EU president tells Boris Johnson his latest Brexit plan is just no-deal: ‘We are fine with that’

Boris Johnson’s suggestion that Britain could trade with the EU on the same terms as Australia would amount to a no deal, the president of the European Commission has said.

Ursula von der Leyen said she was “surprised” to hear the prime minister propose an “Australian-style” Brexit because “the European Union does not have a trade agreement with Australia”.

Mr Johnson made the comments in a speech last week where he rejected suggestions the UK could align to EU rules to gain more market access – the bloc’s key requirement.

“Honestly, I was a little bit surprised to hear the prime minister of the United Kingdom speak about the Australian model,” Ms Von der Leyen said during a debate in the European Parliament on Tuesday.

“Australia, without any doubt, is a strong and a like-minded partner, but the European Union does not have a trade agreement with Australia.”

The head of the EU’s executive branch said that if the UK wanted to leave without a deal, the bloc was “fine with that”, however.

“We are currently trading on WTO terms and if this is the British choice, well, we are fine with that, without any question,” she said.

“Of course the UK can decide to settle for less, but I personally believe that we should be way more ambitious.”

Mr Johnson has set himself a deadline of the end of this year to negotiate a trade deal with the EU. If one is not secured, the UK will crash out of the transition period and trade on WTO terms, with British businesses facing high tariffs and quotas for trade.

Two key battlegrounds are emerging in the early stages of talks: the extent to which the UK guarantees it will play by EU rules on a “level playingfield” when it trades, and the extent to which the European Court of Justice will oversee the agreement.

The EU also wants fishing rights for its fleets in British waters, while the UK wants access for its financial service firms to European markets.

On Tuesday, the chancellor Sajid Javid said he wanted a “reliable equivalence process” for financial services rules on which “a durable relationship” can be built with the EU.

But Michel Barnier, the EU’s chief negotiator who was also speaking in the parliamentary debate, knocked back the chancellor’s demands, stating: “I’d like to make it clear to certain people in the UK in authority that they shouldn’t kid themselves. There will not be general, open-ended, ongoing equivalence in financial services. We’ll retain a free hand to take our own decisions.”

He said the bloc would simply not negotiate with the UK on this issue. As a result of Britain’s departure from the EU, City firms will lose their automatic “passporting” rights to keep doing business on the continent.

Mr Barnier added that ”the opening of our markets, access to data, and equivalencies for financial services will be proportional to the commitments made to meet a true level playingfield” in the UK staying tied to EU regulations.

It comes amid reports that member states are pushing the commission to toughen up conditions on Britain even further, requiring it to stay aligned with new EU rules after it leaves.

Mr Johnson had said in his speech: “In the very unlikely event that we do not succeed, then our trade will have to be based on our existing withdrawal agreement with the EU.

“The choice is emphatically not ‘deal or no deal’. The question is whether we agree a trading relationship with the EU comparable to Canada’s – or more like Australia’s.”

Under the “Australia” scenario, the UK would end up paying tariffs and having quotas imposed on its imports and exports with the EU.

Under an agreement mirroring the Canadian deal with the EU, a relatively hard Brexit, there would also be tariffs and quotas – though fewer. The UK has also said it wants to try and negotiate a deal with zero tariffs and quotas.

There are currently no tariffs and quotas during the transition period, under which the UK stays aligned to EU rules until the end of 2020.