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EU President Charles Michel and Australian Prime Minister Scott Morrison held a "frank and direct" exchange on the margins of the UN General Assembly, an EU official has said. The comments come as leaders try to defuse the diplomatic storm provoked by the announcement of the new Pacific security grouping AUKUS. A key EU-US trade meeting next week, as well as discussions on an EU-Australia FTA are under threat following last week's announcement by the Australian, the US and UK leaders.

The leaders also underlined their "common interest in the Indo-Pacific region and noted the region's strategic importance to EU interests".

Michel also called on Australia to "engage with the EU and its Member States to build confidence and a strong partnership".