Brexit panic erupts in Brussels: Details emerge on Barnier’s latest bid to avoid no deal

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The two sides struggled to make any progress during Brexit talks but in a major concession, Michel Barnier informed diplomats the demands over state aid may need to be dropped. State aid has been one of the key issues between the two sides with Mr Johnson demanding Britain be free of EU state aid rules, environmental or social standards. Now, Mr Barnier’s plan to try and overcome the two sides differences on the issue has been unveiled.

Instead of tying the UK into EU regulations and rules, Mr Barnier will present a hybrid model using an arbitration board to determine each individual case.

One diplomat, however, said the agreement on state aid must be based on certain conditions and be monitored independently.

They said: “There must be a solid framework with independent oversight.

“If they agree to settle on broad rules for granting state aid and to have this independent institution, then we have a deal.”

The concept of state aid is whereby resources are granted to companies in order to give them assistance.

EU officials have demanded an agreement on the concept in order to stop the UK from undercutting businesses to become a more attractive destination for organisations.

Although the EU may drop demands on the issue, one diplomat insisted there must be guarantees from the UK on state aid if trade to the bloc is to be maintained.

A second diplomat said: “The room for compromise lies in something that will let the UK decide on its own since ‘regaining sovereignty’ is such a big Brexit thing.

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“We would reserve the right to decide on any consequences vis-a-vis access to the single market for UK companies as a result.”

As well as state aid, fishing rights also remain an area of divergence between the two sides.

The EU wants an agreement similar to what is currently in place.

The UK however, wants to break away from the Common Fisheries Policy (CFP).

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The CFP combines the coastal waters of all member state under one economic zone.

However, due to the UK’s waters, British fishermen have insisted it allows European trawler boats to exploit the waters.

Although it has remained a sticking point between the two, another diplomat claimed fisheries will not stop an overarching agreement from being agreed.

They said: “Fisheries won’t wreck the whole thing.

“It’s just about waiting for the right time for the UK to move.”

The role of the European Court of Justice (ECJ) in British judicial matters also remains unresolved.

UK officials want the ECJ removed from UK matters due to Britain’s newfound independence after Brexit.

Additional reporting by Monika Pallenberg.

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