The European Union’s Brexit negotiator has called for “realism” over the terms of the future relationship between the UK and Brussels.
Michel Barnier’s comments came after claims from EU officials that Britain has a “fantasy” approach to the talks sparked anger.
Chancellor Philip Hammond and Theresa May’s top Europe adviser Olly Robbins were forced to defend the Government’s approach after the criticism from Brussels.
Mr Barnier’s intervention, during a visit to Portugal, illustrated the gap between the two sides in the negotiations.
“Time is running short,” he said, stressing the need to finalise the withdrawal agreement – including an agreed “backstop” proposal covering cross-border issues between the UK and Ireland.
Mrs May has rejected the European Commission’s fallback option to cover the border, which would see Northern Ireland remain closely tied to EU rules – effectively creating a new border in the Irish Sea.
She has promised to put forward the UK’s alternative backstop proposal, although the Prime Minister remains hopeful of finding a way to solve the problem of the border within the wider post-Brexit deal.
Mr Barnier stressed that “realism is needed on the future relationship”.
Earlier, the Chancellor insisted that talks with EU officials were “constructive” after reports from the continent that Britain was being “unrealistic” and little progress made in discussions in recent days.
Arriving in Brussels for talks with other finance ministers at the Economic and Financial Affairs Council, Mr Hammond said: “We are having very constructive discussions, I don’t think that is a particularly helpful comment.
“There are obviously a wide range of views on both sides but everybody that I have engaged with has been very constructive, very keen, to find a way to move forward.
“We are very conscious of the ticking clock and the need to make significant progress for the June European Council and that is what we are here to do.”
The increase in tension emerged after the UK made clear it would seek a return of £1 billion in funding it has put into the Galileo satellite system if the EU continued to shut Britain out of key aspects of the project post-Brexit.
Mr Hammond added that the UK was prepared to see external non-European partners to develop its own rival to Galileo and the US GPS system if it had to, saying: “We need access to a satellite system of this kind, our plan has always been to work as a core member of the Galileo project, contributing financially and technically to the project.
“If that proves impossible then Britain will have to go it alone, possibly with other partners outside Europe and the US, to build a third competing system.
“But for national security strategic reasons, we need access to a system and we will ensure we will get it.”
Mr Robbins had earlier insisted that Britain has presented its case “calmly and professionally” during talks with Brussels.
The PM’s key Brexit adviser tweeted: “Very proud of the x-Government team that worked so hard to support technical talks in Brussels this week.
“UK proposals for a deep relationship, calmly and professionally presented.”
The move followed reports that a senior EU official insisted Britain must accept the “consequences” of its decision to quit the bloc and abandon the “fantasy” that things would remain the same.
The spat also came as Bank of England governor Mark Carney said a “disorderly” Brexit transition period may trigger a cut in interest rates, or force a pumping of money into the economy, in order to stabilise the situation.
The UK central bank’s current projections are based on a smooth transition when Britain leaves the European Union, he said in a speech on Thursday, before warning that “a sharper Brexit could put monetary policy on a different path”.
Addressing the Society of Professional Economists, he said that if that happened, the Bank’s Monetary Policy Committee (MPC) would face “a trade-off between the speed with which it returns inflation to target and the support policy provides to jobs and activity”.
Earlier this week, Mr Carney said Brexit has knocked real household incomes by around £900, and lowered growth by “up to 2%” against what the Bank of England had expected in 2016 if the UK had voted to remain in the EU.