Philip Hammond has described EU fears that a soft Brexit could encourage other countries to leave the trading bloc as "paranoia", saying Brussels should be doing more to keep existing members rather than "punish" Britain.
Mr Hammond visited Berlin this week to call for clarity on what the EU wants from future relations and to make the case for a wide-ranging Brexit deal.
Responding to the interviewer's suggestion that a soft Brexit might offer an incentive for the people in other countries to leave, Mr Hammond said: "I can understand that paranoia. But imagine you are running a successful, thriving club. If one member leaves, you don’t immediately panic that all the other members might leave, but are confident they will want to remain.
"You cannot really run a club if you are constantly threatening members who decide to leave. You should rather redouble your efforts to remain attractive for new and existing members."
The Chancellor was also critical of the EU leaders' approach to negotiating Britain's exit, saying they should be looking to the future.
"We hear a willingness and enthusiasm in the USA and from many other countries around the world to make new trade deals with us. But we don’t hear that from Europe," he said.
"We hear from Europe only backward-looking stuff. 'Are you sure you want to leave?' Or 'It’s a bad decision to leave.' Or 'You must be punished for deciding to leave.' Well, we are leaving and we want to retain the closest possible partnership with the European Union. But we can only have that if the European Union also wants it. "
Urging those people still hoping that Britain will stay in the EU beyond March 2019 to "stop harking on about this illusion", he said "we should focus instead on the new relationship".
Mr Hammond has used his trip to Berlin to stress the need for the UK's vast financial services sector to be part of the talks on future trade ties, after chief EU Brexit negotiator Michel Barnier ruled that out.
The chancellor told the newspaper that a free trade deal with the EU that did not include services was "not a realistic proposition for us", adding that "more than 80 percent of our economy is services".
Asked what the UK had to offer in return, he said it would "crazy" for Europe to cut itself off from the City.
"We are world market leaders in financial, legal and other high-quality services and play a hugely important role in the competitiveness of European business," he said.
"Every time European firms raise capital through the City of London and do so more cheaply than they could raise it elsewhere in Europe, that makes those businesses that little bit more competitive."
Theresa May has insisted that Britain will not make substantial payments to the EU for access to market after Brexit as she appeared to contradict Mr Hammond.
Mr Hammond was asked earlier in his trip to Berlin whether the UK would be prepared to pay for access to the EU markets for City firms.
He replied: “We will talk about all of these things."