Thread by @BrunoBrussels

ANALYSIS: EU scents potential to soften Brexit or for it, potentially, to be reversed FOUR NEXT STEPS: EXTENSION, NEW NEGOTIATIONS, LEGAL ASSURANCES or NO DEAL

Germany backs Article 50 extension - so does France so it is a done deal if May asks
Peter Altmaier, German economy minister (an important post given coalition) comments very important - he is genuinely very close to Merkel on EU policy and significantly to Selmayr in EC)

Clarification process is seen by the EU as moment when government’s red lines could well shift - permanent customs union, poss. with British involvement in European trade policy, could be key. Focus turns away from legal assurances on backstop to substance of future relationship

EU will use the ticking clock and looming no deal to put the pressure on the government and Commons, May will use it too 
Barnier: "We are 10 weeks from the 31st of March and at 10 weeks the risk of a no deal has never seemed so high.”

STEP 1 - EXTENSION
Short extension is a certainty, believes the EU and an extra year could be given if Britain rethinks Brexit

Article 50 extension periods: Until EU elections on 23 May, I’m told that EU negotiators know tUK is at least a month behind on legislation so option disappears over next 2 to 3 weeks. So until EP sits on 2 July (so end of June)

OR
Until 2020 to hold a referendum or big rethink. Legal route of doing this given the EU elections is unclear and nothing has been settled but most think this would be possible if a major softening or reversal of Brexit was on the cards.

STEP 2 - NEW NEGOTIATIONS
The EU would be ready to reopen the Brexit deal if May softens red lines. A new deal could be unlocked if May signs up to a “customs union plus” (so better than Turkey’s) which could include involvement in EU trade policy

There is some support to reopen backstop in these circumstances but EU has not taken a position, France, Ireland and others are more hostile. Article 50 can be extended to do this - certainly until end of June and possibly longer if government asks

STEP 3 - LEGAL ASSURANCES ON BACKSTOP
Further legally binding assurances on the backstop are possible but the extent of the defeat means the EU is now assuming, rightly, that the issue is deeper and about the substance of Brexit itself

STEP 4 - NO DEAL
The EU is confident that with extension and a new approach form government that no deal can be avoided but preparations will be stepped up. EU will pressure MPs by warning that automatic no deal can happen unless Commons comes up with consensus on what next