Merkel says EU must be prepared if Brexit talks fail

German Chancellor Angela Merkel said on Wednesday the European Union must prepare for a possible failure of talks with Britain over a new trading relationship. Talks on a future, EU-UK trade deal have resumed in Brussels on Monday, with negotiators meeting face-to-face for the first time since the COVID-19 outbreak forced the process to be carried out via video link.

Merkel said talks were to be accelerated in order to achieve an agreement in the autumn that could be ratified by the end of the year. But the EU "must and should prepare for a situation in which an agreement does not happen," she told Germany's lower house of parliament.

The German Chancellor wants Boris Johnson to be more flexible so she can convince her fellow European Union to support a compromise. The veteran leader will play an influential role in the remaining Brexit talks after she today assumed the role as head of the EU’s rotating presidency. Trade talks between the bloc and the UK are deemed as one of the top priorities over the six-month period, according to Merkel’s ambassador in Brussels.

Britain left the bloc on 31 January. A transition period, during which Britain remains in the European single market and customs union, expires on 31 December and pressure is mounting to agree a free trade deal before then.

Both sides have indicated a new drive to make headway with intensified talks over the coming weeks, following the virtual meeting earlier in June between UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen.

However, London and Brussels remain far apart on key issues such as fishing policy and the commitment to a "level playing field" in competition, as set out in the divorce deal.

"Some of the EU's unrealistic positions will have to change if we are to move forward," the UK's chief negotiator David Frost said in a tweet posted last week. "UK sovereignty, over our laws, our courts, or our fishing waters, is of course not up for discussion. Equally we do not seek anything which would undermine the integrity of the EU's single market."

"Our overall message this week but also for the coming weeks and the coming months is to intensify our negotiations in order to make progress in order to get a deal," said European Commission spokesperson Daniel Ferrie on Monday.

Of key concern to the European Union are rules on state aid, where the bloc wants to ensure it is not undercut by future UK policy - along with other areas such as the environment, labour law, data protection and tax.

The EU's chief negotiator Michel Barnier has accused the UK government of failing to set out its plans, and of deviating from its obligations by being determined to forge its own path.

The EU wants the UK to follow "dynamic alignment" (following EU standards as they change overtime) on subsidy policy, giving the European Court of Justice (ECJ) oversight of some UK economic policy.

Failure to reach agreement would mean that from January the EU and the UK would trade on World Trade Organization (WTO) terms, which many businesses and economists say would be disastrous. It would also leave arrangements on a wide variety of issues in a state of legal limbo.

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