Coalition talks are close to breakdown over whether the government will exercise its opt-out of more than 130 EU police and criminal justice measures, the Guardian has learned.

The Tory Cabinet Office minister, Oliver Letwin, and the Liberal Democrat Danny Alexander, have been trying to hammer out a deal over which of the 130 measures are regarded as so vital that Britain would immediately ask Brussels for permission to opt back into them.

But it is understood that the talks have effectively broken down with the Lib Dems digging their heels in over such emblematic issues for the Tory right as the European arrest warrant.

A source with knowledge of the talks has confirmed that "they are not making a great deal of progress, they are having to work through the package on a case by case basis".

The talks have been going on since October when the home secretary, Theresa May, told the Commons of the government's intention to exercise Britain's mass opt-out of police and criminal justice measures agreed between the 1992 Maastricht treaty and the 2007 Lisbon treaty under the banner of "repatriating British powers from Brussels".

The Lib Dems are prepared to sign up to the mass opt-out but only if the Conservatives agreed beforehand to provide the list of measures that Britain would immediately ask permission to opt back into.

It now appears that the coalition talks to reach that agreement have run into the sand.

A breakdown over the issue has serious implications for David Cameron's strategy on Europe as this is one of the main issues he was hoping to secure demonstrable progress on this side of the general election, regardless of any promises of a referendum afterwards.

The row at the heart of the coalition's European strategy broke cover on Thursday morning when the minister without portfolio, Ken Clarke, "announced" on BBC Radio 4's Today programme, that ministers would opt back in to 30 of the 130 measures that were regarded as essential for crime and justice purposes.

However a senior Lib Dem source rapidly made clear that the politician was jumping the gun: "There's a lot of common ground between Ken Clark and the Liberal Democrats on Europe, but he's getting ahead of himself on the justice and home affairs issue. No decision has been taken about how many measures the UK will opt back into. The question of whether to exercise the mass opt-out remains under discussion in government."

One of the big bones of contention in the Letwin/Alexander talks has been the future of the European arrest warrant which Tory right-wingers have put at the centre of their campaign for the repatriation of British powers from Brussels.

The Lib Dems, with the support of the police, have argued that there would be wide support across Europe to reform the workings of the arrest warrant.

The Eurosceptics argue that it is a waste of money to spend £30,000 sending a Pole back from London to Warsaw to face charges of 100 outstanding parking tickets.

But the Lib Dems have been arguing that this could be dealt with by simply raising the threshold for the seriousness of the crimes that would trigger the use of the warrant, and that the entire system did not have to be dismantled.

Sarah Ludford, the Lib Dems' home affairs spokeswoman in the European parliament, said in a Times letter on Thursday, that the arrest warrant had led to more than 300 paedophiles, murderers and rapists being returned to Britain to stand trial. She also said it would be folly to abandon the European-wide sharing of DNA and fingerprints found at crime scenes.

The only point of agreement the Lib Dems seemed to have reached with the Conservatives is that the plans for a European public prosecutor (which does not yet exist) should be abandoned.