Senior figures close to the negotiations have said there is an unwillingness on the EU side to finalise a Brexit deal.
According to the Government insiders, the aim is to put pressure on Theresa May over money while not being seen to put the EU’s financial interests over the right of citizens
One Whitehall source told The Times: “Clearly it is not in the interests of the EU side to accept that it is now only money that is the sticking block to progress.
“But in reality that is the situation. We could have wrapped up most of citizens’ rights by now but we are still waiting to hear their response to our proposals.
“It is hard to see this as anything else other than an attempt to increase the pressure on our position.”
Some European diplomats have also admited privately that calling for the EU courts to have direct oversight of residency rights is a “smokescreen”, according to the newspaper.
They claim it is designed to ensure that the 27 member states cannot be accused of holding up talks just over money.
They believe the real aim is to push Britain into making an “absolute” commitment on its share of £205billion budget liabilities.
Britain has already committed in writing to paying budget payments of £20 billion in budget payments after Brexit between March 2019 and the end of 2020 to stop a “black hole” in EU budget spending.
Agreeing to pay the total liabilities would add as much as £28 billion to the total bill.
Diplomats close to the drafting talks said Germany and other countries privately think that a deal on residency rights is “very close”, but still want more money.
A source said: “This is really about getting the balance — citizen rights and Ireland are more or less there. The money is not.”
Mr Davis expressed his frustration last week over EU negotiator Michel Barnier’s refusing to discuss the UK’s offer on citizen’s rights and instead asking for more money.
The deal would allow EU nationals to leave the UK for extended periods and be allowed re-entry with their rights unchanged.
In return, UK nationals living in an EU country could move and settle to another.
It comes as Theresa May and Jean Claude Juncker met for a hastily arranged dinner.
Joined by Brexit Secretary David Davis, the Prime Minister had dinner with the Commission president and EU chief negotiator last night in a bid to end the stalemate over the UK’s divorce settlement.
A statement released after this evening’s dinner on behalf of both parties said the meeting had seen a “broad, constructive exchange” and agreement the pace of negotiations should increase in the coming months.
It said: “As regards the Article 50 negotiations, both sides agreed that these issues are being discussed in the framework agreed between the EU27 and the United Kingdom, as set out in Article 50 of the Treaty on European Union.
“The Prime Minister and the President of the European Commission reviewed the progress made in the Article 50 negotiations so far and agreed that these efforts should accelerate over the months to come.
“The working dinner took place in a constructive and friendly atmosphere.”