallel world here in this building we can manage this issue because we spent a lot of time yesterday to find a common ground and a pan-European response to the issue."

Cameron left the European Council in Brussels at 0430GMT Friday morning after a long night of preliminary talks. He found himself waking up three hours later to re-enter the cauldron where Donald Tusk, the president of the European Council, held bilateral meetings with President Francois Hollande of France and Czech Prime Minister Bohuslav Sobotka, who is representing the four Visegrad countries - Hungary, Poland, Czech Republic and Slovakia.

The crux of the disagreements surround how many years Britain would be able to request the implementation of a safeguard mechanism, otherwise called an emergency break, on in-work benefits for new EU migrants entering the UK.

In talks with Tusk, Sobotka insisted the emergency break should only be available to Britain for a maximum of five years, whereas Britain wants the availability of the mechanism to remain in place for 13 years - seven years initially followed by two renewable periods of three years.

Another key standoff is over the issue of how the allocation of child benefits would be indexed for EU migrants residing in the UK but with children abroad. Eastern European countries want the reduction in payments to apply only to new arrivals whereas Britain insists it should apply to all migrants including those already living in the country.

While Eastern nations haggle with Cameron over benefits, France, Germany, Belgium and Luxembourg have all renewed their concerns over parts of the deal that would allow the UK to carve itself out completely of the EU's single rule book for banks, which specifies harmonized prudential rules for all EU lenders.

The initial deal presented to Britain opened the door for different sets of Union rules to apply to non-euro area countries in the areas of supervision, resolution and macro-prudential rules.

But the UK's partners are concerned that writing this into legislation will give other non-eurozone countries such as Bulgaria, Poland, Hungary, Romania, Sweden and Croatia an excuse to drop their obligations to one day adopt the euro. Cameron had set his sight on making sure these assurances within a new deal were incorporated into the EU Treaties, while his adversaries were fearful of any such inclusion.