U.K. Prime Minister Theresa May got a first taste of thehigh-wire act involved in European Union negotiations after heropening offer for a Brexit deal ran into immediate opposition fromEU leaders who challenged her attempt to tie a free-trade deal tosecurity cooperation.

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In an early sign that two years of divorce negotiations will beas contentious and complicated as feared, Guy Verhofstadt — theEuropean Parliament's point person on Brexit matters and someonewho will have a say on the final outcome — complained that“security is far too important to start to bargain it against aneconomic agreement.”

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The slap came hours after May formally served notice that theU.K. will leave the EU in March 2019 and immediately pitched for anunprecedented trade deal that would enable banks to maintain easyaccess to the regional economy. Her government will begin theparliamentary process of taking back control over thousands of EUlaws on Thursday.

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The lesson of the first day of the Brexit process was that anybenefits will be hard won as the debate shifts from the purelydomestic arena and EU officials set about dictating the terms ofthe discussions. EU President Donald Tusk said conversations overcommerce would have to wait until the breakup is resolved andothers demanded the U.K. cover its financial dues.

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Tusk will join German Chancellor Angela Merkel, Irish PrimeMinister Enda Kenny and other members of the conservative EuropeanPeople's Party group at a long-planned meeting in Malta on Thursdaythat now takes place against the backdrop of Brexit.

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“This is Day1 of a very long and difficult road,” EU negotiatorMichel Barnier tweeted.

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Nine months since Britons voted to terminate their 44-year runin the EU, May initially struck a conciliatory tone in a letter toTusk that invoked Article 50 of the Lisbon Treaty. She cast thebreakup as a chance to forge a new “deep and special partnership”and acknowledged she cannot cherry-pick the best bits of EUmembership.

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But it soon became apparent the two sides were as far apart asever. The niceties were followed by a bid for a “bold andambitious” duty-free trade pact, which for the first time Maysuggested should encompass finance, a key plank of the U.K. economythat she argued is critical for the EU too.

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Keen to safeguard tens of thousands of banking jobs and the Cityof London's status as a global financial hub, the premier alsoechoed industry requests for an early commitment to a transition tosmooth the break and avoid a “cliff edge” of uncertainty.

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That's also a sign she realizes the deal she wants cannot besealed within the time frame she still maintains is possible. Ittook the EU more than seven years to secure an accord with Canadaand it included only partial access for the finance sector.

A First

“If the U.K. succeeds in agreeing the sort of trade agreementwith the EU that the PM wants, it will be a first in global trade,”said Phillip Souta, head of policy at law firm Clifford Chance.

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The European Parliament may also prove an obstacle. It said anytransition conversation should await “substantial progress” on anexit agreement and then the stopgap shouldn't last longer thanthree years.

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But May's lauding of the mutual advantages of free trade camewith a hint of menace. She cited “security” 11 times in a letterwritten a week after London's worst terror attack in more than adecade reminded European nations of their shared vulnerability.

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If “we leave the European Union without an agreement the defaultposition is that we would have to trade on World Trade Organisationterms,” she wrote. “In security terms a failure to reach agreementwould mean our cooperation in the fight against crime and terrorismwould be weakened.”

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May's office insisted that the U.K.'s support for NATO'soperations bolstering European defense was not in doubt. The newsecurity deal the premier wants would cover only specific EUprograms such as the U.K.'s membership of the European ArrestWarrant and Europol, an information-sharing network, said JamesSlack, May's spokesman.

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Home Secretary Amber Rudd nevertheless underlined the point thatBritain views security as very much in play.

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“We are the largest contributor to Europol, so if we leftEuropol, then we would take our information — this is in thelegislation — with us,” she told Sky News. “The fact is, theEuropean partners want us to keep our information in there becausewe keep other European countries safe as well.”

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Nick Macpherson, the U.K. Treasury's former top civil servant,tweeted that “crime and terrorism don't respect borders. It is nota credible threat to link cooperation to a deal.” Rupert Harrison,a former government adviser now at BlackRock, called thejuxtaposition “punchy.”

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However, the German chancellor and others weighed inforcefully to remind the U.K. that the early part of negotiationshas to be about the talks themselves. Tusk insisted the first phasemust focus on “key arrangements for an orderly withdrawal.”

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Merkel promptly backed him. “In the talks, we first have tofigure out how to disentangle” the bonds, she said in a speech inBerlin. “Only when those questions have been dealt with, hopefullysoon, can we talk about how to craft our future relationship.”

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Tusk's job for the next 48 hours is to flesh out the EU'sstrategy by drafting guidelines for Barnier to be pored over by EUleaders on April 29.

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Differences over money also lingered. With the U.K. dismissiveof the suggestion that it must pay a bill of around 60 billioneuros ($65 billion), the European Parliament said in a draftresolution that the U.K. must “honor all its legal, financial andbudgetary obligations.”

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May indicated two can play the money game as she said Britainhas rights as well as obligations and that a “fair settlement” wasmerited.

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“There's certainly going to be a dogged fight about that,”Austrian Chancellor Christian Kern said.

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European Commission President Jean-Claude Juncker made his owndark prediction. The Britons, he said, made “a choice they willregret one day.”

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Bloomberg News

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