document_title: Transition economy

question_text: what was the initial effect of the transition from command to market economies in eastern europe

text: Transition economy

text: Transition indicators[edit]

text: The existence of private property rights may be the most basic element of a market economy, and therefore implementation of these rights is the key indicator of the transition process.

text: The main ingredients of the transition process are:

text:
Liberalization – the process of allowing most prices to be determined in free markets and lowering trade barriers that had shut off contact with the price structure of the world's market economies.
Macroeconomic stabilization – bringing inflation under control and lowering it over time, after the initial burst of high inflation that follows from liberalization and the release of pent-up demand. This process requires discipline over the government budget and the growth of money and credit (that is, discipline in fiscal and monetary policy) and progress toward sustainable balance of payments.[4]
Restructuring and privatization – creating a viable financial sector and reforming the enterprises in these economies to render them capable of producing goods that could be sold in free markets and transferring their ownership into private hands.
Legal and institutional reforms – redefining the role of the state in these economies, establishing the rule of law, and introducing appropriate competition policies.[5]

text: According to Oleh Havrylyshyn and Thomas Wolf of the International Monetary Fund, transition in a broad sense implies:

text:
liberalizing economic activity, prices, and market operations, along with reallocating resources to their most efficient use;
developing indirect, market-oriented instruments for macroeconomic stabilization;
achieving effective enterprise management and economic efficiency, usually through privatization;
imposing hard budget constraints, which provide incentives to improve efficiency; and
establishing an institutional and legal framework to secure property rights, the rule of law, and transparent market-entry regulations.[6]

text: Edgar Feige, cognizant of the trade-off between efficiency and equity, suggests[7] that the social and political costs of transition adjustments can be reduced by adopting privatization methods that are egalitarian in nature, thereby providing a social safety net to cushion the disruptive effects of the transition process.

text: The European Bank for Reconstruction and Development (EBRD) developed a set of indicators to measure the progress in transition. The classification system was originally created in the EBRD's 1994 Transition Report, but has been refined and amended in subsequent Reports. The EBRD's overall transition indicators are:

text:
Large-scale privatization
Small-scale privatization
Governance and enterprise restructuring
Price liberalization
Trade and foreign exchange system
Competition policy
Banking reform and interest rate liberalization
Securities markets and non-bank financial institutions
Infrastructure reform[8]

text: Context[edit]

text: The economic malaise affecting the Comecon countries – low growth rates and diminishing returns on investment – led many domestic and Western economists to advocate market-based solutions and a sequenced programme of economic reform. It was recognized that micro-economic reform and macro-economic stabilization had to be combined carefully. Price liberalization without prior remedial measures to eliminate macro-economic imbalances, including an escalating fiscal deficit, a growing money supply due to a high level of borrowing by state-owned enterprises, and the accumulated savings of households (“monetary overhang”) could result in macro-economic destabilization instead of micro-economic efficiency. Unless entrepreneurs enjoyed secure property rights and farmers owned their farms the process of Schumpeterian “creative destruction” would limit the reallocation of resources and prevent profitable enterprises from expanding to absorb the workers displaced from the liquidation of non-viable enterprises. A hardening of the budget constraints at state-owned enterprises would halt the drain on the state budget from subsidization but would require additional expenditure to counteract the resulting unemployment and drop in aggregate household spending. Monetary overhang meant that price liberalization might convert “repressed inflation” into open inflation, increase the price level still further and generate a price spiral. The transition to a market economy would require state intervention alongside market liberalization, privatization and deregulation. Rationing of essential consumer goods, trade quotas and tariffs and an active monetary policy to ensure that there was sufficient liquidity to maintain commerce might be needed.[9] In addition to tariff protection, measures to control capital flight were also considered necessary in some instances.[10]

text: Transition in practice[edit]

text: The most influential strategy for the transition to a market economy was that adopted by Poland launched in January 1990. The strategy was strongly influenced by IMF and World Bank analyses of successful and unsuccessful stabilization programmes which had been adopted in Latin America in the 1980s. The strategy incorporated a number of interdependent measures including macro-economic stabilization; the liberalization of wholesale and retail prices; the removal of constraints to the development of private enterprises and the privatization of state-owned enterprises; the elimination of subsidies and the imposition of hard budget constraints; and the creation of an export-oriented economy that was open to foreign trade and investment. The creation of a social safety net targeted at the individual to compensate for the removal of job security and the removal of price controls on staple goods was also part of the strategy.[11]

