There is still chance of a Brexit deal: Merkel

Berlin

THE European Union (EU) and Britain could still reach a Brexit trade agreement but the bloc's 27 remaining members are prepared to live with no deal if necessary, German Chancellor Angela Merkel said on Wednesday.

A wrestle over so-called "level playing field" rules, which would prevent Britain undercutting EU standards on things like labour and environmental standards, is the big issue still to be resolved, she told German lawmakers.

Berlin has full confidence in the European Commission (EC) to pursue the Brexit negotiations, she added ahead of talks between British Prime Minister Boris Johnson and EC president Ursula von der Leyen in Brussels later on Wednesday.

"There is still the chance of an agreement. We are continuing to work on it, but we are also prepared for conditions which we cannot accept," Mrs Merkel told the Bundestag lower house of Parliament.

"One thing is clear: the integrity of the internal market must be preserved," she added.

"We must have a level playing field, not just for today but for tomorrow and beyond... Otherwise, unfair competition conditions arise to which we cannot subject our companies. This is the really big question."

With growing fears of a chaotic no-deal finale to the five-year Brexit crisis when the United Kingdom finally leaves the EU's orbit on Dec 31, the meeting between Mr Johnson and Ms von der Leyen over dinner is cast as a chance to unlock the stalled trade talks.

A British government source said a deal may not be possible, as did EU chief Brexit negotiator Michel Barnier.

The main sticking points have been over fishing rights in British waters, ensuring fair competition for companies on either side, and ways to solve future disputes.

Michael Gove, a senior minister in Mr Johnson's government dealing with Brexit issues, told Times Radio the EU would have to compromise if it wanted a deal.

"The EU has to move," Mr Gove said.

Britain formally left the EU in January, but has since been in a transition period during which it remains in the EU single market and customs union, meaning that rules on trade, travel and business have stayed the same.

That all ends on Dec 31, and if by then there is no agreement to protect around US$1 trillion in annual trade from tariffs and quotas, businesses on both sides would be hit.

Failure to agree a deal would snarl borders, shock financial markets and sow chaos through supply chains across Europe and beyond as the world faces the economic cost of Covid-19.

A measure of expected price swings in the British pound known as overnight implied volatility jumped 25 per cent to the highest since late March.

Mr Johnson portrays Brexit as a chance to give Britain an independent and more agile economy.

The EU's biggest powers fear London wants the best of both worlds - preferential access to EU markets but with the advantage to set its own rules. That, they say, would undermine the post-World War II project which aimed to bind the ruined nations of Europe - and particularly Germany and France - into a global trading power.

Mr Gove said a one-on-one meeting between leaders often produced a breakthrough and that compromise could be possible on fishing in British waters.

But Brexit-supporting lawmakers in Mr Johnson's party say he must ensure Britain remains sovereign, sets its own rules and keeps control of its rich fishing waters.

Britain said on Tuesday it had clinched a deal with the EU over how to manage the Ireland-Northern Ireland border, and would now drop clauses in draft domestic legislation that would have breached a Brexit withdrawal agreement signed in January.

Mr Gove said the deal on Northern Ireland opened up "a smoother glide path" towards a possible deal.

He added that if a deal was not done, finance minister Rishi Sunak would take steps to ensure British businesses were competitive. REUTERS