Spanish Prime Minister Pedro Sanchez says Madrid and London will continue to negotiate an agreement on the British territory of Gibraltar on the Iberian Peninsula after the Brexit trade deal clinched with the European Union.
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"I welcome the principle of agreement between the EU and the UK ... Spain and the UK continue their dialogue to reach an agreement on Gibraltar," Sanchez said in a tweet, adding that EU member states would still examine the Brexit deal in coming days.
Spain claims sovereignty over the port at the mouth of the Mediterranean that it ceded to Britain in 1713 after a war.
But it has agreed to put the issue of sovereignty to one side to focus on the opportunity to reach a side deal with Britain to avoid having a hard EU border in southern Spain after Brexit.
About 15,000 people commute daily from Spain to Gibraltar, which has a population of 32,000. The port also welcomes some 10 million tourists per year, a sector accounting for about a quarter of its economy.
Gibraltar's Chief Minister Fabian Picardo told Spanish state broadcaster TVE on Wednesday the sides were working on a deal to facilitate the daily crossings for workers on both sides of the border, not ruling out a possible agreement that would make Gibraltar part of the Schengen area.
El Pais newspaper said earlier Spain and Gibraltar were nearing such an agreement that would mean that from January 1 there would be border controls for British citizens travelling to Gibraltar, but Spaniards and Gibraltarians could freely cross the land border.
In a 2002 referendum, 99 per cent of Gibraltarians rejected any idea of Britain sharing sovereignty with Spain.
But in 2016, nearly 96 per cent of voters in Gibraltar backed staying in the EU, while in Britain proper the referendum vote was 52 per cent - 48 per cent in favour of leaving the bloc.
Australian Associated Press
