Johnson and EU Set Sights on Deal as Talks Enter Final Phase

(Bloomberg) --

The U.K. and the European Union agreed to step up their negotiations over a post-Brexit trade accord following a crunch call between Boris Johnson and the bloc's leadership in which both renewed their commitment to getting a deal.

With less than two weeks before the prime minister's deadline to secure an accord, the talks will now move into an intensive final stage. But both sides acknowledge there are still significant divides to bridge in the time remaining.

The two leaders “instructed their chief negotiators to work intensively in order to try to bridge” the gaps between the two sides, they said in a joint statement. “They agreed on the importance of finding an agreement, if at all possible.”

Johnson's video call with European Commission President Ursula von der Leyen on Saturday is a sign that both sides are still intent on reaching an accord after seven months of negotiations ended in deadlock on Friday. Without a deal, Britain will crash out of the single market at year-end, leaving businesses and consumers facing disruption and additional costs.

Officials are clear that a lot of work lies ahead, with the biggest sticking points remaining the same as they did when talks started seven months ago: what restrictions on government subsidies to businesses the U.K. will sign up to, and what access EU fishing boats will have to British waters.

‘Serious Divergences'

One EU official familiar with the conversation said the tough political choices that will have to be taken on those two subjects in particular have yet to be made, and the discussions could stretch on beyond Johnson's mid-October deadline. According to one U.K. official, Johnson told von der Leyen he wants to know by then whether a deal is possible.

The EU's chief negotiator, Michel Barnier, spoke of “persistent serious divergences on matters of major importance” in a statement on Friday. His U.K. counterpart David Frost said that the disagreement over fish “risks being impossible to bridge.”

Johnson and von der Leyen's conversation gives the green light for the two negotiators to try and nail down an agreement. Talks are set to resume in London next week, followed by Brussels the week after.

The last two days of that two-week period coincides with a major summit of EU leaders, also in Brussels, at which Brexit is due to be on the agenda. If a deal isn't done by then, officials don't rule out dramatic make-or-break interventions by French President Emmanuel Macron and German Chancellor Angela Merkel.

The EU wants Johnson to signal that he's willing to agree to a level competitive playing field, something that would put limits on state aid so British companies can't undercut European rivals.

After Johnson sought to rewrite the earlier Brexit Withdrawal Agreement, a move that breaks international law, von der Leyen stressed in her call that the EU wants any agreement to be backed up by an iron-clad, legally binding dispute resolution mechanism, one EU official said. So far, the prime minister has been unwilling to commit to that.

The U.K. wants the EU -- and notably Macron -- to soften its stance on fisheries and allow British boats to catch far more -- and, by extension French vessels far less -- in U.K. waters than is currently the case.

In their statement, Johnson and von der Leyen “endorsed the assessment of both chief negotiators that progress had been made in recent weeks, but that significant gaps remained, notably but not only in the areas of fisheries, the level playing field, and governance.”

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