EU summit set to unlock next phase of Brexit talks

BRUSSELS - 12 December 2017: European Union leaders are set to open the next phase of Brexit talks at a summit this week, but may toughen their conditions after Britain cast doubt on whether a deal on divorce terms is binding.

British premier Theresa May and European Commission chief Jean-Claude Juncker reached a last-minute agreement Friday regarding the Irish border, Britain's divorce bill and the rights of EU migrants.

The leaders of the 27 remaining countries are to decide on Friday whether to approve that deal and green light the opening of talks on a post-Brexit transition period and the bloc's future relationship with Britain.

But they have been alarmed by comments by Britain's Brexit Minister David Davis in which he said that Britain would not pay the bill without a trade agreement, and that Friday's deal was a "statement of intent" rather than "legally enforceable."

European Parliament Brexit coordinator Guy Verhofstadt said Davis's comments were "unacceptable" and a self-inflicted "own goal" for Britain as the EU would now take a tougher stance.

"I have seen a hardening of the position of the council (of EU leaders) and hardening position of the parliament," Verhofstadt told reporters at the parliament in Strasbourg, France on Tuesday.

The European Parliament is set to back in a vote on Wednesday the opening of the second phase of Brexit talks. MEPs will also have a final say on any Brexit deal in 2019.

- 'Most difficult challenge' -

With the possibility of a British backtrack in mind, the EU negotiating guidelines that leaders are set to adopt on Friday will say phase two talks can only start once the divorce commitments are "translated faithfully in legal terms."

The EU leaders will also say that talks on trade will not start until March, to give the British government time to provide "further clarity" on what it wants from the future relationship.

Britain has said it will leave the EU's single market and customs union but has given no hint of a wider plan, with May's cabinet only having its first meeting on the subject next week -- a full year and a half after the June 2016 Brexit referendum.

The EU guidelines will add that talks on the transition -- a period of around two years during which the bloc says Britain will have to follow EU law -- cannot start until January.

The clock is ticking, as the EU says an outline deal needs to be in place by October 2018, so that the British and EU parliaments can approve it by the time Britain leaves the bloc on March 29, 2019.

EU President Donald Tusk warned last week after the divorce deal that "the most difficult challenge is still ahead".

- Euro reforms -

The EU leaders, again without Britain, will also on Friday discuss ways to reform the euro single currency, a top priority of French President Emmanuel Macron as well as Juncker.

In a draft of the "leader's agenda" to prepare the summit, Tusk said there was broad convergence among the heads of state on creating a crisis-fighting European Monetary Fund, as well as forging ahead with the banking union.

But Macron's ambitions have been stymied by political uncertainty in Germany, where a weakened Chancellor Angela Merkel is still trying to form a government.

Germany is especially reticent to reforming EU public spending rules or setting up a European-wide deposit insurance scheme, the last remaining pillar of the banking union.

An ambition to create a European finance minister or a eurozone budget has also failed to gain traction, dealing a disappointment to Macron, while there is also debate about how who should control the monetary fund.

The leaders will only debate reforms at the Friday summit, with a further discussion in June set to decide next steps.

On the first day of the dinner on Thursday the leaders, together with Britain, will discuss reforming the bloc's asylum system, particularly quotas for member states to accept refugees, which Tusk called "highly divisive".

The leaders will also have a signing ceremony to mark the launch of a landmark pact on boosting military cooperation -- an agreement that had for years been held up by British opposition.