text: The choice of the transition strategy was influenced by the critical state of most post-socialist countries. Policy-makers were persuaded that political credibility took precedence over a sequenced reform plan and to introduce macro-economic stabilization measures ahead of structural measures that would by their nature take longer to implement. The “credibility” of the transition process was enhanced by the adoption of the Washington Consensus favoured by the IMF and the World Bank. Stabilization was deemed a necessity in Hungary and Poland where state budget deficits had grown and foreign debts had become larger than the country’s capacity to service. Western advisers and domestic experts working with the national governments and the IMF introduced stabilization programmes aiming to achieve external and internal balance, which became known as shock therapy. It was argued that “one cannot jump over a chasm in two leaps”.[12]

text: The many foreign advisers from, principally, the United States, the United Kingdom and Sweden were often under contract to the international financial institutions and bilateral or multilateral technical assistance programmes. They favoured free trade and exchange rate convertibility rather than trade protection and capital controls, which might have checked capital flight. They tended to support privatization without prior industrial restructuring; an exception was to be found in Eastern Germany where the Treuhand (Trust Agency) prepared state-owned enterprises for the market at considerable cost to the government.[13] Western technical assistance programmes were established by European Union – through the Phare and TACIS programmes – and other donors (including the US AID, the UK Know-how Fund and UNDP) and by the IMF, the World Bank, EBRD and KfW, which also advanced loans for stabilization, structural adjustment, industrial restructuring and social protection. Technical assistance was delivered through the exchange of civil servants and by management consultants, including Agriconsulting, Atos, COWI, Ernst & Young, GOPA, GTZ, Human Dynamics, Idom, IMC Consulting, Louis Berger, NIRAS, PA Consulting, PE International, Pohl Consulting, PwC, and SOFRECO.

text: It had been expected that the introduction of current account convertibility and foreign trade liberalization would force a currency devaluation that would support export-led growth.[14] However, when prices were de-controlled enterprises and retailers raised their prices to match those prevailing in the black market or towards world price levels, earning them windfall profits initially. Consumers reacted by reducing their purchases and by substituting better quality imported goods in place of domestically produced goods. Falling sales led to the collapse of many domestic enterprises, with personnel lay-offs or reduced hours of work and pay. This further reduced effective demand. As imports grew and exporters failed to respond to opportunities in world markets due to the poor quality of their products and lack of resources for investment, the trade deficit expanded, putting downward pressure on the exchange rate. Many wholesalers and retailers marked prices according to their dollar values and the falling exchange rate fed inflation. The central banks in several countries raised interest rates and tightened credit conditions, depriving state agencies and enterprises of working capital. These in turn found it impossible to pay wages on time, dampening effective demand further.[15]

text: The impacts of the conventional transition strategies proved to be de-stabilizing in the short-term and left the population impoverished in the long-term. Economic output declined much more than expected. The decline in output lasted until 1992-96 for all transition economies. By 1994, economic output had declined across all transition economies by 41 percent compared to its 1989 level. The Central and Eastern European economies began growing again around 1993, with Poland, which had begun its transition programme earliest emerging from recession in 1992. The Baltic States came out of recession in 1994 and the rest of the former Soviet Union around 1996. Inflation remained above 20 percent a year (except in the Czech Republic and Hungary) until the mid-1990s. Across all transition economies the peak annual inflation rate was 2632 percent (4645 percent in the CIS).[16] Unemployment increased and wages fell in real terms, although in Russia and other CIS economies the rate of unemployment recorded at employment exchanges remained low. Labour force surveys undertaken by the International Labour Organization showed significantly higher rates of joblessness and there was considerable internal migration.[17] High interest rates induced a “credit crunch” and fuelled inter-enterprise indebtedness and hampered the expansion of small and medium-sized enterprises, which often lacked the connections to obtain finance legitimately.[18]

text: In time domestic producers were able to upgrade their production capacity and foreign direct investment was attracted to the transition economies. Local-manufactured higher quality consumer goods became available and won market share back from imports. Stabilization of the exchange rate was made more difficult by large-scale capital flight, with domestic agents sending part of their earning abroad to destinations where they believed their capital was more secure. The promise of European Union membership and the adoption of the EU’s legislation and regulations (the Community acquis or ‘’acquis communautaire’’) helped secure trust in property rights and economic and governmental institutions in much of Central and Eastern Europe.

