Brexit Heads Back to Political Leaders as Talks End in Stalemate

(Bloomberg) -- The latest round of talks between the U.K. and European Union over their future relationship is set to finish without a breakthrough, with both sides stuck after another week of difficult negotiations.

Officials are still far apart on trade and other crucial issues ahead of a key deadline at the end of the month, and the tense atmosphere hasn't improved significantly, according to people familiar with the matter. Both sides are due to make separate statements on the situation on Friday after a final session of discussions.

The failure to narrow the gap between the U.K. and EU will add to pressure for Prime Minister Boris Johnson and European Commission President Ursula von der Leyen to intervene directly to break the deadlock when they hold talks, probably during the week beginning June 15. EU officials hope then to persuade Johnson to signal a willingness to compromise over the next few months. That may be “wishful thinking” in the words of the prime minister's spokesman.

The two sides have made “no real progress,” Germany's ambassador to the bloc, Michael Clauss, said Thursday. He warned that the post-Brexit deliberations could now drag on through October, spelling months of uncertainty for businesses and consumers.

The two sides are now braced for a difficult summer trying to find common ground. While negotiations have so far been difficult, officials do have a broad sketch of the path to an agreement and, privately, there is little talk from either camp of pulling the plug.

‘Realistic Approach'

“Is a deal possible? Yes, definitely,” Clauss told an online event Thursday organized by the Brussels-based European Policy Centre. “But I think it also means that the U.K. needs to have a more realistic approach,” he said. Britain “cannot have full sovereignty and at the same time full access to the internal market.”

The two sides have clashed over what measures will be needed to ensure a level competitive playing field between the two sides as well as over the EU's demand to have continued access to U.K. fishing waters, which are among the most fertile in Europe.

Despite an intense focus this week on fishing, a discussion officials wanted to wrap up by the end of this month, there is still huge disagreement. The British are pressing for the EU to back down from its demand to maintain the status quo, which benefits countries like France and Spain. Instead, the U.K. wants to grant access through annual negotiations. The EU says there can be no overall trade deal without an agreement on the issue.

The two sides have also clashed over what measures will be needed to ensure a level competitive playing field, with the EU demanding the U.K. remain aligned to many of the bloc's rules, notably those limiting state aid. There remains little consensus on the subject. The British government says it has already conceded far more than would be normal in a trade deal and signing up to EU rules would undermine its national sovereignty.

While negotiators are at odds in key areas, including the role of the European Court of Justice in overseeing any deal, officials acknowledge some tentative positive progress has been made on subjects such as trade in services.

There are just weeks left until a crucial June 30 deadline by when the U.K. needs to decide if it is going to ask to extend the negotiations beyond the end of this year. Officials from both sides said they now don't expect this to happen.

Johnson has repeatedly ruled out seeking additional time and warned if no significant progress is made by the end of the month he may walk away and prepare to leave the EU single market and customs union without a new trade agreement in place. That would see costly tariffs imposed on goods traded between the two sides and leave businesses grappling with additional paperwork.

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Clauss, whose country will next month take over the EU's six-month rotating presidency, warned the post-Brexit negotiations could still occupy much of the EU's political attention in September and October -- effectively the last date a deal could be signed and still be implemented in time for the year-end.

“This is a must-do,” he said. “We work under the assumption the U.K. isn't going to ask for an extension. That means a deal needs to be struck in the next six months.”

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