updated 9/19/2006 10:08:28 AM ET 2006-09-19T14:08:28

Spain and Britain have reached a historic deal to resolve side issues stemming from their 300-year-old dispute over Gibraltar, but sidestepped the main one — their claims to the Rock’s sovereignty.

Gibraltar itself — the quirky, multicultural British colony of 30,000 people at Spain’s southern tip — was also represented as an equal partner by its Chief Minister Peter Caruana at a ceremony Monday.

A key aspect in the accord, reached after 18 months of three-way talks, opens up Gibraltar to airline flights from Spain and the rest of Europe. Spain has until now denied use of its airspace, forcing Gibraltar-bound planes to leave from Britain and perform dangerous approaches heading into the Rock.

This change will open up an important access route to beach resorts on Spain’s Costa del Sol. Spain will maintain restrictions for military flights.

Other measures include increasing the number of phone lines into the colony and resolving a long-running dispute over pension payments to Spaniards who once worked on Gibraltar. Spain also promised to soften sometimes overzealous border controls, which have often resulted in frustrating hours-long waits at the border.

'Truly historic agreement'
“This is a truly historic agreement,” said Geoff Hoon, Britain’s European affairs minister. “It shows that we can work together to make a difference in the lives of normal working people on either side of the Gibraltar border.”

The deal marks the first time Spain, Britain and Gibraltar have reached an agreement on the Rock, which Britain has used a military outpost for centuries.

The promontory is at the eastern end of the Strait of Gibraltar, the strategic waterway that links the Atlantic and the Mediterranean and separates Europe from Africa.

An Anglo-Dutch fleet captured Gibraltar in 1704, and Spain ceded sovereignty to Britain in 1713 but has persistently sought its return, claiming the territory as a natural and historic part of its geography. Spain’s claim to sovereignty still stands, despite the accord.

Spanish governments have refused until now to let Gibraltar have equal say in talks, and Gibraltar rejected any deal in which it had not negotiated.

But Spain’s Socialist Prime Minister Jose Luis Rodriguez Zapatero agreed to the three-way format when he came to power in April 2004.

U.K. to cover unpaid pensions
Spain says the agreement has been made possible by greater flexibility from Caruana, who was long wary of a deal with Spain, and Britain’s willingness to cover the unpaid pensions of up to 9,000 Spaniards who used to work in Gibraltar.

Most of them had provided the manpower to run the Royal Navy’s docks until in 1969, when Gen. Francisco Franco closed the border, effectively starving Gibraltar of workers while depriving these people of much-needed jobs and of a right to claim pensions. The frontier was not fully reopened until 1985.

Monday’s deal calls for an average lump sum payment of nearly $8,000 to these pensioners or their descendants.

Under the previous, conservative government in Spain, Madrid and London came up with the idea of sharing sovereignty over the Rock. But this was rejected resoundingly in a nonbinding referendum in Gibraltar in 2002.

Under the new accord, Spain is allowed to open up a branch of the Cervantes Institute — the government’s main network for promoting the Spanish language — in Gibraltar.

This means a red-and-yellow Spanish flag will fly in Gibraltar for the first time since 1954, when Franco closed the Spanish consulate there in a fit of rage over a visit by Queen Elizabeth II.

While most Gibraltarians speak fluent Spanish, few write it correctly, Spain says.

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