Speaking in the House of Commons on Friday, UK Foreign Secretary, Jack Straw announced - as expected - that the United Kingdom and Spain are in broad agreement on a number of issues, but that there are still some areas of dispute over the future of Gibraltar.
Following the appointment of Ana De Palacio to replace former Spanish Foreign Secretary, Josep Pique, formal talks between the two countries tabled for Friday were postponed until after the summer in order to allow Ms De Palacio time to get to grips with the Gibraltar situation.
However, Jack Straw told MPs last week that the announcement of a full agreement on sovereignty by July 12 had never been on the cards in any case. He revealed - to a chorus of 'sell out!' from the Opposition benches - that the UK and Spain have agreed that the two countries should share sovereignty over the Rock, that Gibraltar should be allowed more internal self-government, that the territory should retain its British traditions and way of life, and that Gibraltarians should retain the right to British citizenship, but should be allowed to become Spanish nationals should they so desire.
The Foreign Secretary admitted, though, that the Spanish authorities are still holding out for a deal whereby all of the Rock's residents will eventually become Spanish citizens.
He stressed that the situation cannot continue as it is, arguing that the status quo is damaging for all concerned:
'It is damaging Gibraltar because Gibraltar will not thrive while the dispute festers and its people have to put up with everyday disruption. [It] is also damaging to Britain's interests because we are trying to build a strategic alliance with Spain to help deliver the EU we both seek.'
He continued: 'The only way of securing for Gibraltar a stable and prosperous future is through a comprehensive and permanent settlement. And that means an agreement with Spain on all issues - including sovereignty.'
Shadow Foreign Secretary, Michael Ancram on Friday condemned the Anglo-Spanish talks as 'shabby and dishonourable', and criticised Mr Straw for deliberately choosing to make the announcement with regard to the future of the former colony on a day when the Commons was sparsely populated.
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