text: Some economists have argued that the growth performance of the transition economies stemmed from the low level of development, decades of trade isolation and distortions in the socialist planned economies. They have emphasized that the transition strategies adopted reflected the need to resolve the economic crisis besetting the socialist planned economies and the overriding objective was the transformation to capitalist market economies rather than the fostering of economic growth and welfare.[19]

text: But by 2000, the EBRD was reporting that the effects of the initial starting point in each transition economy on the reform process had faded. Although the foundations had been laid for a functioning market economy through sustained liberalization, comprehensive privatization, openness to international trade and investment, and the establishment of democratic political systems there remained institutional challenges. Liberalized markets were not necessarily competitive and political freedom had not prevented powerful private interests from exercising undue influence.[20]

text: Ten years on, in the Transition Report for 2010, the EBRD was still finding that the quality of market-enabling institutions continued to fall short of what was necessary for well-functioning market economies. Growth in the transition economies had been driven by trade integration into the world economy with “impressive” export performance, and by “rapid capital inflows and a credit boom”. But such growth had proved volatile and the EBRD considered that governments in the transition economies should foster the development of domestic capital markets and improve the business environment, including financial institutions, real estate markets and the energy, transport and communications infrastructure. The EBRD expressed concerns about regulatory independence and enforcement, price setting, and the market power of incumbent infrastructure operators.[21]

text: Income inequality as measured by the Gini coefficient rose significantly in the transition economies between 1987 and 1988 and the mid-1990s. Poverty re-emerged with between 20 and 50 percent of people living below the national poverty line in the transition economies. The UN Development Programme calculated that overall poverty in Eastern Europe and the CIS increased from 4 percent of the population in 1988 to 32 percent by 1994, or from 14 million people to 119 million.[22] Unemployment and rates of economic inactivity were still high in the late 1990s according to survey data.[23]

text: By 2007, the year before the global financial crisis hit, the index for GDP had reached 112 compared to 100 in 1989 for the transition economies. In other words, it took nearly 20 years to restore the level of output that had existed prior to the transition. The index of economic output (GDP) in the countries of Central and Eastern Europe was 151 in 2007; for the Balkans/ South-eastern Europe the index was 111, and for the Commonwealth of Independent States and Mongolia it was 102. Several CIS countries in the Caucasus and Central Asia as well as Moldova and Ukraine had economies that were substantially smaller than in 1989.[24]

text: The global recession of 2008-09 and the Eurozone crisis of 2011-13 destabilized the transition economies, reduced growth rates and increased unemployment. The slowdown hit government revenues and widened fiscal deficits but almost all transition economies had experienced a partial recovery and had maintained low and stable inflation since 2012.[25]

text: Process[edit]

text: Transition trajectories have varied considerably in practice. Some nations have been experimenting with market reform for several decades, while others are relatively recent adopters (e.g., Macedonia, Serbia and Montenegro). In some cases reforms have been accompanied with political upheaval, such as the overthrow of a dictator (Romania), the collapse of a government (the Soviet Union), a declaration of independence (Croatia), or integration with another country (East Germany). In other cases economic reforms have been adopted by incumbent governments with little interest in political change (China, Laos, Vietnam).[26] Transition trajectories also differ in terms of the extent of central planning being relinquished (e.g., high centralized coordination among the CIS states) as well as the scope of liberalization efforts being undertaken (e.g., relatively limited in Romania). Some countries, such as Vietnam, have experienced macro-economic upheavals over different periods of transition, even transition turmoil.[27]

text: According to the World Bank's 10 Years of Transition report "... the wide dispersion in the productivity of labour and capital across types of enterprises at the onset of transition and the erosion of those differences between old and new sectors during the reform provide a natural definition of the end of transition."[28] Mr. Vito Tanzi, Director of the IMF's Fiscal Affairs Department, gave definition that the transformation to a market economy is not complete until functioning fiscal institutions and reasonable and affordable expenditure programs, including basic social safety nets for the unemployed, the sick, and the elderly, are in place. Mr Tanzi stated that these spending programs must be financed from public revenues generated—through taxation—without imposing excessive burdens on the private sector.[29]

text: According to the EBRD a well-functioning market economy should enjoy a diverse range of economic activities, equality of opportunity and convergence of incomes. These outcomes had not yet been achieved by 2013 and progress in establishing well-functioning market economies had stalled since the 1990s. On the EBRD’s measure of transition indicators the transition economies had become “stuck in transition”. Price liberalization, small-scale privatization and the opening-up of trade and foreign exchange markets were mostly complete by the end of the 1990s. However economic reform had slowed in areas such governance, enterprise restructuring and competition policy, which remained substantially below the standard of other developed market economies.[30]

