EU's Juncker says ties with UK will always be close but Brexit demands remain

By Alastair Macdonald

STRASBOURG (Reuters) - European Commission head Jean-Claude Juncker on Wednesday renewed a pledge of close trade and security ties with Britain after Brexit, but said the European Union would not compromise on key withdrawal terms.

Delivering his annual state-of-the-union speech to the European Parliament, Juncker said the EU will not allow Britain to participate only in some parts of the bloc's single market after Brexit without honouring all of its rules.

"We respect the British decision to leave our union, even though we continue to regret it deeply," Juncker said. "But we also ask the British government to understand that someone who leaves the union cannot be in the same privileged position as a member state."

"After 29 March 2019, the United Kingdom will never be an ordinary third country for us. The United Kingdom will always be a very close neighbour and partner, in political, economic and security terms," Juncker said.

Markets have been reacting increasingly nervously to Brexit news in recent weeks as the EU and Britain have yet to reach a comprehensive agreement before Britain leaves on March 29, 2019.

Businesses fear a disruptive "no-deal" scenario under which Britain would crash out of the EU next year with few agreements in place to transition into a new reality. Avoiding reintroducing checks on the EU-UK land border on the island of Ireland remains a key obstacle.

"The European Commission, this Parliament and all other 26 member states will always show loyalty and solidarity with Ireland when it comes to the Irish border," Juncker said. "We want to find a creative solution that prevents a hard border in Northern Ireland."

A senior EU official said separately it would be sending a "wrong signal" to suggest there was a softening of the EU line, and dismissed suggestions EU leaders might rejig instructions for chief negotiator Michel Barnier when they meet May in Austria next week.

Juncker sent a positive signal on May's Brexit proposal, known as the "Chequers" plan for the country residence where it was hammered out in July. It calls for Britain to stay in a free trade zone with the EU for goods, opposed at home by both supporters of closer ties and those who want a cleaner break.

"I welcome Prime Minister May's proposal to develop an ambitious new partnership for the future, after Brexit. We agree with the statement made in Chequers that the starting point for such a partnership should be a free trade area between the United Kingdom and the European Union," Juncker said.

(Writing by Gabriela Baczynska; Editing by Peter Graff)