The president of the European Council, Charles Michel, on Friday proposed setting up a €5 billion ($5.7 billion) reserve fund to mitigate any unforeseen economic consequences of Brexit on European Union member states.

The EU and the United Kingdom are in the middle of negotiations to hammer out a basis for trade following the end of the post-Brexit transition phase on December 31, 2020.

If the deadline passes without a trade deal in place, it could have devastating consequences for businesses in both the EU and the UK. Some experts have called the short timeline for a trade deal unrealistic. Another meeting of EU and UK officials is set to begin on July 20.  

Read more: Brexit: Europe, UK trade talks stall over 'serious differences'

"We all know that the ongoing negotiations are not easy," said Michel on Friday. "And we know that probably by the end of the summer or in September, October, we will have a clearer vision about where we are" in the negotiation process.

Michel's proposal will be debated as part of EU budget discussions planned during a special EU leaders' summit next week.

'Consequences' with or without a deal

Michel said that Brexit, with or without a trade agreement in place, will have "consequences" for EU member states.

"I think it's ... necessary to ask the Commission to prepare for a needs assessment by November 2021," he said.

Among member states, Ireland is expected to be most affected by Brexit, with Belgium and northern France also vulnerable to economic instability. 

Read more: UK fine wines face Brexit hangover

On Thursday, the EU Commission said it is planning post-Brexit emergency measures for dozens of sectors, warning of "inevitable" economic disruptions.

"There will be far-reaching and automatic changes and consequences for citizens, consumers, businesses, public administrations, investors, students and researchers," the EU's executive warned, while urging governments to prepare.

wmr/mm (AFP, Reuters, dpa)