text: Inequality of opportunity was higher in the transition economies of Central and Eastern Europe and Central Asia than in some other developed economies in Western Europe (except France, where inequality of opportunity was relatively high). The highest inequality of opportunity was found in the Balkans and Central Asia. In terms of legal regulations and access to education and health services, inequality of opportunity related to gender was low in Europe and Central Asia but medium to high in respect of labour practices, employment and entrepreneurship and in access to finance. In Central Asia women also experienced significant lack of access to health services, as was the case in Arab countries.[31] While many transition economies performed well with respect to primary and secondary education, and matched that available in many other developed economies, they were weaker when it came to training and tertiary education.[32]

text: Over the decade 1994 to 2004, the transition economies had closed some of the gap in income per person with the average for the European Union in purchasing power parity terms. These gains had been driven by sustained growth in productivity as obsolete capital stock was scrapped and production shifted to take advantage of the opening-up of foreign trade, price liberalization and foreign direct investment. However the rapid growth rates of that period of catch-up had stalled since the late 2000s and the prospects for income convergence have receded according to the EBRD’s prognosis, unless there are additional productivity-enhancing structural reforms.[33]

text: The recent history of transition suggested that weak political institutions and entrenched interest groups had hindered economic reform. The EBRD’s Transition Report 2013 looked at the relationship between transition and democratization. The report acknowledged that the academic literature was divided on whether economic development fostered democracy but argued that there was nonetheless strong empirical support for the hypothesis. It suggested that countries with high inequality were less inclined to support a limited and accountable state. In general, the proportion of the population with an income of between US$10–50 a day (the so-called “middle class”) correlated with the level of democracy; however this correlation disappeared in transition countries with high income inequality. Those countries with large natural resource endowments, for example oil and gas producers like Russia and Kazakhstan, had less accountable governments and faced less electoral pressure to tackle powerful vested interests because the government could rely on resource rents and did not have to tax the population heavily. Countries with a strong institutional environment – that is, effective rule of law, secure property rights and uncorrupted public administration and corporate governance – were better placed to attract investment and undertake restructuring and regulatory change.[34]

text: To spur further economic reform and break out of a vicious circle, the EBRD Transition Report 2013 proposed that the transition economies should:

text:
Open-up trade and finance, which made reform more resilient to popular pressure (“market aversion”) and meant that countries could access the EU single market either as member states or through association agreements (such as those being negotiated with Ukraine, Moldova and Georgia);
Encourage transparent and accountable government, with media and civil society scrutiny, and political competition at elections;
Invest in human capital, especially by improving the quality of tertiary education.[35]

text: Countries in transition[edit]

text: Although the term "transition economies" usually covers the countries of Central and Eastern Europe and the Former Soviet Union, this term may have a wider context. There are countries outside of Europe, emerging from a socialist-type command economy towards a market-based economy (e.g., China). Moreover, in a wider sense the definition of transition economy refers to all countries which attempt to change their basic constitutional elements towards market-style fundamentals. Their origin could be also in a post-colonial situation, in a heavily regulated Asian-style economy, in a Latin American post-dictatorship or even in a somehow economically underdeveloped country in Africa.[3]

text: In 2000, the IMF listed the following countries with transition economies:[5]

text:
Albania
Armenia
Azerbaijan
Belarus
Botswana
Bulgaria
Cambodia
China
Croatia
Czech Republic
Estonia
Georgia
Hungary
Latvia
Lithuania
Kazakhstan
Kyrgyz Republic
Laos
Macedonia
Moldova
Poland
Romania
Russia
Slovak Republic
Slovenia
Tajikistan
Turkmenistan
Ukraine
Uzbekistan
Vietnam

text: In addition, in 2002 the World Bank defined Bosnia and Herzegovina, and the Federal Republic of Yugoslavia (later Serbia and Montenegro) as transition economies.[28] In 2009, World Bank included Kosovo in the list of transition economies.[36] Some World Bank studies also include Mongolia.[37] According to the IMF, Iran is in transition to a market economy, demonstrating early stages of a transition economy.[38]

