UK must stick to EU rules during transition, Barnier says

[BRUSSELS] The European Union's chief Brexit negotiator, Michel Barnier, told the UK it must follow all EU rules during a transition period after it exits the bloc, and the duration of such an arrangement must be short.

"This period would begin on March 30, 2019, when the United Kingdom is no longer a member of the European institutions, and therefore no longer takes part in the decision-making process," Mr Barnier told Italian lawmakers on Thursday in Rome. An extension of EU law, "with all its benefits, then logically this would require existing union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures to apply," he said.

While this isn't a new EU demand, it underscores the determination of the bloc to deny the UK any flexibility if it opts for an interim period designed to ease the shock of a new regime for businesses and investors. His remarks imply Britain would have to abide by all rulings of EU courts and make full budget contributions during this time.

Mr Barnier spoke in Italy 24 hours before British Prime Minister Theresa May delivers a speech in the country, in which she will outline what she's prepared to offer to settle a "Brexit bill" of tens of billions of euros. The UK is also expected to ask for a transition period after leaving the EU during which it may continue to pay into the bloc's central budget.

No transition period is possible unless there is an overarching Brexit deal that satisfies the EU on the rights of European citizens in the UK, the Irish border and the financial settlement, Mr Barnier warned.

"I am convinced that a rapid agreement on the conditions of the UK's orderly withdrawal, and a transition period, is possible," Mr Barnier said. "For that to happen, we would like the United Kingdom to put on the table, as soon as next week, proposals to overcome the barriers." After three rounds of negotiations since May gave formal notification of the UK's decision to leave the EU in March, the time to get a deal is slipping away fast, Mr Barnier said.

"Six months will be necessary to allow for ratification before March 29, 2019; there is therefore only one year left," he said.

The Frenchman, who will lead the negotiations with his UK counterpart David Davis when the next round starts in Brussels on Monday, reiterated a point made earlier this month, that Britain didn't have freedom to choose any sort of future relationship with the bloc it wanted.

"If the United Kingdom wanted to go further than the type of free-trade agreement we have just signed with Canada, there are other models on the table," he said. "For example, Norway and Iceland have chosen to be in the single market, to accept the rules, and to contribute financially to cohesion policy." "One thing is sure: it is not - and will not - be possible for a third country to have the same benefits as the Norwegian model but the limited obligations of the Canadian model," Mr Barnier said.

BLOOMBERG