The pound soared after Michel Barnier’s comments that Britain could end up with an unprecedentedly close relationship with Brussels after it exits the bloc in March next year.
Speaking in Berlin he appeared to break months of stalemate by saying: “We are prepared to offer Britain a partnership such as there never has been with any other third country.”
After holding meetings with German Foreign Minister Heiko Maas, he added that the agreement could include economic as well as foreign and security policy ties.
Mr Barnier has repeatedly said the UK will not be able to "cherry pick" it's own bespoke agreement.
He has stuck to the line that we will have to follow an existing model such as the relationship Norway or Canada currently enjoy with Brussels.
But today's comments mark the most significant shift in rhetoric by the EU's top brass in months, and raises hopes of a deal being hammered out this autumn.
And it is a significant boost for Theresa May, who has spent the summer trying to convince leaders across the continent to accept her White Paper proposals.
However he also warned: “We respect Britain's red lines scrupulously. In return, they must respect what we are.
"Single market means single market … There is no single market a la carte."
In response to Mr Barnier’s change in stance, sterling rallied sharply against both the dollar and the euro this afternoon as the markets reacted to the decreasing chance of there being a “no deal” Brexit.
His comments came just as the Brexit Secretary Dominic Raab was appearing in front of Lords Committee to answer questions about how the EU negotiations were going.
He rejected suggestions from a Labour peer that Theresa May’s Chequers agreement amounted to “begging for a deal", saying: “I don’t beg.”
And he said he was prepared to play hardball with Brussels over our £39billion “divorce payment”, suggesting the UK could choose to withhold some of it if a long-term agreement cannot be agreed.
The Cabinet minister added: "I'm confident that a deal is within our sights. We're bringing ambition, pragmatism, energy and if, and I expect it will be, and if it is matched, we get a deal."
There was a light-hearted moment when Lord Liddle’s mobile phone went off in the committee room and Mr Raab joked: "It's probably someone from Brussels trying to check in on the money."
He had been speaking about the UK’s plans for providing the EU with a the financial settlement, saying a “no-deal” scenario could affect arrangements over payments to the EU.
Mr Raab said: "The financial settlement, as it's calibrated in the withdrawal agreement, reflects a whole range of considerations not just the strict legal obligations.
“And if we left with no deal then not only would there be a question around quite what the shape of those financial obligations were as a matter of strict law, but secondly on the timing.
"Remember that the timing of payments is actually – we overlook it on our side – rather important on the EU side because of the way money is distributed.
“But I don't think it could be safely assumed on anyone's side that the financial settlement as has been agreed by the withdrawal agreement would then just be paid in precisely the same shape or speed or rate if there was no deal.
"As I said that would be a peculiar position for the UK to take because we view the package as a whole."
It comes as Mr Barnier was accused of avoiding having more Brexit talks with Mr Raab because of diary issues – while also posting pictures from his holiday
He previously said he is available "24-7" for discussions with the Brexit Secretary – but the minister has complained his requests for discussions have been knocked back by Brussels.
Earlier this month the pair vowed to speed up the drawn-out process of debating Theresa May’s Chequers plan with the autumn deadline for a deal looming.
They said they would have “continuous talks” from then on, but today there are reports UK officials are “tearing their hair out” at the EU’s failure to live up to this promise.
The two sides were due to spend this week locked in negotiations, but Mr Barnier only offered Mr Raab a three-hour slot this Friday because of his schedule commitments.
It came after he tweeted an image of himself in the sunshine in eastern France on Sunday.
The Guardian reported that after complaints from the British side that has been extended to five hours, but it says diplomats have raised this issue several times.
The newspaper reports that the EU commission’s claim, repeated by a spokesman on Tuesday, that Mr Barnier was available day or night has been proved to be false.
Mr Raab hinted at his frustration when at a press conference last week he expressed hope for a longer meeting this week.
And he also suggested a deal would require “energy on both sides”, as they admitted the October deadline for hammering out a deal had slipped to the end of the year.
In response an EU official said: “The commission is working for a deal. Negotiation agendas, including meetings between principals, are decided jointly.
“The aim of the meetings between the principals is to take stock of progress made at technical and coordinator level.”
The Department for Exiting the European Union said: “Both the secretary of state and Michel Barnier are committed to weekly discussions to ensure that both sides get a good deal.”
Responding to today's story Mr Raab said: "I shall be over in Brussels tomorrow evening for a long, substantive meeting on Friday, I hope that gives you the facts directly with Michel Barnier."
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