Angela Merkel has urged Britain to come to the negotiating table with a “different, sensible” Brexit plan as she dismissed Theresa May’s Chequers proposal.
In a speech to business leaders in Berlin, the German chancellor warned that the UK could not pick and choose between elements of the EU’s single market.
Under the Prime Minister’s Chequers proposal the UK would sign up to the EU’s rules for goods but not services.
The rebuke follows a bruising EU summit in Salzburg last week in which the head of the European Council, Donald Tusk, said Mrs May’s plan “will not work”.
Mrs Merkel also warned that the 21-month Brexit transition period will not be long enough if the terms of a future trade deal with the UK are not made clear and concrete in the next eight weeks.
Speaking at the Federation of German Industries (BDI) conference, she said: “We are entering the decisive phase of negotiations in autumn.
“There is likely to be a special council of European heads of state and government in November on which the resignation agreement must be finalised. This may succeed in October.
“At any rate, future relations with Great Britain must be described as concretely as possible.
“For if a political declaration on future relations is too general, then the transitional period can quickly become too short, so that a reasonable agreement, which, in the light of things, must be a very intense free trade agreement, can barely be passed in the appropriate time.”
She added: “I think playing for time does not help the economy either. After all, you need clarity and the ability to see how you shape your future relationships. That’s why we now have six or eight weeks of the toughest work to do in making the policy.
“Of course, this also depends on what Britain really wants. Even there, the discussion is not quite clear.”
Mrs Merkel reiterated the rejection of the Chequers proposals, telling business leaders “one cannot belong to the internal market if one only wants to be part of the single market in one part but not in the other parts of the internal market, there we have to find different, sensible ways”.
Roberto Azevedo, head of the World Trade Organisation, appeared at the same conference and said he would seek to minimise the damage of a no-deal Brexit.
He added: “If we can minimise the disruption, if we can minimise the pain, that’s what we will try to do.”
Monday’s Cabinet meeting saw Mrs May tell ministers to hold their nerve with her Brexit plan.
At the meeting, ministers also agreed to ensure that EU nationals be subject to the same rules as migrants from the rest of the world after free movement ceases to apply in the UK.
The agreement in principle came following the recommendations of the Migration Advisory Committee, which published a Government-commissioned report last week.
The study said that, if immigration is not part of the negotiations with the EU and the UK is deciding its future system in isolation, there should be no preference given to citizens from the European Economic Area, which includes the present 28 EU countries, as well as Iceland, Norway and Liechtenstein.