EU's Michel proposes five billion euros Brexit emergency fund

(This July 10 story, corrects spelling of looser in paragraph 7)

European Council President Charles Michel holds a news conference on the EU budget for 2021-27 ahead of a EU leaders summit, in Brussels, Belgium July 10, 2020. Kenzo Tribouillard/Pool via Reuters

(Reuters) - European Council President Charles Michel said on Friday that EU talks with Britain on their new relationship were “not easy” and countries, regions and industries will face disruptions from 2021 whether there is a new pact or not.

Laying out his compromise proposal for a multi-billion-euro economic stimulus for the EU to recover from the coronavirus pandemic, Michel said a new Brexit “adjustment reserve” of 5 billion euros ($5.64 billion) was also needed to “counter the unforeseen consequences” of Britain’s departure.

Michel said the EU’s executive European Commission should review by February 2021 the first consequences of the new reality between Britain and the bloc, and the money could then be used to support those most affected in Europe.

“Hope for the best, prepare for the worst: a sound principle in politics,” Belgian Prime Minister Sophie Wilmes said in reaction to the proposal that will be debated by the 27 national EU leaders in Brussels next week.

“Proposal for a new Brexit adjustment reserve to counter consequences in member states worst affected is a very good signal to start the negotiations,” said the leader of one of the countries, along with Ireland, most likely to seek such aid.

Britain left the EU in January but is still covered by a status-quo transition phase until the end of the year to allow time to negotiate new ties from trade to security.

Negotiations have so far stalled over differences on fisheries and fair competition guarantees, among others.

British Prime Minister Boris Johnson only wants a looser trade pact with the EU from 2021, while the bloc seeks much closer links in many other areas, including security.

Talks this week in London between EU and British negotiators, briefly joined by Johnson at a No.10 dinner, brought no breakthrough and more negotiations are due next week in Brussels.

“There are significant differences that still remain on a number of important issues,” a spokesman for Johnson said on Friday.

“We have been clear that we cannot agree to a set of novel and unbalanced proposals that bind us to EU law and impose control over our domestic regimes, these include the so-called level playing field and fisheries.”

The spokesman also said, however, Britain was still keen to identify a basis of the new agreement this month.

EU’s chief negotiator Michel Barnier has also offered a bearish assessment this week, saying “significant divergences” persisted in the talks and added that the bloc would not seal a deal without an agreement on fishing quotas and access to fishing waters, as well as the so-called level playing field provisions for competition regulation.

Reporting by Gabriela Baczynska, additional reporting by Elizabeth Piper; Editing by Alex Richardson and Jane Merriman