If Brexit phase 1 was hard, phase 2 looks like it's going to be brutal.

Draft negotiating guidelines put forward by European Council President Donald Tusk make clear that the EU and the U.K. are on a collision course on the basic question of what can be accomplished in the second phase of negotiations.

While London has been clear that it expects to map out the contours of a new, deep and special future trade relationship, the EU is far less ambitious, with Brussels insisting that the Brexit negotiations will not amount to formal trade talks. That means issues crucial to the U.K., such as the future of London's financial services industry, may not be settled for years.

One senior EU diplomat predicted "big problems in phase 2," because of the mismatched expectations.

"The financial settlement has been portrayed by the British as a kind of transaction, the payment, the price of an entry ticket into what they call trade talks in phase 2," the diplomat said. "You know perfectly well that there will be no trade talks proper until after the U.K. leaves the European Union. It would be impossible to have them."

Tusk strategically narrowed the frame of his draft guidelines to focus primarily on a transition period.

To the extent that the EU is willing to talk about a future trade deal, EU officials warned Friday that they would have to be mindful in their discussions with the U.K. of other deals that Brussels already has in place with third countries — like the big Japan agreement reached on Friday. Some of those deals even include provisions for renegotiation if the EU offers sweeter terms to another trade partner, like the U.K.

While the U.K. is eager to get to the trade discussion, Tusk strategically narrowed the frame of his draft guidelines, which must be approved by the EU27 leaders, to focus primarily on a transition period, warning that yet further guidelines will be needed to talk about the future. And he warned that none of it will be easy.

"Let us remember that the most difficult challenge is still ahead," he said at a news conference. "We all know that breaking up is hard. But breaking up and building a new relation is much harder. Since the Brexit referendum, a year and a half has passed. So much time has been devoted to the easier part of the task."

The same, but different

Tusk's guidelines, first and foremost, seek to make clear the tough conditions for the U.K. to secure a transition period: Britain will lose all of its decision-making authority but will be obligated to continue paying into the EU budget and must follow all EU rules and regulations and even any new policies adopted without its input.

Of course, the U.K. has to agree to that, but officials in Brussels presented those requirements as an absolute deal-breaker. If Prime Minister Theresa May refuses, she and her country will be headed over the cliff edge.

"The world continues to be as it is today, except that the U.K. no longer has a place in the Council, no longer has MEPs, no longer has a judge in the court and so on and so forth," a senior EU official said, cutting to the bottom line.

As the EU envisions the transition, the U.K. will also be prevented from negotiating new trade deals with other countries, will have to act in accordance with EU foreign policy, police the EU's borders, collect its customs tariffs, and so on and on.

"This may sound draconian," the official said. "But I think that it is understood by everybody. And there are good reasons for these conditions: They are simply necessary for this to work in practice."

In a stark warning, the senior official noted that a transition does not guarantee that the negotiations will ultimately yield a mutually acceptable withdrawal deal: "There will still be, in the absence of an agreement, a cliff's edge down the road."

There are leftover phase 1 issues to argue about, including the finalizing of a plan for dealing with the Irish border.

Where the negotiating guidelines for phase 1 set a bar of "sufficient progress," the new guidelines don't even have a clear signpost. It is not clear at all when a second set of phase 2 guidelines, offering more specific instructions on discussions about the framework of a future trade relationship, will be issued.

"While an agreement on a future relationship can only be finalized and concluded once the United Kingdom has become a third country, the Union will be ready to engage in preliminary and preparatory discussions with the aim of identifying an overall understanding of the framework for the future relationship," the draft guidelines stated.

But given the U.K.'s insistence on leaving the EU's single market and customs union, the guidelines warn that "the European Council will calibrate its approach as regards trade and economic cooperation in the light of this position so as to ensure a balance of rights and obligations" and "to avoid upsetting existing relations with other third countries."

Adding to the pressure is a clause at the very end of the "sufficient progress" agreement reached Friday essentially declaring that the phase 1 accord on divorce terms self-destructs if negotiators fail in the next stage.

If all that doesn't make phase 2 harder, there are also leftover phase 1 issues to argue about, including the finalizing of a plan for dealing with the Irish border.

The EU's chief negotiator, Michel Barnier, called the phase 1 agreement a "dynamic compromise," saying he hoped it would lead to further compromises down the road. If one thing was clear on Friday, it was that a whole lot more compromising remains to be done.