This is worrying, since it suggests that HMG still thinks that the EU26 can be persuaded to persuade the Irish to accept a hard border. We also saw this before the December 2017 agreement that ruled a border out. It suggests that there is still bad faith on the issue in London.
And that does indeed make no deal at all a real possibility. Hopefully the June Council will take the opportunity to warn all stakeholders, notably firms, that they cannot take a transition for granted and that they should be preparing for a cliff-edge Brexit.