The speech from Alice Weidel in the Bundestag, the German parliament, also tore into Angela Merkel for using German taxpayers money to finance her EU project.
The leader of the far-right party slammed Mrs Merkel for her treatment of Britain and ordered her to stop sending threats to the country to punish Brexit.
Dr Weidel, who oversaw the AfD surge in the German election last September, unleashed a fiery address at the Bundestag podium to a huge round of applause.
She said: “The EU wants to make an example of Great Britain, a punishment beyond any economic or political reason. This is not how one treats a European partner.
“And by the way the recession that was predicted ahead of the referendum did not happen! The British economy has showed growth.
“Now Brussels, Paris and Berlin are afraid that others could follow, that other states in Europe could take back their sovereignty.
“And that is why the European Commission is planning to restrict Britain’s access to the single market even during the transition period.
“By supporting these plans of the ostracism of Germany’s biggest trading partner in the EU you are taking free trade and competition as a hostage and making a failed EU ideology.
“The good trading relationship with Great Britain and the rest of the continent have to be maintained – otherwise Europe will be at a disadvantage in global trade.”
Michaela Kuefner, political editor of German broadcaster DW, tweeted: “Weidel tells Merkel to ‘stop threatening Britain’ over Brexit and accuses her of ‘only spending other people’s money’ on the EU. Applause is a sure sign of who is AfD.”
The morning debate in the Bundestag was a debate on the EU27 summit, which will be held in Brusels tomorrow.
Later in her speech, Dr Weidel laid into Angela Merkel, who earlier in the week said she felt “responsibile for Europe”.
She attacked the leader’s plan to hand over “more sovereignty and money” to the EU, with Brexit set to leave a huge financial blackhole in the bloc’s budget.
Instead of an increased payment to Brussels, Dr Weidel call for the EU budget to be cut.