EU's Michel says uncertain if there will be post-Brexit deal with UK

By Gabriela Baczynska

BRUSSELS (Reuters) - It is not certain that Britain and the European Union will be able to seal a deal on their new relationship after Brexit, European Council President Charles Michel said on Friday, urging London to come clean on its state aid plans to unlock progress.

Speaking to Reuters and five other European news agencies, Michel said: "Sooner or later, the UK should clarify what they want. It's not possible to leave the European club and at the same time keep all the benefits."

"The UK should clarify its position. For us, the level-playing field is key and essential," he added. "It's impossible that they diverge and there are no consequences, for example on tariffs."

Michel spoke ahead of another negotiating round between the EU and Britain in London next week aimed at sealing a new partnership agreement from 2021 on everything from trade and security to cooperation on nuclear, transport and aviation.

After the summer brought no breakthroughs on the key outstanding issues - the level-playing field guarantees of fair competition, fisheries and dispute settling - the EU has grown increasingly wary that an agreement may not come together in time for the bloc to be able to ratify it by year-end.

The bloc's Brexit negotiator, Michel Barnier, went to London last Sunday to tell his UK counterpart, David Frost, that Britain must move on state aid, or there will not be an agreement, according to EU diplomatic sources.

Michel said Barnier came back empty-handed ahead of what the bloc now says is a "strict deadline" of the end of October to seal a deal between the two sides.

A senior EU diplomat estimated chances for a deal against a rough split without an agreement to continue some of the current, close-knit cooperation, at 50-50. Michel refused to comment on that but said:

"We have no certainty that we'll reach a deal. I hope it will be possible - but not at all cost ... We defend European interests."

Calling on Britain to clarify its future state aid plans - which the bloc worries London might use to support UK firms that would then gain an unfair advantage in offering their products on the EU's cherished single market of 450 million people, Michel said: "It takes two to tango."

(Reporting by Gabriela Baczynska; Editing by John Chalmers and Alison Williams)