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REUTERS SUMMIT-East Europeans push for soft Brexit deal, say UK must not be punished

punished@ (For other news from Reuters Central & Eastern Europe Investment Summit, click on http://www.reuters.com/summit/CentralEasternEuropeInvestment17)

BUDAPEST/WARSAW, May 26 (Reuters) - Eastern members of the European Union are pushing for a soft separation with Britain, hoping that this would protect the rights of millions of east Europeans living and working there.

Top policy makers from Hungary, Poland, the Czech Republic and Romania have called on the EU this week not to punish Britain for leaving the bloc.

The concern is that a hard Brexit could lead to substantially diminished contributions from Britain to the EU budget, thus decreasing development funds flowing to poorer members of the former communist bloc and potentially damaging their trade links.

The emerging economies of the region rely heavily on EU funds to boost growth and help them catch up with wealthier Western European members.

"Our aim is that the ... European institutions do not sit to the negotiating table with an intention to punish the British," Hungarian Foreign Minister Peter Szijjarto told the Reuters Central & Eastern Europe Investment Summit.

"So ... have an intention to come to the best possible agreement which needs to have two pillars in our understanding: number one (is) the tightest possible cooperation on economy, trade and investments."

Szijjarto said the other key element was "guarantees for the EU citizens who have been working and studying in the UK that their rights will be protected."

The EU will offer to protect the welfare and residence rights of Britons living on the continent after Brexit when it opens talks with London next month, according to a document seen by Reuters on Thursday.

The paper will accompany another prepared on Britain paying outstanding sums into the EU budget to be discussed by officials from the other 27 member states next week. These two issues are among the most important that EU Brexit negotiator Michel Barnier has identified in reaching a divorce treaty.

"At some stage of the negotiations, emotions will play a big part," Krzysztof Szczerski, top foreign policy adviser to Polish President Andrzej Duda said. "In Poland, there are no bad feelings in relation to the British decision."

There are over a million Poles working in the UK, and hundreds of thousands more Romanians and Hungarians.

Romania's foreign minister said that the deal on Brexit was important for Romania for financial reasons but also due to the contribution that the UK could bring to European security and defense policy.

"Our bid is to have a post-Brexit accord with UK that keeps them as close as possible to the European Union," Teodor Melescanu said.

JOINT VISEGRAD POSITION?

Budapest hopes for a common position from the Visegrad four countries - Hungary, Poland, the Czech republic and Slovakia -- regarding Brexit talks, led by Poland, that would aim for the "tightest possible cooperation agreement (with Britain) regarding trade and economy," Szijjarto said.

Czech Prime Minister Bohuslav Sobotka echoed his words.

"One of the things I regard as important is that V4 (Visegrad Four) should pick up some of the agendas that Britain has been pushing for," he said.

"That means for example good functioning of the internal market, not creating barriers to it."

Sobotka said it was also important to maintain strong security links with Britain, be it within NATO, or even within the European Union in the future.

"The biggest complication will probably be connected to setting the trade relations, because we will be ready to agree with the Brits only when our citizens' rights issue is solved, when the British contribution to the European budget is solved," Sobotka added. (Writing by Krisztina Than, Additional reporting by Robert Muller and Radu Marinas; Editing by Elaine Hardcastle)