text: The eight first-wave accession countries, which joined the European Union on 1 May 2004 (Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia) and the two second-wave accession countries that joined on 1 January 2007 (Romania and Bulgaria) have completed the transition process.[39] According to the World Bank, "the transition is over" for the 10 countries that joined the EU in 2004 and 2007.[40] It can be also understood as all countries of the Eastern Bloc.[41]

text: Branch of economics[edit]

text: Transition economics is a special branch of economics dealing with the transformation of a planned economy to a market economy. It has become especially important after the collapse of Communism in Central and Eastern Europe. Transition economics investigates how an economy should reform itself to endorse capitalism and democracy. There are usually two sides: one which argues for a rapid transformation and one which argues for a gradual approach. Gérard Roland's book Transition and Economics. Politics, Markets and Firms (MIT Press 2000) gives a good overview of the field. A more recent overview is provided in Transition Economies: Political Economy in Russia, Eastern Europe, and Central Asia by Martin Myant and Jan Drahokoupil.[42]


document_title: Disputed status of Gibraltar

question_text: what territory is spain and the united kingdom in a dispute over

question_tokens: what territory is spain and the united kingdom in a dispute over

root

text: Disputed status of Gibraltar

text: Capture of Gibraltar and the Treaty of Utrecht[edit]

text: Gibraltar was captured in 1704 by a force led by Admiral Sir George Rooke representing the Grand Alliance on behalf of the Archduke Charles, pretender to the Spanish Throne. After the battle, almost all the original inhabitants decided to leave to the surrounding areas of Campo de Gibraltar.[7] Spanish attempts to regain the territory in the Twelfth Siege of Gibraltar failed, and it was eventually ceded to the Kingdom of Great Britain by Spain in the 1713 Treaty of Utrecht as part of the settlement of the War of the Spanish Succession. In that treaty, Spain ceded to Great Britain "the full and entire propriety of the town and castle of Gibraltar, together with the port, fortifications, and forts thereunto belonging ... for ever, without any exception or impediment whatsoever."

tag: p

text: Should the British Crown ever wish to relinquish Gibraltar, a reversion clause holds that the territory would first be offered to Spain, "And in case it shall hereafter seem meet to the Crown of Great Britain to grant, sell or by any means to alienate therefrom the propriety of the said town of Gibraltar, it is hereby agreed and concluded that the preference of having the sale shall always be given to the Crown of Spain before any others."

text: Furthermore, the Treaty stipulates "that the above-named propriety be yielded to Great Britain without any territorial jurisdiction,[8] and without any open communication by land with the country round about" (although there is dispute over whether this disclaims territorial jurisdiction over Gibraltar, or over the "country round about"[9]) and that no overland trade between Gibraltar and Spain is to take place, except for emergency provisions in the case that Gibraltar is unable to be resupplied by sea. The British Government and the Government of Gibraltar today argue that the membership of both Gibraltar and Spain in the European Union (EU) — Gibraltar was included as a Special member state territory when the United Kingdom joined the EU in 1973; Spain joined the EU in 1986 — supersedes such restrictions as the EU is committed to free movement of goods and services.

text: Differing positions[edit]

text: The United Nations February 2016 report sets out the differing points of view of the various parties with regard to Gibraltar which the United Nations considers to be a Non-Self-Governing Territory administered by the United Kingdom of Great Britain and Northern Ireland.[6]:3/16 [10]

text: Gibraltar was given the Gibraltar Constitution Order 2006 by Britain which established a form of government whereby the Governor of Gibraltar is responsible for the conduct of external affairs, defence, internal security and for certain appointments to public office, and the Government of Gibraltar is made responsible for all other matters. The UK believes that as an independent territory, recognised by the United Nations Gibraltar enjoys the individual and collective rights that are set out in the 2006 constitution and the right of self-determination. Spain disputes the legality of the constitution and claims that it does not change the position of Gibraltar as a colony of the UK with only the UK empowered to discuss Gibraltar matters on the international scene.[6]:4/16

text: The territorial government of Gibraltar, based on law in the 2006 constitution, collects its own taxes and budgets its costs and capital expenditure, with maximum personal tax rates of 28% and company tax of 10%. Spain notes that the European Commission is investigating the tax regime of Gibraltar and that Spain considers Gibraltar a tax haven. The UK believes Gibraltar meets all EU laws regarding the issues of anti money laundering, direct taxation and financial supervision.[6]:5/16

text: Gibraltar has a robust financial regulation system with anti tax evasion agreements on exchange of tax information with 79 countries including all the EU nations except Spain who have not responded. The UK asked for Gibraltar to be subject to an EU evaluation of anti money laundering issues. Spain recalls that crimes of tobacco smuggling and money-laundering from Gibraltar had been noted in an EU anti fraud report in 2014.[6]:6/16

