Marcel Fratzscher, president of DIW Berlin, said there should be no “favourable deals’ for Britain when negotiations take place.
Speaking on CNBC’s Squawk Box, the head of the institution, also known at the German Institute for Economic Research, said he believed Berlin would play a key and rational role in the Brexit process.
His comments come after German MEP Manfred Weber tweeted the European Parliament would have the final say on Brexit not Britain.
Marcel Fratzscher believes UK shouldn't receive gifts in Brexit
There’s no attempt to punish the UK
Mr Fratzscher said: “There’s no attempt to punish the UK but at the same time the UK government should not expect any gifts.
"So there has to be a clear dividing line, a clear dealing with the Brexit. No favourable deals, but also no punishment.
“But I think what we see at the moment is that Mrs May and her government are trying to get something that allows them access to the single market as preferential conditions without the obligations.
“So particularly on the four freedoms and particularly on migration, that’s the red line for Europe and Europe needs to stick to that because otherwise it will have huge internal problems.”
On Tuesday, the UK’s most senior court upheld a High Court decision that the government must gain an Act of Parliament before triggering Article 50.
Supreme Court announces its decision on Brexit
The Supreme Court’s ruling means Theresa May now has 66 days to secure the consent of Parliament before beginning EU divorce proceedings.
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The Prime Minister pledged to pull the country out of the Single Market and stop “huge” payments to the EU Budget.
But German politician Mr Weber’s tweeted she did not have the power.
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These are the Supreme Court Judges who could stop Theresa May triggering Article 50 next week, throwing the UK’s plans to break from the EU into total disarray.
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The Supreme Court Judges.
He said: “UK Supreme court ruling is clear: Parliaments must be respected.
“European Parliament will have the final say on Brexit.”
This was met with fury by Brexit campaigners, with Ukip home affairs spokeswoman Jane Collins MEP calling it a “narcissistic rant”.