The comments at the weekend, by German economy minister Sigmar Gabriel, have triggered a wave of criticism and forced both the German Chancellor Angela Merkel and European Commission to issue separate statements insisting that the transatlantic trade and investment partnership (TTIP) negotiations remain on track.
On Sunday, Gabriel said that negotiations over TTIP had failed because Europe rejected some US demands.
However, 24 hours later, a senior Commission spokesperson told reporters, "The ball is rolling right now and the Commission is making steady progress in the ongoing TTIP negotiations."
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He said the EU had a unanimous mandate from all member states to finalise negotiations on the trade deal.
GUE/NGL group shadow rapporteur on TTIP, Helmut Scholz, questioned the motives behind Gabriel's comments, "given that his position on these agreements has not changed and Chancellor Merkel has immediately reinforced her support for TTIP."
The deputy said, "We must not forget that Gabriel's statement comes right before elections in Berlin and Mecklenburg-Western Pomerania."
Elsewhere, a spokesperson for the US-based Trans-Atlantic Business Council (TABC), a cross-sectoral business association representing global companies, is among others who have voiced concern at the German minister's comments.
TABC Director-General/CEO Tim Bennett said he was "disappointed that such a key political leader in the most important EU economy" should claim that TTIP negotiations had failed.
He said Gabriel had "ignored the clear and repeated" statements by both European trade Commissioner Cecilia Malmström and US trade representative Michael Froman that "intensive and sustained" efforts are still underway by the EU and US teams to conclude the TTIP talks by the end of this year.
Bennett said, "Nobody is under any false illusions as to how difficult it will be to conclude the TTIP negotiations before the end of the Obama administration, but TABC members agree that such an effort should be made and fully support the firm commitment both governments have made to doing so."
He added, "NGOs, particularly in Europe, have raised numerous objections to TTIP, some of which are legitimate and need to be addressed, but most of which will likely prove to be unfounded once the negotiated text is completed."
He went on, "Trade liberalising agreements have proven to generate greater economic growth and employment levels than would occur otherwise.
"Political leaders in the EU and US should continue to lend their support to this effort to strengthen the competitiveness of the transatlantic economies vis-à-vis other global competitors."
The White House also disputed Gabriel's contention, saying it was still aiming to reach a deal by the end of the year.
"It's going to require the resolution of some pretty thorny negotiations, but the President and his team are committed to doing that," said a White House spokesperson.
In Berlin, Germany's leading industry associations were also critical of Gabriel's remarks and urged the German government to show greater commitment to free trade deals.
Major protests against TTIP and other EU-brokered trade deals are planned in 10 cities throughout Germany on 17, in Brussels on 20 and in Bratislava on 22 September.
The GUE/NGL group will hold a hearing on "economic alternatives" to such deals on 15 November in the European Parliament.
Meanwhile, both the French trade secretary Matthias Fekl and Friends of the Earth Europe have called for the end of the current TTIP negotiations.
Friends of the Earth Europe said TTIP will "undermine environmental, social, health standards in Europe and gives unacceptable rights to US investors to sue European governments if they take measures that affect their profits."
It calls on EU leaders to reject outright both TTIP and CETA, a similar agreement between the EU and Canada.
Paul de Clerck, economic justice programme coordinator at the group, said: "Fine words from political leaders during election years is not enough.
"EU governments need to put their words into actions and halt the dangerous TTIP negotiations and discard the CETA agreement with Canada. These Trojan trade deals undermine democracy and threaten our environment and social protections."