BRUSSELS (Reuters) - A row between London and the European Union over the “Irish backstop” is blocking a Brexit deal and could mean Britain leaving on March 29 without one, disrupting trade.

A Brexit sign is seen between Donegal in the Republic of Ireland and Londonderry in Northern Ireland at the border village of Muff, Ireland, February 1, 2018. REUTERS/Clodagh Kilcoyne

This is what the backstop is and why it matters:

BOTH SIDES WANT TO AVOID A “HARD BORDER” - WHAT’S THAT?

In 1998, Britain and Ireland made the Good Friday Agreement to end 30 years of violence over whether Northern Ireland should stay British or join the Irish Republic. With both states in the EU, that ended checks along a 500-km (300-mile) land border. But Britain leaving the EU single market and customs union would, in principle, mean checkpoints that would be targets for militants.

AND THE SOLUTION IS...?

A UK-EU free trade deal to be negotiated during a status-quo transition of 20 to 44 months will ensure seamless borders.

BUT THERE’S A CATCH

Ireland and the rest of the EU want a “backstop” insurance policy. It says the UK will follow many EU rules “unless and until” “alternative arrangements” ensure no hard border. The EU had proposed keeping only Northern Ireland in its economic area but British Prime Minister Theresa May and her Northern Irish allies argued that would set Northern Ireland on a course toward union with the Republic. It would now keep all of the United Kingdom tied to EU rules. Last month, May’s deal was heavily defeated in parliament, which told May to get the EU to junk or rework it. The EU refuses, including ruling out a time limit or giving Britain a right to end the backstop.

STALEMATE

May argues there are “alternative arrangements” to avoid a hard border without the backstop. The EU says that is its hope too, but that those alternatives are untested and need to be worked on during the transition. So, with Ireland uncompromising and calling Britain’s alternatives “wishful thinking”, the backstop stays, unchanged, the EU says.

SO WHAT HAPPENS NOW?

Neither side is blinking yet. Both are stepping up planning for Britain leaving on March 29 with no deal. Many EU officials and diplomats see either an 11th-hour deal at a quarterly summit on March 21-22 followed by a technical 2-3 month delay in Brexit to let Britain pass laws, or a “no deal” crash out on March 29.

BUT DOESN’T NO DEAL MEAN A HARD BORDER?

This is the heart of the conundrum for Ireland and the EU. Britain says it will not impose border checks. So has Ireland. But the EU says there must be checks on British goods coming in. A brief status quo on the border seems likely. But the EU will want to see at least discreet checks being made, rather as are envisaged under the “alternative arrangements”. If not, Britain would have a “back door” to the EU single market and Ireland could risk having its own exports to the rest of the EU being subject to checks at EU ports to ensure they are not British.

SO THE PRESSURE IS ON

Britain faces heavy disruption if the EU imposes checks and tariffs on UK exports. So too do EU businesses. Longer term, the EU fears a failure of talks will poison relations with its big neighbor for years as they try to build new trade relations. But the EU says the backstop is a vital defense for its single market against a major economy dodging its rules. British lawmakers call it an intolerable attack on sovereignty. Very few are willing to bet heavily on one outcome.