Loiseau said British Prime Minister Theresa May's plan unveiled in July, which envisages the UK leaving the EU's single market but staying in a free trade area for goods through a customs deal and common rulebook, is unattainable.
The EU has proposed replicating its free trade agreement with Canada, or non-member Norway's access to the single market, which May opposes because it
entails paying into the bloc's budget and accepting rules such as the free movement of people.
“The problem with the current proposal made by the British government is that it would join the benefits of Norway with the obligations of Canada and this is not possible,” Loiseau told the BBC.
She said Britain must compromise to comply with the EU's key principles.
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“There is something in between (Norway and Canada) but there has to be a balance between rights and obligations in the relationship with the European Union,” Loiseau added.
Britain is set to leave the bloc on March 30, but the two sides want to strike the divorce agreement by late October to give their parliaments enough time to endorse a deal.
Britons voted to leave the 28-nation bloc in June 2016, but negotiations were only launched a year later and have bogged down frequently since then.
Talks have become stuck in several areas, including how to avoid a hard border for people and goods crossing between EU member Ireland and the British province of Northern Ireland.
“Until now nothing else has been proposed that is feasible and would respect the integrity of the single market,” Loiseau said of proposed solutions to the Irish issue.
Both sides have said they are making contingency preparations for no deal.
Britain's Brexit Secretary Dominic Raab and EU chief negotiator Michel
Barnier will hold six hours of talks in Brussels on Friday to try to break the deadlock.
Raab said Wednesday that reaching a deal by October “is within our sights” but there is “leeway” to miss the deadline, which coincides with a summit of EU heads of state.
Barnier reiterated that the bloc was prepared to offer Britain a partnership unlike “any other third country”.