Angela Merkel has given hope there will eventually be success in Brexit negotiations

The German Chancellor said progress is coming 'step by step'

Angela Merkel has given hope there will eventually be success in Brexit negotiations, raising the possibility of trade talks between the EU and UK starting in December.

The German Chancellor rebuffed suggestions that talks might collapse, saying they were making progress “step by step”.

But her positive note was balanced by the Dutch Prime Minister Mark Rutte who said the EU27 still need “more meat on the bone” of Britain's exit payment promise.

They were speaking after Theresa May issued a direct plea to leaders to clear the way for a deal which she can sell to British voters.

Amid growing pressure from hardline Eurosceptics in her own party to prepare for a no-deal Brexit, the Prime Minister told leaders of the remaining 27 states that they face a “clear and urgent imperative” to give new impetus to stalled negotiations.

In an early-hours press conference following the dinner, Ms Merkel said: “I have no doubt that if we are all in clear minds... we are going to achieve a good outcome.

“As far as I am concerned, I don't hear any reason to believe that we are not going to be successful.”

Ms Merkel said she was “highly motivated” to work on a new mandate for chief Brexit negotiator Michel Barnier which might permit trade talks to begin in December, but warned the second stage of talks would be “more complicated than the first”.

On the divorce issues dealt with in the first stage, there was “by and large general agreement” on the future status of the Irish border and “headway” was being made on expats' rights after Brexit, but Ms May made no specific new offer on Britain's financial settlement, she said.

Mr Rutte explained that Ms May's promise in a speech in Florence last month that the UK would honour financial commitments made as an EU member needed a more concrete footing.

The offer made by Ms May in Florence is believed to amount to around £18 billion, while Brussels is understood to be seeking something closer to £53 billion.

Ms Merkel and French president Emmanuel Macron made a public show of support for the Prime Minister on the first day of the council, engaging her in prolonged conversation on their way into the summit chamber.

However, the EU27 will declare at the European Council in Brussels on Friday that insufficient progress has been made in withdrawal negotiations for trade talks to begin as Britain wants, with several leaders making clear they want more “clarity” about how much the UK is willing to pay in its Brexit “divorce bill”.

But they are expected to offer Ms May a glimmer of hope by agreeing to start internal “scoping” work on their trade stance ahead of a possible green-light for the second phase of negotiations, dealing with trade and the transition to Brexit, at their next gathering on December 14-15.