Von der Leyen warns of economic damage in no deal Brexit

European Commission President Ursula von der Leyen on Monday warned that the economies of EU countries and the UK are being "severely hit" by the coronavirus pandemic and that failure to strike a Brexit deal could make things worse.

"We want an agreement," she told reporters in Lisbon at the start of an official visit to Portugal.

"We're working hard and negotiating. I'm still convinced an agreement is possible."

Britain entered a crucial week of post-Brexit talks with the European Union on Monday, rejecting the EU's demand that it drop plans to breach the legally binding agreement it signed on its departure from the bloc.

The EU has told British Prime Minister Boris Johnson to brace for a legal fight.

The bloc insisted that abiding by every last detail of the international treaty that regulated the UK's departure on January 31 was key to maintaining trust and hopes of salvaging a rudimentary trade deal in the next few weeks.

After a short meeting between the two sides in Brussels, UK Brexit planning minister Michael Gove said Britain wouldn't withdraw its Internal Market Bill, which includes clauses to override parts of the Brexit withdrawal treaty.

The rift means that talks between the two sides' trade negotiators will begin Tuesday under an ominous cloud. Britain and the 27-nation bloc have just weeks to strike a deal before a post-Brexit transition period runs out on December 31.

Both sides stand to suffer economically if they fail to find a compromise agreement.