As pressure mounted on the Prime Minister to break the deadlock in Brexit talks by handing billions to Brussels, Jacob Rees-Mogg urged Theresa May to hold firm. 

She should not be “blackmailed” into paying a huge divorce bill to the bloc he said. 

Mr Rees-Mogg insisted that the UK’s negotiating position was much stronger than the EU’s. 

He said: “If we say that we are not continuing to contribute without a deal to the last 21 months of the multi-annual financial framework then the EU has a huge hole in its budget – it has no legal ability to borrow and it is effectively insolvent for that period.  

“So I would say to people who say we’re not going to get on to the second stage, well that’s fine, but then you haven’t got any money for 21 months. 

“Where are you going to get it from? 

“Is Germany going to pay more or is Poland going to receive less? 

“It’s a really strong negotiating position.”  

In her Florence speech, Mrs May pledged to pay in to the EU budget for two years after we leave on March 29, 2019 – adding an estimated extra £18billion to Brussels’ coffers. 

But it has always been implied that the time-limited offer of continuing to pay into EU budgets until 2021 is conditional on the UK and EU forming a new tariff-free trading partnership. 

The EU is refusing to move on to trade talks until the UK makes progress on an additional “divorce” payment to settle long-term liabilities such as pensions and debts, with Brussels demanding up to £53billion. 

After a meeting with Mrs May in Sweden on Friday, European Council president Donald Tusk gave Britain a two-week ultimatum to offer significant concessions.  

EU chief negotiator Michel Barnier has already put a two-week deadline on the talks – even though nothing was ever likely to be agreed until the EU Council meets next month. 

Last night a source said Mr Barnier was trying to backtrack on this, with his team insisting he actually meant three weeks, not two. 

Faced with growing pressure from ministers, including Foreign Secretary Boris Johnson and Brexit Secretary David Davis, not to cave in to the EU’s multi-billion pound demands, Mrs May has called on Brussels to offer assurances about agreeing a trade deal. 

Speaking as she left Sweden on Friday, Mrs May said: “We are agreed that good progress has been made but there is more to be done.”  

However, Mr Tusk said she must significantly increase her divorce offer, thought to be about £20billion. 

He later added: “We still have a chance to achieve our first goal. 

“I am very cautious but optimistic.” 

The pair are due to meet in Brussels next Friday.  

Downing Street has distanced itself from claims the Prime Minister is willing to part with even more billions of pounds – a move that would anger Brexiteer backbenchers who would rather leave without a deal, and Remainers who say we would be better off staying in.  

A Government source said reports that Mrs May was willing to pay up to £50billion to seal a divorce settlement were “wide of the mark”. 

The EU is also said to be threatening to hold back Britain’s final £5billion budget rebate for 2018 in an attempt to force our hand. 

A Downing Street source said: “The Prime Minister met European Council President Donald Tusk on Friday and they spoke about the progress that has been made so far in the negotiations on citizens’ rights, Northern Ireland and the financial settlement.  

“It is fair to say they agreed there is more work to be done but they want to take further steps forward together.  

“We will honour the commitments made during the period of our membership but we are not going to get into specific figures. 

“The Prime Minister remains resolute that we can only resolve the financial settlement as part of the settlement of all the issues laid out in her Florence speech.” 

In an interview with the BBC on Friday, Mr Davis insisted that the UK had “made all the running” and suggested it was time for the EU to compromise.  

He pointed out that countries such as Holland and Spain were eager to move on to to trade negotiations but Germany and France were not.  

As the first and third biggest economies in the EU respectively, they would have to stump up most of Britain’s contributions if we left without a deal. 

Irish Prime Minister Leo Varadkar also wants to stall trade talks until the UK offers further concessions on the Irish border. 

Although briefings from Brussels suggest Britain is on the back foot in the negotiations, it is thought Mr Barnier is making contingency plans to resume negotiations in January.