Angela Merkel's deputy, Sigmar Gabriel, has warned that the UK cannot expect to receive better Brexit terms with the EU than EU membership.
Gabriel, Germany's Vice-Chancellor in the country's coalition government, told reporters that the difficulty created by the shock referendum result was a major political problem for the EU.
EU leaders have concerns that a favourable deal for London, particularly around access to the Union's large internal market, may encourage other member states to follow the UK's move to leave the bloc, sending, warned Gabriel, the EU's future "down the drain".
"Brexit is bad but it won't hurt us as much economically as some fear - it's more of a psychological problem and it's a huge problem politically," said Gabriel.
He reiterated Chancellor Angela Merkel's view that the EU is unlikely to allow the UK to cherry-pick aspects of its future EU relationship, such as single market access, without accepting the corresponding rules on free movement of people.
"If we organise Brexit in the wrong way, then we'll be in deep trouble, so now we need to make sure that we don't allow Britain to keep the nice things, so to speak, related to Europe while taking no responsibility."
Meanwhile, British Prime Minister Theresa May is set to host a special 'away day' meeting of her top team at her official country residence, Chequers, on Wednesday, to discuss how the UK should negotiate its departure.
The meeting comes as reports of a growing split between senior Brexit ministers and new UK Chancellor Philip Hammond on whether to retain access to the EU's single market.