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UPDATE 7-Brexit brinkmanship: Johnson says prepare for no-deal, cancels trade talks

Fri, 16th Oct 2020 08:50

* UK says talks over unless EU fundamentally changes stance

* Says UK can break from Europe 'with complete confidence'

* Germany's Merkel says a deal is best

* Johnson: EU has not negotiated seriously

* EU says: We're still working for a deal

* EU approved 2 more weeks of talks, Macron says

* $900 billion in annual UK-EU trade at stake
(Recasts headline and lead to add Johnson spokesman)

By Guy Faulconbridge and William James

LONDON, Oct 16 (Reuters) - Prime Minister Boris Johnson said
on Friday it was now time to prepare for a no-trade deal Brexit
unless the European Union fundamentally changed course, bluntly
telling Brussels that there was no point in talking any more.

A tumultuous "no deal" finale to the United Kingdom's
five-year Brexit crisis would sow chaos through the delicate
supply chains that stretch across Britain, the EU and beyond -
just as the economic hit from the coronavirus pandemic worsens.

At what was supposed to be the "Brexit summit" on Thursday,
the EU delivered an ultimatum: it said it was concerned by a
lack of progress and called on London to yield on key sticking
points or see a rupture of ties with the bloc from Jan. 1.

"I have concluded that we should get ready for January 1
with arrangements that are more like Australia's based on simple
principles of global free trade," Johnson said.

"With high hearts and with complete confidence, we will
prepare to embrace the alternative and we will prosper mightily
as an independent free trading nation, controlling and setting
our own laws," he added.

Johnson's spokesman said shortly afterwards that talks were
now over and there was no point in the EU's chief negotiator
Michel Barnier coming to London next week barring a change in
approach.

"The trade talks are over: the EU have effectively ended
them by saying that they do not want to change their negotiating
position," his spokesman said.

Johnson's brinkmanship, which follows an EU demand that
London make further concessions, may push Brexit towards
disorder, though he still left open the possibility that the EU
could reconsider and offer Britain a better deal.

"Unless there is a fundamental change of approach, we're
going to go for the Australia solution. And we should do it with
great confidence," he said.

A so-called "Australia deal" means that the United Kingdom
would trade on World Trade Organization terms: as a country
without an EU trade agreement, like Australia, tariffs would be
imposed under WTO rules, likely causing significant price rises.

The pound oscillated to Brexit news on Friday, dropping a
cent against the U.S. dollar on Johnson's remarks but then
rising and then falling again on his spokesman's comments.

JOHNSON: BRITAIN IS 'INDEPENDENT COUNTRY'

Asked if he was walking away from talks, Johnson said: "If
there's a fundamental change of approach, of course we are
always willing to listen, but it didn't seem particularly
encouraging from the summit in Brussels."

"They want the continued ability to control our legislative
freedom, our fisheries, in a way that is obviously unacceptable
to an independent country," Johnson said.

Before his spokesman declared the talks over, the EU said it
was continuing to work for a new Brexit accord, dismissing
Johnson's no-deal rhetoric as hot air.

"The EU continues to work for a deal, but not at any price,"
said European Commission President Ursula von der Leyen. "As
planned, our negotiation team will go to London next week to
intensify these negotiations."

French President Emmanuel Macron said the EU's 27 government
leaders were united in their views about Brexit and had tasked
Barnier to extend talks with Britain for two weeks.

"We are ready for a deal, but not at any price," Macron
said, adding that Britain needed a deal more than the EU.

Britain formally left the EU on Jan. 31, but the two sides
have been haggling over a deal that would govern trade in
everything from car parts to medicines when informal membership
known as the transition period ends Dec. 31.

Johnson had repeatedly asserted that his preference is for a
deal but that Britain could make a success of a no-deal
scenario, which would throw $900 billion in annual bilateral
trade into uncertainty and could snarl the border, turning the
southeastern county of Kent into a vast truck park.

"We are heading into very dangerous territory," said Ian
Wright, the chief executive of Britain's Food and Drink
Federation. "In the event of a no-deal Brexit, shoppers will -
literally - pay a heavy price."

WTO TERMS

Johnson said discussions showed the EU would not give
Britain a comprehensive trade deal such as the one the bloc has
with Canada. "It does seem curious that after 45 years of our
membership they can offer Canada terms they won't offer us."

EU officials have said Britain, with the world's 6th largest
economy and geographically next door to Europe, poses a much
bigger competitive challenge than distant Canada and so cannot
be offered a similar accord.

The EU's 27 members, whose combined $18.4 trillion economy
dwarfs the United Kingdom's $3 trillion economy, says progress
had been made over recent months though compromise is needed.

German Chancellor Angela Merkel, Europe's most powerful
leader, said it would be best if a deal was struck but that if
not then the EU would have to plan for alternatives.

"We have seen light in the past days but also shadows,"
Merkel told a news conference after a meeting of EU leaders in
Brussels.

(Additional reporting by Michael Holden and Kate Holton in
London, Gabriela Baczynska and John Chalmers in Brussels, Kirsti
Knolle in Berlin and Michel Rose in Paris
Writing by Guy Faulconbridge
Editing by Mark Heinrich)

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