DUP leader Arlene Foster has branded the European Union's response to Prime Minister Boris Johnson's Brexit proposals as "beyond crazy".
A No 10 source has said a Brexit deal is "essentially impossible" following a phone call between Mr Johnson and German Chancellor Angela Merkel.
The prime minister spoke to Mrs Merkel earlier today about the proposals he put forward to the EU.
However, Sky News quoted a No 10 source as saying: "She has made clear a deal is overwhelmingly unlikely and she thinks the EU has a veto on us leaving the customs union."
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Shadow Brexit secretary Sir Keir Starmer said the comments were a "cynical" attempt by No 10 to "sabotage" negotiations with the EU.
"Boris Johnson will never take responsibility for his own failure to put forward a credible deal. His strategy from day one has been no-deal Brexit," Sir Keir said.
But Mrs Foster said Mrs Merkel's reported suggestion that "Northern Ireland must remain in the EU Customs Union forever now reveal the real objective of Dublin and the European Union".
"For the United Kingdom to be asked to leave a part of its sovereign territory in a foreign organisation of which the UK would no longer be a part and over which we would have no say whatsoever is beyond crazy. No UK Government could ever concede such a surrender.
"The EU is not interested in a negotiated outcome at this time. Their position is the UK can only leave with a deal if it agrees a binding piece of international law permanently tying either the whole country or a part of it to the EU's legal order over which it has no control.
"The true purpose of the 'backstop' is now in the open for all to see. Those who eagerly supported the backstop as the best of both worlds can now see the error of that assessment. It was neither temporary nor an insurance policy."
The DUP has a 'confidence and supply agreement' with Mr Johnson's Tory party as part of a deal to prop up the Conservatives in Parliament.
Mrs Foster accused the Irish government of trying to "trap" Northern Ireland into remaining in the EU Customs Union.
"The Prime Minister's proposals have flushed out Dublin's real intentions to trap Northern Ireland in the EU Customs Union forever, where Dublin rather than the United Kingdom's elected representatives would be in the driving seat," she said.
"We will not accept any such ultimatum or outcome."
