Mr Timothy was one of the Prime Minister’s closest allies and has hit out at her Cabinet, who he claims have undermined her.
He said: “The EU has divided and ruled Britain’s panicking political classes.
“It wants us to contribute to the defence of Europe, while excluding us from its information-sharing schemes and Galileo, the satellite system.
“France is using Brexit to build its own special relationship with America. Northern Ireland is being used to tie us into the single market and customs union.
“And while Britain is not ready for a ‘no deal’ Brexit, the EU is upping its own preparations for that outcome.”
The former adviser accuses Business Secretary Greg Clark for making the case for free movement and Chancellor Philip Hammond of blocking “meaningful no-deal planning”.
Mr Timothy added: “This is ridiculous, and it has to stop.
“The EU showed last December – when the talks faltered over Northern Ireland – that they want a deal.
“But they want a deal on the best terms for them, and the very worst for Britain. As things stand, they might well succeed.”
Mr Timothy’s intervention comes only days ahead of a critical Cabinet meeting at Chequers to agree on the final UK negotiating strategy.
But many Eurosceptic ministers fear they are going to be forced into supporting a diluted Brexit which will see the UK tied to the customs union and single market.
Writing in The Telegraph, the former aide added: “Pro-EU rebels want to prevent a ‘no deal’ outcome while forcing us into a customs union and, perhaps, the single market.
“They have allowed the Europeans to divide and rule us, and cherry pick what they want from the future relationship.”
Mr Timothy also claims Home Secretary Sajid Javid is the only minister who is prepared to put the EU on the back foot.
He said: “Since becoming Home Secretary, he has torn up plans for a preferential immigration system for Europeans, because the EU is not offering us preferential trading access.
“And he has challenged Brussels about the rights of UK nationals living in the EU.
“In response, Guy Verhofstadt, the European Parliament’s Brexit coordinator, admitted member states have not done enough.”
But Mr Timothy concluded that the UK’s position is “far from hopeless” and the UK should “toughen up”.
He said: “The time for playing nice and being exploited is over. The coming Brexit white paper should herald a new approach.
“It should articulate – on our own terms – what we want.
“We should say we want a partnership encompassing trade and security where rights and obligations are reciprocal and in balance.
“We will not accept the jurisdiction of the European Court, free movement or massive annual payments for market access that should be free.
“The time for sincere cooperation with a partner that does not want to sincerely cooperate is over: we must toughen up.”