Angela Merkel is reported to have said she would rather Britain left the EU than see measures introduced which would undermine the principle of the free movement of labour.
The influential Der Spiegel magazine quoted sources from within the German government as saying Mrs Merkel feared Britain was approaching “the point of no return”.
At the weekend, the Sunday Times reported that David Cameron had already dropped one proposal to impose quotas on low-skilled EU migrants in the face of German opposition. Mr Cameron is apparently now looking at a plan to deport migrants who are unable to support themselves after three months.
The Conservatives have promised to re-negotiate Britain’s membership of the EU and deliver an in/out referendum in 2017. The prime minister has insisted that freedom of movement of workers would be “at the very heart of my renegotiation strategy for Europe”.
A Downing Street spokesman said: “The prime minister will do what is right for Britain, as he has repeatedly made clear.”
German paper Der Spiegel reports Berlin wants UK EU exit if we try and limit immigration. Still think you can renegotiate, Mr Cameron?
— Nigel Farage (@Nigel_Farage) November 2, 2014
The reports are likely to heighten concerns within Tory ranks ahead of next week’s by-election in Rochester and Strood, where the party is desperate to avoid losing a second seat to Ukip.
Chancellor George Osborne dismissed the reports of Mrs Merkel’s comments as “speculation”, telling the BBC: “We have had good discussions with the Germans; I was in Berlin just a few days ago myself.
“They understand the disquiet that is caused amongst British people when you have people coming in from other parts of Europe here, to claim our benefits, who don’t necessarily have jobs to go to.”
Shadow foreign secretary Douglas Alexander said Mr Cameron was “losing influence and losing allies in Europe”, adding: “His weakness within his own party means he now risks pushing Britain towards exit from Europe altogether.
Mrs Merkel’s spokesman Steffen Seibert said Germany wanted Britain to remain an “active and engaged” member of the EU, but “the general principle of freedom of movement in the European Union is not negotiable”.