EU urged to avoid no-deal Brexit as cost of virus pandemic is mounting

Some European Union member nations have warned the bloc not to allow the United Kingdom to leave without a trade deal because the financial hit would be too much following the economic cost of the novel coronavirus pandemic.

The nations, said to include Belgium and Ireland, reportedly believe a hard Brexit would be catastrophic while the bloc faces its most serious postwar economic slump to date.

The Financial Times said diplomats made the suggestion during recent talks related to the bloc's seven-year budget and the 750-billion-euro ($852-billion) recovery fund that will support member nations — including France, Italy, Poland, and Spain — as they recover from the pandemic.

The UK officially left the EU on Jan 31 but remains bound by its laws until the end of 2020 while talks continue for a replacement trade deal.

But those negotiations have been difficult and, if the parties fail to reach an agreement, the UK could leave without a deal and resort to trading under World Trade Organization rules. Experts say such an arrangement, a so-called no-deal or hard Brexit, would slow the flow of goods and services and add to their cost.

With the EU's economy predicted to shrink by 8.7 percent this year due to the virus, the EU member nations say the bloc must avoid additional costs.

They have also reportedly noted that the EU's novel coronavirus fund will offset some of the cost of the virus fight for some nations but that there is not a similar fund to support nations that would be hit hard by a no-deal Brexit.

The Express newspaper claims the warnings will further complicate trade deal negotiations.

An EU official told the paper: "We are consistently trying to remind member states, but also all stakeholders, that under all circumstances — deal or no-deal — at the end of the year the commercial relationship between the EU and UK will look very different."

The Reuters news agency reports the EU is also prioritizing a deepening of the bloc's capital market, as a way to recover from the impact of the virus.

The agency said the move would reduce the bloc's reliance on the City of London financial district for currency transactions.

An EU report released on Wednesday laments that the bloc still relies on UK-based banks.

The EU has now convened a "high level forum" of experts to accelerate the establishment of an EU-wide Capital Markets Union, something the bloc has called for it the past but failed to create.

The report says: "With the UK having left, a question for politicians is how much of this market one wants onshore, and how much offshore."