text: Crossing the land border between Gibraltar and Spain is subject to checks. Spain stresses that checks are not politically motivated, it being necessary to ensure strict compliance with EU border regulations to counter the common illicit trafficking issues and that Spain complies with the recommendations from the EU to improve the border crossing. The location of the checkpoint does not conform to the border recognised by Spain. The airport is a military area where civilian aircraft are permitted to operate. Spain claims the airfield is occupied illegally by the UK. The UK claims its sovereignty extends over the isthmus area on which the airfield is built. The UK also claims a three-mile limit in the territorial waters around Gibraltar whereas Spain claims maritime rights to all areas except inside the ports on Gibraltar. UK claimed incursions of Spanish vessels into Gibraltar territorial waters being considered by Spain to be routine activity of Spanish ships in their own waters.[6]:7/16

text: In 2004 a system of trilateral discussion began with Spain, the UK and Gibraltar participating. The discussions ended in 2010 with the UK and Gibraltar asking for their continuance from 2012 to 2014. Spain stating they believed the forum no longer existed and that only ad hoc discussions on local issues should take place with Campo de Gibraltar also included.[6]:10/16

text: In 2015 the UK reaffirmed its claim to sovereignty, that Gibraltar had its right to self-determination set out in the 2006 constitution and that the UK would not enter into any sovereignty discussions unless Gibraltar agreed and further that the UK was committed to safeguarding Gibraltar, its people and its economy. The UK claimed sovereignty over land extended over the sea to a limit of three miles or to the median line under the UN convention on the Law of the Sea. Any discussion must include Gibraltar as their constitution gave them sole powers over many issues.[6]:11/16

text: Gibraltar claimed it remained the last colony in Europe only because the Government of Spain insisted the inalienable principle of self-determination should not apply to Gibraltarians with Spain blocking the annual request for Gibraltar to be removed from the UN list of Non-Self- Governing Territories.[6]:12/16 The Gibraltarian government asserts that Gibraltar has been effectively decolonised.[11][12][13][14]

text: Spain claiming that the UK was refusing to negotiate on sovereignty. That the land occupied by the UK was greater than that ceded by the Treaty of Utrecht and that it was the restoration of Spanish territorial integrity that was the key, not self-determination. The 2006 constitution had not changed the international status of Gibraltar with the local authorities having no right to interfere in the negotiations about the illegal occupation of Spanish territory. Spain would not agree to any situation that was detrimental to people in the area or to the finances of Spain or the EU. The border checks were EU regulated and designed to stop illegal trafficking of tobacco that was costing the region tax revenue. Spain was happy to discuss sovereignty issues with the UK and for four way ad hoc discussion on local issues.[6]:13/16 [15]

text: Spanish position[edit]

text: The neutrality of this section is disputed. Relevant discussion may be found on the talk page. Please do not remove this message until conditions to do so are met. (December 2016) (Learn how and when to remove this template message)

tag: table

text: The traditional Spanish position is based on territorial integrity, as per UN Resolution 1514 (XV) (1960), which according to Spain complements and constrains the right to self-determination: "Any attempt aimed at the partial or total disruption of the national unity and the territorial integrity of a country is incompatible with the purposes and principles of the Charter of the United Nations."

text: During the 1960s, the UN General Assembly passed five resolutions on the issue (2231 (XXI), "Question of Gibraltar"[16] and 2353 (XXII), "Question of Gibraltar"[17]). The resolutions on the decolonisation of Gibraltar focused on the "interests" and not the "wishes" of the Gibraltarians. The latter resolution states that:

text: any colonial situation which partially or completely destroys the national unity and territorial integrity of a country is incompatible with the purposes and principles of the Charter of the United Nations and especially with paragraph 6 of Resolution 1514 (XV) of the General Assembly [...] Invites the Governments of Spain and the United Kingdom of Great Britain and Northern Ireland to resume without delay the negotiations provided for in General Assembly Resolutions 2070 (XX) and 2231 (XXI), with a view to putting an end to the colonial situation in Gibraltar and to safeguarding the interests of the population.

