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EU eyes softening key state aid demand in Brexit talks - sources

Published 03/08/2020, 13:55
Updated 03/08/2020, 15:10
© Reuters. FILE PHOTO: European Union chief Brexit negotiator Michel Barnier and British Prime Minister's Europe adviser David Frost 5 are seen at start of the first round of post -Brexit trade deal talks

© Reuters. FILE PHOTO: European Union chief Brexit negotiator Michel Barnier and British Prime Minister's Europe adviser David Frost 5 are seen at start of the first round of post -Brexit trade deal talks

By Gabriela Baczynska

BRUSSELS (Reuters) - The European Union is willing to compromise to rescue troubled Brexit talks by softening its demand that Britain heed EU rules on state aid in the future, diplomatic sources told Reuters.

They said Brussels could go for a compromise entailing a dispute-settling mechanism on any state aid granted by the UK to its companies in the future, rather than obliging London to follow the bloc's own rules from the outset.

Provisions to ensure fair competition pose the biggest stumbling block in the negotiations aimed at sealing a new trade accord from 2021 following Britain's exit from the EU in January after 46 years of membership.

The 27 EU countries have long demanded so-called "level playing field" guarantees from Britain if it wants to continue selling goods freely in the bloc's lucrative single market of 450 million people - after Britain's standstill transition period following Brexit expires at the end of this year.

Without an agreement, trade and financial ties between the world's fifth largest economy and its biggest trading bloc would collapse overnight, likely spreading havoc among markets, businesses and people.

But Prime Minister Boris Johnson's government has refused to be bound by EU state aid rules, environmental standards or labour laws, saying the essence of Brexit was to let Britain decide alone on its own regulations.

"The room for compromise lies in something that will let the UK decide on its own since 'regaining sovereignty' is such a big Brexit thing," said a EU diplomat close to the Brexit talks.

"We would reserve the right to decide on any consequences vis-à-vis access to the single market for UK companies as a result."

Another diplomatic source said such a dispute resolution mechanism could be a way to help clinch an agreement.

CAUTIOUS OPTIMISM

A third diplomat, also speaking on condition of anonymity, acknowledged the EU was ready to ease its earlier demands that Britain agree to a "dynamic alignment" of its competition rules in the future with the bloc's own.

The person said, however, Britain would still need to agree with the EU on a broad outline of company subsidies policy - rather than specific laws or cases - to allow the bloc to go for such a fix. EU Brexit negotiator Michel Barnier has repeatedly urged London to make its future plans on that known to the bloc.

"There must be a solid framework with independent oversight. If they agree to settle on broad rules for granting state aid and to have this independent institution, then we have a deal," said the diplomat.

The other significant sticking point is fishing rights in sea channels between the EU and Britain. The bloc has previously signalled it was willing to compromise in that area as well should London shift as well.

While arduous, the negotiations have brought the sides closer in recent weeks on some other aspects, leaving the EU cautiously optimistic on chances for an overall deal.

"Fisheries won't wreck the whole thing...It's just about waiting for the right time for the UK to move," said a fourth EU diplomat.

© Reuters. FILE PHOTO: European Union chief Brexit negotiator Michel Barnier and British Prime Minister's Europe adviser David Frost 5 are seen at start of the first round of post -Brexit trade deal talks

Others have warned the talks could still go right down to the wire.

(Reporting and writing by Gabriela Baczynska with additional reporting by Philip Blenkinsop; Editing by Mark Heinrich)

Latest comments

if anyone in the EU thinks that the UK government is going to move on this they need their head checking. Political parties think about votes first and economies second.
the 'fourth' EU diplomat should not be deluded
Guys this is fake news! Nothing like this has reported within the bloc - don’t know whether Reuters has been faster than the EU - the EU is not aware of this for negotiations remain same as before - this is Fake New!
The Guardian: The resilience of British business is absolutely on the floor,” Carolyn Fairbairn told the BBC. “Every penny of cash that had been stored up, all the stockpiles prepared have been run down.”“The firms that I speak to have not a spare moment to plan for a no trade deal Brexit at the end of the year - that is the common sense voice that needs to find its way into these negotiations.”
This is the reason why the current rotating presidency had pity in the uk population to go hungry and for that matter history repeats itself the uk labours running to the eu for jobs. you guys don’t be proud for nothing when you are in the ground for countries voukd change its stand having pity. the uk have gone thrice into very deep recession and the eu knows that and that is also the reason why the eu feel deep sorry for the stupidity to leave vote - very sily to vote leave. all standards the uk is today is deriving from the eu making every second sure the uk abided with and nothing of uk’s standards is achieved by the uk itself. don’t get confused on what you believe uk is today - it’s the continous strick application of the eu on the uk
the Guardian is a lefty liberal paper pro EU pro federalism ,a huge provider of fake and misleading news.
Hope this cold help a bit of sense in economics just incase your guys do not have some academic background and just ordinary jobs as labourers which attributes to not understanding commin logic in economics hahaha
The impact of Brexit on British business could be devastating to sectors that managed to avoid the worst effects of the coronavirus pandemic.Brexit will deliver a double shock to the economy regardless of whether the UK can secure a deal with the European Union or not, analysis by the London School of Economics (LSE) suggests.The sectors most at risk from Brexit - the scientific industries, professional services, and publishing - are those largely insulated from the worst impacts of the coronavirus pandemic, says The Guardian.
Bit of a joke when you look at the level of state aid that's been chucked at the European airline industry. Much of which would have fallen over by now if it hadn't been for large amounts of EU tax payers money. State aid is alive and kicking in the EU lets not kid ourselves.
lol. the EU is willing to compromise by not forcing an independent nation to abide by EU rules! I wonder if this part was in the Japan trade deal or did they require Japan to check with EU state aid rules.
lol - i hope france sticks on fisheries so i can lol louder to see the uk without a deal collapsing then after a lesson is learnt then the eu can give the uk bones hahaha- common logic sense is missing in equation
hahaha.. what can japan offer - toyota - but a trade deal is easy to achieve with any county not with the eu
how can the eu and uk both collapse overnight without a deal. you mean the uk and not the bloc of 27 member states. there will obviously be an adjustment in revenue incomes for trading within the bloc will still remain not withstanding the point that almost all uk financial instituitios have already relocated into the eu to avoid business disruptions so it is not the eu that will collapse over night. thanks to the current rotation german presidency of 6 months during the transition period which is very critical for the uk being considered. the only hinderance to progress in the deal is the french insisting in fisheries.
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