“In some places there was movement, in other places there is still a lot of work to do,” she told reporters. “For us, it is important that Ireland can continue to live in peace, that we secure the single market, but we know that Great Britain aims for a certain measure of independence, that it is no longer member of the European Union. In this spirit we have asked Michel Barnier to continue the negotiations,” she added, with reference to the bloc’s chief negotiator.”
“We have asked Great Britain to remain ready for compromise on an agreement,” Merkel added.
The German Chancellor said that if necessary the EU will “live without” an agreement.
But she added: “I believe it would be better to have such an agreement.”
It comes after EU leaders called for post-Brexit trade talks to continue beyond the end of the week, a deadline suggested by Boris Johnson.
The two-day summit began on Thursday in Brussels.
The EU leaders demanded that the UK “make necessary moves” towards a deal.
Michel Barnier, EU chief negotiator, said intensive talks should aim to reach a deal around the end of October.
However, his UK counterpart Lord David Frost said he was “disappointed” by the EU’s approach.
Posting on Twitter, Mr Frost said: “Surprised EU is no longer committed to working ‘intensively’ to reach a future partnership as agreed with Ursula von der Leyen on 3 October.
“Also surprised by suggestion that to get an agreement all future moves must come from UK. It’s an unusual approach to conducting a negotiation.”
Mr Frost said the prime minister will “set out the UK reactions and approach” on Friday.
At the summit in Brussels, the EU leaders previously raised their “concern” that progress in ongoing negotiations with the UK was “still not sufficient for an agreement to be reached”.
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The leaders agreed that the 27 member states and EU institutions would “step up their work on preparedness and readiness at all levels and for all outcomes” before the end of the transition period.
At a news conference, Mr Barnier said the EU wa ready to continue negotiations “until the last possible day”.
He added: “We want to give these discussions every chance of being successful so that we secure an agreement.”
The EU chief negotiator also proposed a two-week extension to Mr Johnson’s 15 October deadline.
Mr Barnier said his team would travel to London for talks next week and host negotiations in Brussels the week after.
Both the UK and EU are calling on each other to compromise on key issues including fishing and limits to government subsidies to businesses.
The two sides are seeking an agreement to govern their trading relationship for after the Brexit transition period ends in December.
The European Council President, Charles Michel, said the bloc was “100% united”.
Speaking at a news conference, he added: “We are united and determined to reach an agreement but not at any cost.”
Mr Barnier also reiterated the stance and added that differences still remained between the two sides.