text: From such a point of view, Gibraltarians are seen as mere "settlers" from the United Kingdom and other countries and only their interests, not their wishes (as the right to self-determination would involve), need be safeguarded. The point of view that they were settlers is supported by the fact that following the 1704 capture of Gibraltar by Anglo-Dutch troops, only around 70 out of the original 5,000 Spanish inhabitants chose to remain in Gibraltar.[18] Therefore, Spain has insisted that the Gibraltar dispute is a purely bilateral matter with the United Kingdom and has ignored the role and will of the Gibraltarians.

text: The first formal proposal on how to achieve the return of Gibraltar to Spain was made on 18 May 1966 by the Spanish Minister of Foreign Affairs, Fernando Castiella. The proposal comprised three clauses:[19][20]

text:
"The cancellation of the Treaty of Utrecht and the subsequent return of Gibraltar to Spain."
"The stay of the British base in Gibraltar, its use being subject to a specific Anglo-Spanish agreement."
"A 'Personal Statute' for Gibraltarians, under United Nations guarantee, protecting their cultural, social and economic interest in Gibraltar or anywhere else in Spain, including their British nationality. An 'appropriate ... administrative formula' should be also agreed."

tag: ol

text: The proposal was rejected by the British Government and by the Gibraltarians, which overwhelmingly voted to remain under British sovereignty in a referendum held in 1967 (12,138 to 44).

text: As a result, the UN General Assembly adopted during its twenty-third session resolution 2429 of 1968 (XXIII) denounced the 1967 referendum and requested the United Kingdom not delay negotiations.[21]

text: No further advance for the Spanish claims was achieved for the following forty years. In view of that, the Spanish position seems to have softened, being redirected towards some form of temporary or permanent arrangement to achieve joint sovereignty, which has been proposed by Spain and discussed with the British Government. Such a proposal was tabled by the Spanish Minister for Foreign Affairs, Fernando Morán, in 1985. The details of the proposal were not made public, but information released showed an offer on a treaty with the United Kingdom in order to "re-integrate" Gibraltar with Spain, while preserving Gibraltarians' way of life. They would keep their British nationality, as well as their existing political and labour rights, self-government and institutions. Morán proposed that a condominium or leaseback arrangement should be agreed, over a 15 or 20-year period.[22] This proposal was not formally rejected by Douglas Hurd, the British Foreign Secretary, until 1993.

text: In 1997 a second proposal was made by the Spanish Minister for Foreign Affairs, Abel Matutes, foreseeing a hundred-year period of joint sovereignty before a definite transfer to Spain.[23] A similar scheme was provisionally agreed between the Spanish and British governments in the spring of 2002, but this was eventually abandoned, after sustained opposition by the Gibraltarians that included the Gibraltar sovereignty referendum of 2002.

text: British position[edit]

text: In his evidence to the UK Parliament Foreign Affairs Committee in 2008, Jim Murphy MP, Minister of State for Europe stated:[4]

text: The UK Government will never enter into an agreement on sovereignty without the agreement of the Government of Gibraltar and their people. In fact, we will never even enter into a process without that agreement. The word 'never' sends a substantial and clear commitment and has been used for a purpose. We have delivered that message with confidence to the peoples and the Governments of Gibraltar and Spain. It is a sign of the maturity of our relationship now that that is accepted as the UK's position.

text: The British Government has ruled out both the independence of Gibraltar where it refers to the Treaty of Utrecht as, according to the British view, it would require Spanish consent[24] and Gibraltar's integration into the United Kingdom.

text: I will note that, in the view of Her Majesty's Government, Gibraltar's right of self determination is not constrained by the Treaty of Utrecht except in so far as Article X gives Spain the right of refusal should Britain ever renounce Sovereignty. Thus independence would only be an option with Spanish consent.

text: The option of integration was rejected on 26 June 1976, when the British Government issued the Hattersley Memorandum ruling out integration in order to "avoid innovations which might result in prolongation of the frontier restrictions imposed by Spain."[25]

text: Gibraltarian position[edit]

text: Gibraltar argues that the Spanish claims are baseless, pointing to the right to self-determination of all peoples, guaranteed and enshrined by the UN, according to the UN Charter. Its article 1 states that "The Purposes of the United Nations are ... to develop friendly relations among nations based on respect for the principle of equal rights and self-determination of peoples."

text: To the same section 2 of Resolution 1514 (XV) states: "All peoples have the right to self-determination; by virtue of that right they freely determine their political status and freely pursue their economic, social and cultural development."

