German Chancellor Angela Merkel said on Wednesday she still saw a chance for a Brexit deal with Britain but warned that the bloc would reject unacceptable terms.

Speaking ahead of crunch talks between British Prime Minister Boris Johnson and EU chief Ursula von der Leyen, Merkel expressed cautious optimism about a trade agreement.

-There is still a chance for a deal- said Merkel, who holds the rotating EU presidency, but warned -we must not endanger the integrity of the common market.-

-I don't think we'll already know tomorrow if we've been successful or not - I can't promise it - but we're still working on it.-

Merkel told the Bundestag lower house of parliament that the bloc must maintain its red lines.

-We are prepared for conditions from the British side that we cannot accept- she said, even if it meant walking away without an agreement.

She said the process of moving from a "harmonised legal system" between Britain and the EU to a time after Brexit when the systems "grow more and more apart" required a "level playing field for tomorrow and the day after tomorrow".

-We can't just say we won't talk about it- she said, -otherwise we'd end up with unfair conditions for competition which we can't ask of our companies.-

-That is the big question we need a satisfying answer to- she said.