No10 tells EU to forget banking our £39billion unless it significantly boosts UK’s divorce deal

Europe’s leaders fired the starting gun for the second half of  EU exit talks after finally declaring “sufficient progress” on divorce arrangements yesterday.

Theresa May heralded the landmark moment at a summit in Brussels as “an important step”.

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The PM insisted it meant she is “well on the road to delivering the smooth and orderly Brexit that people voted for”.

But as the EU laid down its initial objectives for transition and trade talks next, a series of new flash points with London swiftly emerged.

The biggest was over the shape of the post-Brexit new relationship.

Europe’s bosses are ready only to offer “a political declaration” of future hopes — a far cry from the full trade deal Mrs May asked for in exchange for paying the £39billion.

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WHAT TO EXPECT NEXT FROM BREXIT TALKS

1. ROWS WILL HALT TALKS: Negotiations can only continue as long as both sides stick to last week’s divorce agreement. Trade talks could be halted if lawyers clash over sensitive areas such as the Irish border issue.
2. KEEP NEW EU RULES: Britain must abide by any new EU rules passed in the two-year transition period — despite having left.
   The EU say it is vital to keep the single market’s level playing field, but it will infuriate Brexiteers.
3. TWO YEARS OF EU COURT: The UK must accept all existing EU rules, regulations, budget demands and the European Court of Justice during the transition. Michael Gove wants to pull out of the fisheries policy on Brexit Day One.
4. UK  TRADE DEAL BAN: Britain can’t strike any new trade deals with the world during the transition. The PM will fight this, and there are signs the EU will let us make new deals as long as they aren’t implemented before 2021.
5. STILL LOTS TO AGREE: Europe's bosses have only offered “a political declaration” of aspirations for the future relationship.This falls short of the full trade deal the PM asked for, which she wants signed off by exit day.

A senior No10 source hit back: “The Prime Minister has repeatedly said we want to get a trade deal agreed by the time we leave, and that’s what we’re going to do”.

And while talks on a two-year transition from 2019 will start next month, the EU said it would not be ready to talk about trade until March.

But in a crucial concession as Article 50’s two year clock continues to tick down, EU Council boss Donald Tusk said behind the scenes “exploratory contacts” on a trade and security deal can start now.

No10 aides argued that gives Britain a crucial three months to start shaping Brussels’ fledgling thinking.

A Whitehall source added: “We won’t let the more glacial elements of the EU Commission use these guidelines as an excuse to freeze up”.

EU leaders also issued a formal call on the UK for “further clarity” on exactly what it wants from a Brexit trade deal – while at the same time admitting they needed three months to agree their own thinking.

As a cautious game of ‘chicken and the egg’ began, powerful German leader Angela Merkel said: “It’s not up to us to present wishes of Britain, Britain has to tell us what they want”.

Mrs May was given a rare round of applause from EU leaders after her pitch to them for a smooth and friendly Brexit during a late night summit dinner on Thursday night, before flying home at 2am to leave the other 27 to deliberate yesterday.

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While praising Mrs May for making “a good proposal”, powerful Mrs Merkel warned: “There is a lot of work to do and time is of the essence”.

But others were far warmer to Mrs May, including Hungarian Premier Viktor Orbán who dubbed her “a wonderful person” as well as a “tough lady” who is representing the UK “very well”.

Margaritis also confirmed our lack of representation in the transition extends to all institutional areas.

So, for example, we will have to continue to accept EU fishing quotas but will have no say on how they’re set.

Business leaders welcomed yesterday’s landmark progress.

But five major organisations issued a joint statement to warn that any further delays to negotiations would have “damaging consequences”.

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The British Chambers of Commerce (BCC), Confederation of British Industry (CBI), Federation of Small Businesses (FSB), Institute of Directors (IoD) and EEF, which represents zanufacturers, said: “It is our collective view that the transition period must now be agreed as soon as possible, to give businesses in every region and nation of the UK time to prepare for the future relationship.

Labour leader Jeremy Corbyn dubbed the start of Brexit’s Phase Two “welcome”, but claimed it “should have happened months ago”.