The European Union's chief negotiator said Friday that the bloc and the United Kingdom are starting a "last attempt" to clinch a post-Brexit trade deal, with EU fishing rights in British waters the most notable remaining obstacle to avoid a chaotic and costly changeover on New Year.
Michel Barnier told the EU parliament he "can't say what will come out during this home straight of the negotiations," which have already come a long way in nine months of talks. He called it "a very serious and somber situation" with the jobs of hundreds of thousands of people at stake.
The EU parliament has set a Sunday night deadline on the talks since it still will have to approve any deal ahead of year-end, when a transition period following the Jan. 31 departure of Britain from the bloc will expire.
"It's the moment of truth," said Barnier. "We have very little time remaining - just a few hours."
A failure to reach a post-Brexit deal would lead to more chaos on the borders at the start of 2021 as new tariffs would add to other impediments to trade that are enacted by both sides. The talks have got bogged down on two main issues over the past days - the EU's access to U.K. fishing waters and assurances of fair competition between businesses.
"We have reached the hard nuts to crack," said Barnier.
He said the EU understood and respected the U.K. desire to rule its own waves, but said that "a credible period of adjustment" had to be given, if EU boats are to be kicked out of British waters despite centuries of tradition of sharing them.
On top of that, the more London denies access to its waters, the more the EU can impose duties and tariffs.
"The European Union also has to maintain its sovereign right to react or to compensate," Barnier said, highlighting that the U.K. seafood industry is extremely dependent on exports to the 27-nation bloc. British Prime Minister Boris Johnson has made fisheries and U.K. control over its waters a key demand in the long saga of Britain's departure from the EU.
The European Parliament issued a three-day ultimatum to negotiators to strike a trade deal if it's to be in a position to ratify an agreement this year. European lawmakers said they will need to have the terms of any deal in front of them by late Sunday if they are to organize a special gathering before the end of the year.
If a deal comes later, it could only be ratified in 2021, as the parliament wouldn't have enough time to debate the agreement before that.
A trade deal would ensure there are no tariffs and quotas on trade in goods between the two sides, but there would still be technical costs, partly associated with customs checks and non-tariff barriers on services.
Britain's Parliament must also approve any Brexit deal, and the Christmas break adds to the timing complications. Lawmakers are due to be on vacation from Friday until Jan. 5, but the government has said they can be called back on 48 hours' notice to approve an agreement if one is struck.
Though both sides would suffer economically from a failure to secure a trade deal, most economists think the British economy would take a greater hit, at least in the near-term, as it is relatively more reliant on trade with the EU than vice versa.
Both sides have said they would try to mitigate the impact of a no-deal, but most experts think that whatever short-term measures are put in place, the disruptions to trade will be immense.