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Brussels (AFP)

EU leaders were set to agree Friday to start preparatory talks on the bloc's relationship with Britain after Brexit, offering some progress for embattled Prime Minister Theresa May to take back home.

German Chancellor Angela Merkel struck an optimistic note after a summit dinner on Thursday night, saying that despite delays in the negotiations, she could see "zero indications that we will not succeed" in reaching a final agreement.

EU leaders have made clear they will not agree on Friday to move talks on to the future trading relationship with Britain, saying there has not yet been enough progress on the terms of the divorce.

Draft conclusions indicate they will delay the decision until the next summit in December, but they will agree to "start internal preparatory discussions" on trade and a possible transition deal.

The slow progress of the negotiations, particularly on Britain's financial settlement, stoked fears it could leave the EU in March 2019 without a deal in place, risking economic and legal chaos.

Merkel emphasised she did not want this, saying: "I want very clearly a deal and not some unpredictable solution, on this we are working very intensively."

May was due to join her 27 counterparts for a working breakfast on the future of the EU, before leaving them to discuss the state of Brexit negotiations.

The EU agrees that of the three key separation issues at stake, citizens' rights is the most advanced, but sticking points remain on the bill and Northern Ireland's border with Ireland.

- A deal to defend -

Juncker, who previously said it would take a miracle to move the talks on at this week's summit, said on Friday: "I don't think there will be a miracle."

But an EU source said the leaders would now begin preparations on guidelines for the trade talks, "saving time" if and when the political decision was taken to move forward in December.

May pressed her colleagues over a dinner of pheasant late Thursday for "urgent" progress on a deal she could sell to voters and her own Conservative party, which is still divided over Brexit.

"There is increasingly a sense that we must work together to get to an outcome we can stand behind and defend to our people," she said, according to Downing Street.

A British official noted that May, who lost her parliamentary majority in the June election and is facing calls by some Conservatives to walk away from the talks, was "working against a difficult political backdrop".

Dutch Prime Minister Mark Rutte said May "pleaded her case well", but she did not offer any more detail than in a speech she made in Florence in September.

He called for more "concrete" positions in the runup to December.

European leaders have been increasingly vocal about their frustration at divisions in May's cabinet over Brexit, saying they are still unsure what Britain wants despite five rounds of negotiations.

The exit bill is the most poisonous issue, with Germany and France insisting that there should be no impact on the EU's budget from Britain's departure.

In Florence, May promised to maintain Britain's contributions for two years after Brexit to complete the current EU budget period, totalling around 20 billion euros ($24 billion).

European Parliament chief Antonio Tajani dubbed that sum "peanuts" this week and said it should be nearer 50 billion or 60 billion euros.

- 'Find a solution' -

May engaged in a whirlwind of diplomacy with key European leaders ahead of the summit.

In a move to sway her colleagues on what is a key topic for them, she published an open letter to the three million European citizens living in Britain on Thursday, saying a deal to secure their post-Brexit rights was "within touching distance".

A German government source said progress on citizens' rights had gone "very, very far" and crucial future EU-British ties "outweigh the current dispute about finances."

The source concluded: "I believe everyone is aware of that and that is why we are optimistic that we are going to find a solution there -- with theatrical rumblings."

© 2017 AFP