It's not that risky yet. For the moment the UK can't leave without a deal and Ireland and the EU know it. I'm sure the EU would be quite happy for Ireland back down but they'll continue to back us while the risk is low. If no deal becomes a real option the EU might start offering us some perks to get us to change our position but hanging us out to dry will likely lead to real divisions within the EU. There'll be many countries thinking if the EU doesn't back Ireland now then how can they trust the EU will support them if they ever need it.
No deal has always been the legal default... the only thing stopping it is a majority of UK MPs who want to block it... but, critically,
there is no majority on what to replace it with. No deal is far more likely than you might think.
The GFA is a legally binding agreement. It says that people and goods are free to cross the border without checks.
The GFA categorically does
not say that. It is not acceptable that the EU expects a sovereign state to break itself up just to satisfy the EU's own laws. The GFA compels the UK and Ireland to do everything they can to maintain the peace in Ireland, but it does not rule out customs checks... it doesn't even rule out a hard border, but both Ireland and the UK have committed to no hard border nevertheless.
Why should the EU acquiesce to the UK's demands when those demands are just as unacceptable to the EU as the EU's demands are to the UK?
Because the UK has a legal right to leave (enshrined, ironically, in EU law itself) and the EU does not have any legal (or other) right to keep any part of a non-member state under its governance.
The Irish government's position is supported by all of the Irish political parties and by the vast majority of the population. There's far more support in the UK for the backstop than there is in Ireland for the government to change their position. It is up to the UK to find a solution that doesn't break the law that they helped create.
As stated above, there is nothing illegal about leaving the EU without a deal... on the contrary, it is an outcome provided for by the Lisbon Treaty. If you mean that leaving the EU would mean the UK breaking the Good Friday Agreement, that is not a given either. One could argue that by refusing to negotiate on customs checks, Ireland are breaking the GFA.
Writing from the perspective of another small EU country, what I can say is that if the EU doesn't back Ireland all the way, many of the 26 countries watching, especially the smaller ones will take note of it. And in any other future difficult moments the EU goodwill will be seriously compromised.
The EU have to back Ireland all the way and they are... but the point is that Ireland needs to shift their position because, at present, they are expecting nothing to change in NI (which is not a part of their country) after the UK leaves the EU when, quite obviously, things will have to change. If Ireland shifts, the EU shifts... if the EU shifts, the UK will shift, and hopefully there will eventually be a meeting point. But without Ireland changing its position, a deal seems very unlikely.
The trouble will come when it all backfires and the UK leaves without a deal... then we will see the flipside of this argument - if you want to stay a member of the club, you will do what you are told... and that will mean EU-mandated customs checks at the very least (... or suspending Ireland from the Single Market..). The UK have already committed to no hard border, and Johnson's proposals to replace the backstop would create a new legally-binding international treaty that would enshrine this into international law... and yet Ireland (and thus the EU) are opposing it?!
What will other EU countries think when the EU are forced to deal with Ireland after a No Deal Brexit and force them to carry out customs checks against their will - or, indeed, be forced to kick them out of the Single Market?
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edit: Another reason why the UK Government have good reason to be frustrated at this farce of a process is that both Ireland and the EU seem quite happy to consider any and all possibilities, such as customs checks away from the border, when it suits them... and yet, when the UK suggests the exact same thing it is suddenly out of the question.