German SPD says no 'Europe a la Carte' deal for Britain

(Adds details, background)

By Holger Hansen

BERLIN, Jan 11 (Reuters) - The top priority in Brexit negotiations for the 27 countries remaining in the European Union must be to hold the bloc together, even if this means they suffer one-off economic hits, Germany's Social Democrats (SPD) said in a policy paper.

"Were we to allow a 'Europe à la Carte', this would lead to incalculable domino effects that would threaten the unity of the Union," the parliamentary party of the SPD, junior partner in Chancellor Angela Merkel's ruling coalition, said in the paper.

"The short-term interests of individual groups or member states, including Germany, must recede behind this long-term and overarching goal if there is a conflict," said the paper, seen by Reuters. It added that foreign investments in Britain could lose value or delivery chains be affected.

In the paper, entitled "Strengthening the cohesion of the European Union - our key points for the Brexit negotiations", the SPD said any transitional arrangements for Britain after it leaves the EU should be short-term and tied to tight conditions.

"We reject open transitional rules without a precisely agreed time frame or a clear definition of the new ties," said the paper, dated Jan. 9. It is to be discussed - and likely adopted - by the SPD's parliamentary party on Thursday.

The paper largely reflects the line taken by conservative Merkel who says there will be no cherry-picking for Britain and that the EU must consider limiting British access to the single market if it fails to accept the bloc's four freedoms in talks.

The EU's single market enshrines the four freedoms of movement of goods, capital, people and services.

British Prime Minister Theresa May has said she wants to regain control over immigration, restore British sovereignty, including by pulling out of the European Court of Justice (ECJ), and secure the best possible trading relations with the EU.

The SPD said the rules of the single market, which include fair competition, are guaranteed by the ECJ.

"Without recognition of this function (of the Court) of having the last say, participating in the single market will not be possible, also and in particular, for the service sector," said the paper.

The SPD also said it was prepared to protect the status of Britons in the EU during Brexit talks, as long as Britain does the same for EU citizens there and urged London to provide more clarity about its goals for Brexit.

"Even (Taiwan OTC: 6436.TWO - news) seven months after the referendum, the contours of the broad goals with which the government in London will enter talks are barely visible," said the paper. (Writing by Paul Carrel and Madeline Chambers; Editing by Catherine Evans)