The U.K. should expect a fight in its negotiations to secure a Brexit from the European Union, the President of the Eurogroup, Jeroen Dijsselbloem, told CNBC.
European and Asia markets were shaken up on Friday, after sterling briefly dived 6 percent, with traders struggling to find out whether it was a "fat finger error" or related to fears over Brexit.
While no official reason has yet been given for the pound's sharp fall, one suggestion is linked to comments made by French President Francois Hollande, who said that the EU had to remain firm with the U.K..
Dijsselbloem said the reactions seen across the continent in recent days were more related to some "quite stern comments (which) were given, sounding like a hard Brexit" during the Conservative Party conference in Birmingham by Prime Minister Theresa May and her cabinet on subjects including immigration and the jurisdiction of the European Court of Justice.
"I think the effects of Brexit have yet to sort of trickle down. We really are still in the process of trying to understand it," said Dijsselbloem, telling CNBC that "we need a good deal. We need it sooner rather than later, however complex it may be."
"I think our trade relations will also be strong in the future, but the Brits have to realize that we will of course protect the four freedoms, the integrity of the internal market, so you know it's going to be a tough deal."
"I think there is a very strong feeling among the EU-27 that if the Brits cannot accept the four freedoms — in particular of course on the migration issue this is crucial — that it will be a tough trade deal as well. There is a strong connection here and the British government seems to think that they can take the goodies and leave the bad elements which they don't like."
"But there will have to be a deal and the freedoms that have built the EU, including the free movements of people are crucial to this."
However, Poul Thomsen, Director of the IMF's European Department, told CNBC that he expected both parties in the Brexit talks to move beyond the rhetoric and "start focusing on what is in the mutual interest; to maintain an open system. I am hopeful that we get a solution eventually."
However, Thomsen did stress that Europe and the U.K. needed to keep trade channels open as much as possible and eliminate any grey areas.
"Clearly this where the potential negative growth impact is if there are excessive disruptions in trade in goods and services. And it's too early to say that but we need to eliminate uncertainty as soon as possible."
Ever since the U.K. voted to leave the European Union back in June, strong words have been exchanged from both sides of the English Channel, with several influential European leaders stressing that the country could not cherry-pick its way through the negotiations.
The Eurogroup president echoed these comments saying that there'd be "no cherry-picking possible" within the negotiations. Yet he emphasized that it would be "a very huge mistake" to punish the Brits or anyone on the continent who was thinking of stepping out of the union.
"I don't believe any punishment exercises — not towards the Brits and not towards anyone on the continent who would also like to step out; I think that would be a very huge mistake. But the reality checks are about something else."
"If you want to be part of the internal market, if you want trade to be as free as it is until now, then you will have to accept some of the standards and principles that are so crucial for the internal market. So it's much more about the reality check that the British government will have to face rather than punishing or making sure that exiting the EU is a very unfavorable approach."
"I hope that all of us can relax a little bit in the coming period, start to seriously talk about future relations and once again, that will require a reality check. There will be no cherry picking. The four freedoms will be on the table."