Donald Tusk has called on the UK to come up with its own plan to avoid a border in Ireland. Theresa May rejected the EU's draft offer and is set to announce her own proposal in Brussels.
Following the meeting, an official for Tusk said he and May had "an open and honest debate in a good atmosphere about the real political difficulties ahead of us."
Their meeting at Downing Street came a day after May rejected a draft EU deal proposing that Northern Ireland remain in the EU customs union if the two sides fail to find a better solution. The prime minister reacted angrily to the proposal, saying she would refuse anything that undermined the UK's constitutional integrity.
"The PM said that the draft text put forward by the European Commission yesterday was unacceptable to the UK as it would, if implemented, undermine the UK common market and constitutional integrity of the UK," May's office said in a statement following her meeting with Tusk.
However, it has not said how it intends to avoid a hard border on the island of Ireland in order to protect the Good Friday agreement. The 1998 truce ended three decades of sectarian violence in Northern Ireland.
Tusk has criticized the UK's self-imposed "red lines" on the single market and customs union, warning that would shape the future relationship and make frictionless trade, as called for by British politicians, impossible.
"I want to stress one thing clearly: there can be no frictionless trade outside of the customs union and the single market," Tusk said ahead of the meeting. "Friction is an inevitable side effect of Brexit by nature."
May is set to announce on Friday her expectations for the UK's future relationship with the EU after it leaves on the bloc in 13 months' time. May briefed Tusk on the speech, with reports suggesting she will make the call for an "ambitious economic partnership."
Tusk will make a similar announcement on the EU's stance next week.
Brexit treaty would 'threaten' UK's integrity
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Downbeat Barnier sinks sterling
Warnings from the EU's chief negotiator, Michael Barnier, caused the pound to sink to a seven-week low against the dollar.
Barnier told reporters on Thursday that the only option open to the UK was a free trade deal, similar to the ones the EU recently signed with Canada and Japan.
"The UK is closing the door on itself one by one and the only possible model which remains is that of the free trade agreement, as we did recently with Canada, Japan or Korea," Barnier said in Brussels.
The former French minister for foreign affairs also warned that there was no guarantee for a 21-month transition deal — an agreement designed to give London and Brussels more time to finalize the results of Brexit. According to the reports, the announcement rattled investors and sparked a sell-off of the pound.
Brexit negotiations: What are the key issues?
Brexit talks began in June and both sides have been frustrated at the lack of progress. DW has taken a look at key issues being debated in Brussels as the clock ticks toward Britain's scheduled departure in March 2019.
Image: picture-alliance/dpa/o. Hoslet
Two phases
EU leaders agreed to negotiating guidelines during a summit in April 2017 that divided the divorce talks into two phases. Phase I, in which both sides aimed to settle the basic terms of Britain's departure, started in July and ended with an agreement on "sufficient progress" in December. Officials are now holding Phase II negotiations on the post-Brexit relationship between Britain and the EU.
Image: Reuters/File Photo/Y. Herman
The "Brexit Bill"
London agreed to a formula for calculating what it owes in its "divorce bill" to the EU in early December after months of haggling by British officials. The current EU budget expires in 2022 and EU officials have said the divorce bill will cover financial obligations Britain had committed to before triggering article 50. The final bill will reportedly total around £50 billion (€67 billion).
Image: picture-alliance/empics/D. Martinez
Citizens' rights
Both sides agreed in early December that the 3 million EU citizens currently in Britain and the 1.1 million British citizens in the EU keep their residency rights after Brexit. British courts will have immediate jurisdiction over EU citizens living in Britain. But the EU's highest court, the ECJ, can hear cases until 2027 if British judges refer unclear cases to them.
Image: picture-alliance/dpa/B. Smith
The Irish border
Britain and the EU also agreed in December that no border checks between the Republic of Ireland and Northern Ireland would return post-Brexit. How feasible the commitment will be is unclear, as Britain's commitment to leaving the EU Single Market and Customs Union makes it difficult to avoid customs checks at the Irish border.
Image: Reuters/C. Kilcoyne
Transition period
Theresa May envisages a two-year transition period after March 2019. Both sides still have to hash out the details of the transition period in Phase II, including the exact end-date, whether new EU laws passed during the period will apply to Britain, and whether Britain can negotiate its own free trade deals. British officials hope to agree on the terms of the transition by March 2018.
Image: Imago
Trade
May has repeatedly said Britain will leave the European Single Market and the EU Customs Union. Leaving both could disrupt British-EU trade, but allow Britain to negotiate its own free trade deals and restrict EU migration — key demands by pro-Brexit politicians. London has said it wants to negotiate a new EU-UK trade deal during Phase II to minimize trade disruption before March 2019.
Image: Picture alliance/empics/A. Matthews
Immigration
Britain has also vowed to restrict EU migration into Britain after Brexit. However, some British lawmakers are wary that a sharp drop in immigration could lead to shortfalls in key sectors, including health, social care and construction. The EU has warned that Single Market access is out of the question if London decides to restrict the ability of its citizens to live and work in Britain.
Image: picture alliance/PA Wire /S. Parsons
Security
Recent terror attacks across Europe including a string in Britain underline both sides' support for continued security cooperation after March 2019. But access to EU institutions such as Europol and programs such as the European Arrest Warrant require compliance with EU laws. Whether Britain will still be compliant after it leaves is unclear.