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Confidential papers from the European Commission reveal that Brexit will slash the trade bloc’s budget by 16 per cent and could lead to a suspension of aid to some of Europe’s expectant countries. Spain’s €37billion (£33bn) and Italy’s €43bn in structural funds from the EU could be drastically cut once the UK leaves the EU, while aid money to Greece, Portugal and Eastern European countries could also be at risk. The failure of the EU to secure a large divorce bill with the UK could lead to chaotic infighting inside the EU27.

GETTY•REUTERS The EU has admitted the UK props-up its bloated budget

Jacob Rees-Mogg has argued that Britain should not give in to EU bullying over the Brexit divorce bill arguing that it is the Prime minister’s “trump card” in negotiations as Brussels is desperate for money to reduce its fiscal gap. He said: “If we say that we are not continuing to contribute without a deal to the last 21 months of the multi-annual financial framework then the EU has a huge hole in its budget – it has no legal ability to borrow and it is effectively insolvent for that period. “So I would say to people who say we’re not going to get on to the second stage, well that’s fine, but then you haven’t got any money for 21 months. “Where are you going to get it from?

Brussels EU summit in pictures Fri, October 20, 2017 The EU is expected to say that they will start internal preparatory work on a post-Brexit transition period and a future trade deal with Britain Play slideshow Getty Images 1 of 44 Emmanuel Macron holds a press conference on the second day of European Council meetings

“Is Germany going to pay more or is Poland going to receive less? “It’s a really strong negotiating position.” Britain and Brussels have agreed that “sufficient progress” must be made on the divorce bill, the rights of citizens, and the Northern Ireland/Ireland border before negotiations can move on to “phase two” of negotiations which includes any future trade agreement. Career politician and senior EU boss, Donald Tusk, said that an agreement must be struck at the start of December "at the latest" or he will not have time to make the recommendation to member states that they vote to open trade talks this year. Mr Tusk said: “In October the EU27 started internal preparation on the second phase of negotiations, namely transition, and the future relationship, and we will be ready to move onto the second phase already in December.

“But in order to do that, we need to see more progress from the UK side. While good progress on citizens’ rights is being made we need to see much more progress on Ireland and on the financial settlement. “In order to avoid any ambiguities about our work calendar, I made it very clear to prime minister May that this progress needs to happen at the beginning of December at the latest. “If there’s no sufficient progress by then I will not be in a position to propose new guidelines on transition and the future relationship at the December council.” However, an expert from Brussels based think tank Open Europe has said that Britain has the better negotiating hand. Speaking to the Telegraph Pieter Cleppe said: “The money is Britain’s trump card. There is going to be so much political pain if they don’t get it.”

GETTY David Davis must agree the final divorce bill with the EU before trade talks can begin

GETTY Spain, whose Prime Minister attended an EU summit last month, is likely to lose out after Brexit