GERMANY and France are demanding divorce bill cash from Britain before talks on a two-year transition deal go ahead.
UK officials had hoped talks of transition would be on the table at a high-profile Brussels summit in two weeks.
But although Prime Minister Theresa May’s Florence speech was seen as a positive step forward - a German-led group of EU countries has urged for more clarity on the cash Britain will pledge to cover its financial commitments.
Fears have been raised that such a tough stance is being taken by Berlin just a week after Mrs May met with German Chancellor Angela Merkel to talk through Brexit and her Florence speech, which aimed to offer transition payments to cover a £20billion EU budget shortfall.
Hopes that Brexit talks will go smoothly have now been dashed as the UK’s two main negotiators battle for staff and resources before the fifth round of talks kick starts.
Civil servant Olly Robbins, who left his job as head of the Department for Exiting the EU, is setting up a rival “Europe unit,” according to a leaked email.
It is understood he is openly trying to poach ex-colleagues working for Brexit Secretary David Davis.
Cabinet infighting and the Berlin stance come following the fallout at the Conservative Party conference hitting Mrs May’s momentum after her speech in Florence.
Both France and Germany’s uncompromising positions emerged as ambassador from the remaining 27 EU members staged a first debate on their approach to transition talks, including the chance to rubber-stamp exploratory negotiations in October.
Michel Barnier, the EU’s chief negotiator, underlined the possible benefits of opening talks on a transition deal at the meeting and indicated it would create space to resolve major issues on an exit bill and recognise Mrs May’s accommodating stance.
But Berlin and Paris rejected the standpoint according to diplomats briefed on the meeting.
Germany’s view underlines the EU27 will not let up pressure on divorce issues in coming months despite Mrs May’s Florence overture.
One EU ambassador told his colleagues: “We are not here to save the Tory party.”
But some diplomats are suggesting Berlin’s tough line might be tactical to raise pressure and lower expectations ahead of a summit at which EU leaders would take a more accommodating approach.
A delayed timetable would be a blow to UK business, which is warning ministers an end-of-year transition deal is vital to stop companies from moving to the continent over fears on the future.
Germany’s biggest business lobby has warned members to prepare for a “very hard Brexit” following the stalemate.
Mr Barnier’s team has been holding talks with national customs authorities handling UK trade to make sure they prepare for all scenarios, including a no deal.