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EU, Canada still hope to sign trade deal after Belgian 'Non'

By Philip Blenkinsop and Robert-Jan Bartunek BRUSSELS (Reuters) - Belgium declared on Monday that it could not formally back a free trade deal between the European Union and Canada because of an internal Belgian dispute, but the two sides still appeared to be holding out hopes of a summit to sign off on the deal. Belgian Prime Minister Charles Michel told European Council president Donald Tusk that Belgium was not in a position to consent to a deal that all 27 other EU members are ready to support because its French-speaking authorities opposed it. The European Union had given Belgium until late on Monday to overcome that opposition or the EU-Canada summit on Thursday to sign the pact with Canadian Prime Minister Justin Trudeau would be cancelled. However, Tusk said he and Canadian Prime Minister Justin Trudeau still believed the summit could go ahead. "Together with PM @JustinTrudeau, we think Thursday's summit still possible," Tusk said in a tweet. "We encourage all parties to find a solution. There's yet time," he tweeted. Michel, whose federal government backs the Comprehensive Economic and Trade Agreement (CETA), had called a meeting of the heads of Belgium's regions and linguistic communities. "We cannot give a 'Yes'," Paul Magnette, the premier of the French-speaking Wallonia region, told reporters as he emerged. He said the main problems remained not with Ottawa, which has already agreed to modifications in the deal, but with the EU authorities. Other Socialist-led authorities, including those of the bilingual capital Brussels, have thrown their weight behind the Walloons, while Dutch- and German-speakers have backed Michel's centre-right coalition. The issue goes beyond just a trade deal with Canada, the EU's 12th-largest trading partner. If CETA fails, the EU's hopes of completing similar deals with the United States or Japan would be in tatters, undermining a bloc already battered by Britain's vote to leave it and disputes over Europe's migration crisis. "These are dark days for European trade policy," said Ulrich Grillo, president of the Federation of German Industries (BDI). "This blockade is undermining the trust of international partners in the EU." PRINCIPLES OR INTERNAL POLITICS? Geert Bourgeois, premier of the Dutch-speaking Flanders region, called it a real shame. "We're the laughing stock of the whole world. It's bad for Wallonia, for Flanders, for Belgium, for Europe, for the whole world," he told reporters after the meeting of less than an hour. EU negotiators say they are willing to keep talking with the Walloons though Canada's trade minister left in frustration after talks in the regional capital Namur on Friday, saying the problems were internal ones for the Europeans to sort out. Andre Antoine, Walloon parliament speaker, told Reuters earlier on Monday more time was needed: "A reasonable time frame would be the end of the year. With that, we could get there." CETA supporters say it would increase trade between the partners by 20 percent and boost the EU economy by 12 billion euros (10.64 billion pounds) a year and Canada's by C$12 billion (7.36 billion pounds). Magnette's main objection is to an investor protection system that would allow foreign companies to sue host states they deem are harming their investments. Critics argue it enables multinationals to dictate public policy. The European Commission says CETA has overhauled this, with guarantees on the right of governments to regulate and judges appointed by EU and Canada rather than parties to a dispute. Many EU leaders suspect the local government in Namur is using its devolved powers to play domestic politics. Dutch language Flemish newspaper De Morgen said on Monday that Magnette's stance was both a matter of principle and opportunism, a chance to boost his reputation and to become leader of the centre-left in Belgium. "The takeout is you can't give everyone a veto. It doesn't work. Belgium needs to sort this out," said Hosuk Lee-Makiyama, director of thinktank EPICE. (Additional reporting by Noah Barkin in Berlin; writing by Philip Blenkinsop and Alastair Macdonald; Editing by Richard Balmforth)