Madrid and Brussels have approached the British government with a proposal for removing the border fence between Spain and Gibraltar in order to ease freedom of movement, Spain's top diplomat said Friday.
There was no immediate response from London but Gibraltar's chief minister said his government and the UK had their own proposals on the table.
"The text presented to the United Kingdom is a comprehensive proposal that includes provisions on mobility with the aim of removing the border fence and guaranteeing freedom of movement," Spanish Foreign Minister Jose Manuel Albares said in a statement.
Such a move would make Spain, as representative of Europe's passport-free Schengen zone, "responsible for controlling Gibraltar's external borders", it said.
The Schengen Area allows people to move freely across the internal borders of 26 member states, four of which are not part of the EU.
In remarks to Gibraltar's parliament, Chief Minister Fabian Picardo said Albares' remarks "set out Spain's view" of the ongoing negotiations to iron out the details of a post-Brexit treaty with the EU over the enclave's future.
"The United Kingdom and Gibraltar also have proposals on the table which are designed to deliver benefits for the people of the whole region," he said.
A tiny British enclave at Spain's southern tip, Gibraltar's economy provides a lifeline for some 15,000 people who cross in and out to work every day.
Most are Spanish and live in the impoverished neighbouring city of La Linea.
- Alternative approach -Albares said the proposal would mean Madrid "taking on a monitoring and protection role on behalf of the EU with regards to the internal market with the removal of the customs border control" between Spain and Gibraltar.
The deal would "guarantee the free movement of goods between the EU and Gibraltar" while guaranteeing respect for fair competition, meaning businesses in the enclave would "compete under similar conditions to those of other EU operators, notably those in the surrounding area".
But Picardo appeared to suggest an alternative approach.
"Our proposals provide for the removal of trade barriers and the protection of the integrity of the single market in a manner that would not compromise our fiscal or wider sovereignty concerns," he said, without going into details.
Although Brexit threw Gibraltar's future into question, raising fears it would create a new "hard border" with the EU, negotiators reached a landmark framework deal for it to benefit from the rules of the Schengen zone just hours before Britain's departure from the bloc on January 1, 2021.
Details of the agreement have yet to be settled.
With a land area of just 6.8 square kilometres (2.6 square miles), Gibraltar is entirely dependent on imports to supply its 34,000 residents and the deal was crucial to avoid slowing cross-border goods trade with new customs procedures.
Although Spain ceded Gibraltar to Britain in 1713, Madrid has long wanted it back in a thorny dispute that has for decades involved pressure on the frontier.