However much EU wants a post #Brexit trade deal with UK - and it does - it’s also mindful of the bigger picture -its international reputation. EU wants to be seen to be taking a hard line on Johnson gov attempt to rip up parts of Withdrawal Agreement NOT ONLY.. /1

To make point to Johnson government but also as a „Don’t even think about messing with treaties you’ve signed with us“ message to other non EU countries the bloc has agreements with, or hopes to makes deals with -AND importantly for Brussels it also wants to send clear message /2

to EU members that break/threaten/dance around EU regulations and the rule of law .. eg Hungary, Poland. SO what action might EU realistically take against the government threat to Divorce Deal - IF feels necessary? (Spoiler alert: we‘re not there yet) /3

EU lawyers’ advise even government tabling of internal market bill impacting the Withdrawal Agreement is grounds for arbitration BUT this is not something Brussels is likely to act on HOWEVER if the legislation is passed in its current form .. /4

Then the EU says it will attempt - via the dispute settlement in the Divorce Deal - to impose fines on the UK. And if that approach fails, it could suspend any trade deal or other agreements reached with U.K. in the interim .. This is why the EU is continuing with trade talks /5

on Monday. Brussels believes a trade deal with UK is in its own interest. It still hopes one can be concluded this autumn. After all, it says, the EU was in a similarly “no hope” situation with the Divorce Deal this time last year. Then came last minute concessions .. /6

Dressed up a victory. In good old trade deal tradition. Both sides need to be able to walk away claiming victory. EU hoping for a re-run of that process now re trade deal..BUT row over Internal Mkt Bill definitely doesn’t help .. And anyway the two sides /7

are still far apart on key issues to do with EU-UK future relationship: state aid (and fish). In case a trade deal IS reached but the government still overrides parts of Divorce Deal, the EU says it could/would suspend that trade agreement, imposing quotas and tariffs /8

which would likely hit U.K. car industry +agriculture hard. Brussels could also unilaterally withdraw any post #Brexit licenses it might give to UK financial institutions, giving them the right to do business in Single Market /9

EU hoping UK domestic drama: the brewing rebellion amongst some Tory MPs plus opposition in House ofLords will kill the Internal Market Bill in current form. Then, hopes Brussels, EU-UK disagreements over aspects of implementation of Irish Protocol can instead be dealt with /10

in EU-UK Joint Committee designed to oversee the implementation of the Divorce Deal. EU knows that requires compromise on both sides. How feasible it is agreement could be reached in the Committee AND in trade talks is hard to judge. Odds stacked against but not impossible /11