By William James and Alistair Smout
LONDON (Reuters) - Britain's finance minister Philip Hammond on Sunday faced mounting questions over his future weeks ahead of a budget announcement, finding himself at the center of an increasingly fraught debate over Britain's departure from the European Union.
The EU last week declared a "disturbing deadlock" in talks with Prime Minister Theresa May's government on arrangements to leave the bloc, raising the chances of Britain quitting without a negotiated deal and increasing criticism of the government's handling of Brexit.
On Sunday an unnamed source from the Democratic Unionist Party (DUP) said May must warn Hammond he faces the sack unless he changes his approach to Brexit, the Sunday Telegraph reported. The DUP is a small Northern Irish political party which is keeping May's minority government in power.
"We are very concerned about Philip Hammond's behavior," the senior parliamentary DUP source told the newspaper.
"It is evident to us that he is winding people up and causing unnecessary division within the Conservative Party at a crucial time in the Brexit negotiations."
A DUP spokesman later said the party did not recognize the "inaccurate" comments.
Hammond, 61, who is seen by many as May's most pro-EU minister, has become a focal point of criticism for Brexiteers, who say he is overly pessimistic about the impact of leaving the bloc and is damaging Britain's negotiating stance.
Last week Hammond warned Brexit was causing a "cloud of uncertainty" over the British economy that needed to be cleared as quick as possible. He has previously angered eurosceptics by calling for a lengthy transition out of the EU, during which there will be little change to rules on issues like immigration.
In a botched attempt on Friday to calm speculation over his future and play down the party's divisions Hammond described the EU as the "enemy" in negotiations. He later said he regretted his choice of words.
He had been expected to lose his job if May had won an increased majority at a June snap election, but the vote instead saw the Conservatives lose their majority and Hammond retain his position as May fought to maintain unity between pro-EU and pro-Brexit factions.
The June election also transformed the DUP, which only has 10 lawmakers in the 650-seat parliament, into an influential voice. May struck a deal with the party and is reliant on their support to pass legislation.
(Editing by G Crosse and Matthew Mpoke Bigg)