LONDON (Reuters) - Prime Minister Theresa May urged restive lawmakers to back her in the final stages of Britain’s exit from the European Union, saying talks were in their most difficult phase even if a deal was close.

Britain's Prime Minister Theresa May leaves Downing Street in London, Britain, October 22, 2018. REUTERS/Henry Nicholls

After facing some of the fiercest attacks to date over her Brexit plans since again failing to clinch a deal at an EU summit last week, May tried to calm passions in parliament where her strategy has angered eurosceptics and EU supporters alike.

“Serving our national interest will demand that we hold our nerve through these last stages of the negotiations, the hardest part of all,” May told parliament.

Financial markets seized on the possibility that May could be toppled as prime minister by rebels in her Conservative Party, driving sterling below $1.30 to its lowest since Oct. 4.

With just over five months until Britain is scheduled to exit the EU, talks have stalled over a disagreement on the so-called Northern Irish “backstop”, an insurance policy to ensure there will be no return to a hard border on the island of Ireland if a future trading relationship is not agreed in time.

But May’s attempt to unlock the talks by considering an extension to a status-quo transition period beyond the current proposed end date of December 2020 has further riled both pro- and anti-EU factions in her deeply split Conservative Party.

May again dismissed the EU’s proposed backstop as unacceptable and she set out two options for Britain to choose from: an extension to the transition period, or a temporary UK-EU customs territory which was first outlined earlier this year.

May said the EU had made a substantial shift on the latter option. EU sources told Reuters negotiators were looking at ways to promise Britain a customs deal that could stretch Brussels’ Brexit red lines but might break a deadlock.

In an attempt to highlight how much progress has been made in more than a year of talks with the EU, she told parliament the government has reached agreement on everything from Gibraltar to future security over the last three weeks.

“Taking all of this together, 95 per cent of the Withdrawal Agreement and its protocols are now settled,” she said.

“VASSAL STATE”

But the deal - the terms of Britain’s divorce - cannot be signed off until the two sides settle on future management of the border between Northern Ireland and EU member state Ireland.

British and EU leaders are committed to avoiding obstacles at the border, a crucial aspect of the 1998 Good Friday peace deal that ended decades of Irish sectarian bloodshed.

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The EU proposal for Northern Ireland to remain in the bloc’s customs union has been rejected by May as it would potentially create barriers to trade with the rest of Britain - something ruled out by Northern Ireland’s DUP party, whose 10 votes in parliament prop up May’s government.

At an EU summit in Brussels last week, any agreement seemed just as far off as it did months earlier, with EU officials and diplomats saying that May had offered nothing new to ease the deadlock.

Since then, her proposal to extend the transition period has stoked anger among Conservative eurosceptics, who fear she is leading Britain into a deal that will make Britain a “vassal state” indefinitely - unable ever to fully leave the EU or to forge its own free trade deals with other countries.

Critics of May used Britain’s Sunday newspapers to rhetorically savage the British leader, with unnamed rivals using phrases such as “assassination is in the air”.

However, that approach looked to have backfired as even May’s harshest critics condemned the violent nature of the comments, tempering any confrontation with their leader.

A vote of no-confidence in May would be triggered if 48 Conservative lawmakers submit letters to the chairman of the party’s so-called “1922 Committee” of backbenchers to demand such a vote. The Sunday Times said 46 had now been sent, but Reuters could not verify that number.

However a planned show of strength among the Brexiteers, who intended to rebel at a vote on Northern Ireland legislation in parliament later this week, was called off by the leader of the rebellion, former minister Steve Baker.