European Union warns no "pick and mix" Brexit deal

European Council President Donald Tusk warned Britain on Thursday that there can't be progress toward a post-Brexit trade deal until the issue of the Irish border is resolved.

The UK must find a solution to the Irish-border issue if Brexit talks are to continue, the European Union has warned.

"If in London someone assumes that the negotiations will deal with other issues first before the Irish issue... my response would be "Ireland first".

This is the essence of Brexit", Tusk said at a news conference in Brussels to publicize the guidelines for the next phase of the Brexit negotiations.

Mr Tusk said a free trade agreement can cover trade in goods, but this would not apply to services.

Addressing comments by British finance minister Philip Hammond on Wednesday arguing for a bespoke deal or an ambitious free trade agreement covering financial services, Tusk said the European Union cannot offer the same in services trade as it could in goods. Trade in services will need to be addressed as the United Kingdom will "no longer share a common regulatory, supervisory, enforcement and judiciary framework", according to the guidelines.

In a blistering attack, she accused them of insulting people in Ulster after they claimed Brexit puts peace in Northern Ireland in jeopardy - branding their comments "very galling".

Britain would have to leave the EU's various regulatory agencies but the guidelines do not rule out an "associate" role. Now both sides are back to where they were a year ago, trying to square the U.K.'s desire to ditch the EU's rule book with the aim of avoiding a hard border on the divided island. It said any new deal with Britain would likely make trade more complicated and costly than it is today.

The EU last week published a draft withdrawal text which sets out in great detail a so-called fallback option to avoid a hard border emerging on the island of Ireland after Brexit.

Luxembourg Prime Minister Xavier Bettel insisted there could be "no cherry-picking" by Britain, adding that "Brexit is a damage limitation exercise".

But many banks like Goldman Sachs and Standard Chartered have decided not to rely on a transition deal or bet that Britain will get favourable trading terms for financial services once the political noise dies down.

Hammond's speech will be seen as a rebuke to the EU's negotiating position, while he also escalated tensions by warning European countries that any attempts to take finance industry business from London would backfire.

Any actual trade deal will have to wait until after Brexit day on March 29, 2019.

Financial services is the only area in which Britain has a trade surplus with the European Union, making it very keen to preserve its banks' current access to continental Europe.

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