Ambassadors open talks on terms to be set for bloc to return to negotiating table if UK crashes out in April

The EU has moved into full crisis mode, with officials now setting the terms the UK will have to meet for Brussels to open talks on avoiding an economic meltdown in the weeks after a no-deal Brexit.

In anticipation of a no-deal outcome on 12 April after MPs voted down eight Brexit options on Wednesday, and the likely rejection of the withdrawal agreement on Friday, EU ambassadors on Thursday morning opened discussions on the terms to be set for the bloc to return to the negotiating table.

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The EU’s chief negotiator, Michel Barnier, told the diplomats during the meeting that a no deal was now “the most plausible outcome”, and that there was an urgent need to war-game the bloc’s response to it. The EU is to step up its “full-on crisis” preparations, according to a diplomatic note.

It was agreed among the member states that for there to be any talks after the UK has crashed out, the bloc’s 27 capitals will expect Downing Street to agree to signal by 18 April that it will pay the £39bn Brexit bill despite the failure of the Commons to ratify the withdrawal agreement.

The terms of the Irish backstop, keeping Northern Ireland in large parts of single market legislation and the EU’s customs territory in order to protect the Good Friday agreement, would remain as the bloc’s solution for avoiding a hard border on the island of Ireland.

The residence rights of citizens and coordination on social security laid out in the withdrawal agreement would also need to be respected.

“These are the preconditions – money, Ireland and citizens – and they are the three main issues in the withdrawal agreement”, a diplomat said.

The EU has in recent weeks set out a series of contingency measures that would have a lifespan of between six and nine months, including legislation to both keep planes in the air and haulage routes open. Further measures to keep the City of London operating have a fixed 12-month lifespan.

According to the note, the 27 ambassadors posed the question: “When the contingency measures expire or, even before that, and the UK approaches the EU for deals to mitigate a no deal, what are the conditions on which we are prepared to talk?”

Ambassadors agreed they would expect the UK to come back to the negotiating table “pretty soon with an ask to ensure the vital lines and procedures needed for the UK economy to survive”.

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“The EU is now already discussing what their price is for entering those discussions,” one diplomat said.

Emerging from the meeting of ambassadors, Barnier said: “We are working, we are prepared. Yesterday, we had many noes and now we are waiting for a yes.”

The EU has agreed to extend the article 50 period until 22 May if the withdrawal agreement is ratified this week.

Brussels is offering an extension to 12 April if it fails again, but will expect the British government to offer a new way forward, such as a move towards a soft Brexit, second referendum or general election, to secure a longer extension and avoid a no-deal exit from the bloc.

Barnier told the ambassadors that the customs union solution had lost by only eight votes on Wednesday night, and that there had been over a hundred abstentions, including MPs in the SNP and Liberal Democrats.

“He seemed to think this offered hope,” said a source. “He reiterated that the political declaration could be swiftly amended to reflect that.”

Earlier on Thursday, Nathalie Loiseau, the former French minister spearheading Emmanuel Macron’s European election campaign warned against a second referendum, an option that was lost by 27 votes during the indicative vote process in the Commons.

“There is chaos, there is confusion,” Loiseau told the French channel BFM TV. “I’m against a new referendum because it would be a denial of democracy. Britain must leave.”

The European commission’s chief spokesman said: “We counted eight noes last night, now we need a yes for the way forward. If the withdrawal agreement is not ratified by the end of this week, article 50 will be extended to 12 April. This is now for the UK government to inform us as to the next steps.”

Asked about May’s promise at a meeting of MPs on Wednesday to resign before a second stage of Brexit talks on the future trade deal, the spokesman added: “President [Jean-Claude] Juncker has repeatedly had the occasion to repeat his support and respect for the prime minister who he worked with during this long process.”

Downing Street is expected to put to a vote only the withdrawal agreement, and not the political declaration on the future relationship to MPs. Should it be passed this would be sufficient to trigger the extension to 22 May. But the UK’s domestic withdrawal act would require the political declaration to be passed in order for the draft treaty to be regarded as ratified.

The commission spokesman said: “I am not going to position the commission on the basis of rumours. For us it is clear what is on the table and let’s leave it there.”