Germany will do "whatever we can" to ensure a successful outcome to Brexit negotiations within the two-year deadline set down in the EU treaties, the country's finance minister has said.
Wolfgang Schaeuble said that a "cliff-edge" withdrawal from the EU without an agreed deal would be a disaster not only for the UK but also for Europe.
He played down suggestions, floated by British Prime Minister Theresa May and Chancellor Philip Hammond, that the UK might find itself forced to adopt a Singapore-style low-tax low-regulation economic model to maintain competitiveness if it is frozen out of the European markets by the failure to reach a comprehensive free trade agreement.
He said he expected Britain to remain a very important partner of the remaining EU and London to continue to be an important financial centre for Europe after Brexit.
Speaking alongside Mr Hammond on a discussion panel at the World Economic Forum in Davos, Switzerland, Mr Schaeuble said that the PM's Brexit speech on Tuesday had provided the EU with clarity over the final outcome Britain is seeking from negotiations.
He acknowledged that the detailed talks would be "much more complicated than in the opening speeches", but said he believed a deal was doable.
"The German government will work in these negotiations always in the direction that we minimise any risk and damage for both of us. That's our position," he said.
Asked whether he was worried about the possibility of a "cliff-edge", the finance minister said: "We are very concerned that it will not happen.
"We will not only be concerned, we will be engaged that it will not happen, because it would be a disaster for all of us.
"Now we can start to work and we will do whatever we can to avoid such a situation. I think it is possible to get it done."
Mr Schaeuble said he was not shocked by the prospect of the UK setting itself up as a low-tax centre off the shores of Europe.
"I can't really imagine that the UK - this great nation - would compare itself with Singapore," he said.
"Therefore I am not to be shocked.
"Philip Hammond and I totally agree we have to manage this decision by the British people of Britain in the best way to minimise or to avoid any damage for the UK as well as for Europe.
"For Europe, the UK remains a very important partner."
He added: "I am personally convinced that even after the negotiations have been done, London will remain an important financial centre for Europe."
Mr Schaeuble said the whole EU must respond to the lessons of the Brexit vote, which showed the need for reform to combat disillusionment with the European project and concern about the "disruptive changes" brought about by globalisation.
"The first reaction to the Brexit decision for me was that I cried," he said.
"The second reaction was that it is a wake-up call for Europe. We have a growing euroscepticism all over European member states."
Mr Schaeuble said the referendum result had so far had a positive impact on the UK economy and said he did not expect it to exert a negative influence on the eurozone during 2017.
Mr Hammond earlier said interim arrangements for Britain's exit from the EU will be put in place if discussions are making good progress but "haven't quite got there" within two years.
He said Britain has reinvented itself before and will do again if the country faces the "catastrophe" of being closed off from EU markets.
He said that preferential migration arrangements "could" form part of the Brexit negotiations.
"That could be a subject for the negotiations," he said. "What we have said clearly is that we can't accept the principle of free movement."
Mr Hammond said quitting within two years was a "political necessity" and the broad principles can be agreed in the time scale if there is the political will in Brussels.
He said: "If we are making good progress but haven't quite got there we will simply agree that Britain will leave the European Union and we will agree some interim arrangements while we complete the discussion.
"But we think it can be done in two years if there is a political will on both sides to reach agreement on our exit and at least agreement on the broad principles of the end state that will exist between the UK and the European Union."
Mr Hammond said that Britain would "see some more" inflation this year in response to Brexit.
He added: "If we serve the notice in the end of March 2017 we will leave the European Union end of March 2019.
"That's effectively a political necessity in terms of the UK political situation and it's the legal position of the treaties.
"But we have to face the fact that there are many transitions that will be involved, business transitions, governmental transitions.
"If we change our customs arrangements we will need significant new infrastructure at the borders between the European Union and the UK.
"If we have different migration arrangements we will need significant new IT systems. These cannot be built and deployed in a few months, they are going to take years in some cases."
Mr Hammond ruled out separate negotiations for Scotland, insisting the settlement would be UK-wide.
The Chancellor insisted he "didn't issue any threats" to the EU over turning the UK into a low tax centre if it fails to agree a good exit deal.
He added: "It shouldn't be a surprise for anyone to hear that our first duty as an elected government is to protect the living standards of our people and that means the competitiveness of our economy.
"And, if we were to be, by some catastrophe, closed off from those markets we would have to reinvent ourselves. We would have to find another model, another way to earn our living, to remain competitive in the world.
"I just want to send out a clear message that we've reinvented ourselves before. The City of London now looks radically different to the City of London ... in the 1970s.
"We can reinvent ourselves, we can reinvent our institutions and we will do so if we have to but our clear preference is to remain in that mainstream."