text: Furthermore, resolution 2231 (XXI) itself recalls and demands implementation of Resolution 1514(XV) (guaranteeing Gibraltar's right to self-determination) and therefore it believes that the Spanish claim for its territorial integrity (which would not be affected by Gibraltar's decolonisation) cannot displace or extinguish the rights of the people of Gibraltar under resolution 1514(XV) or under the Charter. From this point of view, any additional right that Spain could claim by virtue of the "reversionary" clause contained in the Treaty of Utrecht is overruled and annulled under article 103 of the UN Charter: " In the event of a conflict between the obligations of the Members of the United Nations under the present Charter and their obligations under any other international agreement, their obligations under the present Charter shall prevail."

text: Finally, it is argued that there is in fact no principle in International Law or UN doctrine that can displace the inalienable right to self-determination. In this regard, in 2008, the UN 4th Committee rejected the claim that a dispute over sovereignty affected self-determination, affirming it to be a basic human right.[26]

text: The Gibraltar Government has also argued that Gibraltar is a British territory and therefore by definition not an integral part of any other state, implying that Spain's territorial integrity cannot be affected by anything that occurs in Gibraltar: "Even if integration of a territory was demanded by an interested State it could not be had without ascertaining the freely expressed will of the people, the very sine qua non of all decolonisation."

text: In a referendum held in Gibraltar in September 2002, Gibraltarian voters rejected even partial Spanish sovereignty.[27]

text: Speaking to the UK Parliament Foreign Affairs committee in March 2008 Peter Caruana the Chief Minister of Gibraltar noted:

text: Spain does not dispute that Gibraltar is properly, in law, British territory. Therefore, this is not disputed land. She has a political claim to the return of Gibraltar sovereignty, but she does not dispute the fact that in proper international law, she ceded sovereignty to Britain in perpetuity and therefore it is undisputed British sovereign territory.[28]

text: Gibraltarians seem to remain mistrustful of Spain despite improved relations.[29][30][31]

text: Resolution discussions[edit]

text: Spain insisted that the Gibraltar dispute is a bilateral matter purely between the United Kingdom and Spain. This principle appears to have been reflected in the United Nations resolutions on the decolonisation of Gibraltar in the 1960s, which focused on the "interests" of the Gibraltarians. Speaking to the UN C24 in 2006, the Chief Minister of Gibraltar, Peter Caruana, stated that "It is well known and documented and accepted by all that, since 1988, Gibraltar has rejected the bilateral Brussels Process, and will never be content with it."[32]

text: With the 2004 return of a centre-left wing government in Spain, a new Spanish position was adopted and, in December 2005, the governments of the UK, Spain and Gibraltar agreed to set up "a new, trilateral process of dialogue outside the Brussels Process" with equal participation by the three parties, any decisions or agreements to be agreed by all three.[5] This was ratified by the 2006 Cordoba Agreement. After meetings in Malaga (Spain), Faro (Portugal), and Mallorca (Spain), the Spanish foreign minister Miguel Ángel Moratinos went to Gibraltar in July 2009 to discuss a range of mutual issues. This was the first official Spanish visit since Gibraltar was ceded. The issue of sovereignty was not discussed.[33]

text: From 2010 Spain has claimed that the trilateral dialogue is finished and reverted to the original call for a bilateral agreement with the UK with four way ad hoc meetings which would include Campo de Gibraltar.

text: Gibraltar political development[edit]

text: The Gibraltarians have sought a more modern status and relationship with the United Kingdom reflecting and expanding the present level of self-government.

text: A new constitution order was approved in a referendum in 2006, which moved Gibraltar to a more Crown dependency-like relationship with the UK, rather than the previous colonial status.[34] The new constitution came into effect in January 2007. Gibraltar is classified as a British overseas territory.

text: In a letter to the UN the British representative, Emyr Jones Parry, writes: "The new constitution provides for a modern relationship between Gibraltar and the United Kingdom. I do not think that this description would apply to any relationship based on colonialism."[35]

text: Chief Minister Peter Caruana addressed the UN Special Committee on Decolonization regarding the new constitution in 2008. He put forth Gibraltar Government's view that "As far as we are concerned, the decolonisation of Gibraltar is no longer a pending issue."[36]

text: Parallel with this, the Government of Gibraltar has engaged in talks with Spain to resolve other disputes, setting aside the issue of sovereignty.

text: Areas of contention[edit]

text: The isthmus[edit]

text: The territory of Gibraltar contains an 800-metre (2,625 ft) section of the isthmus that links the Rock[37] with Spain. Although it is argued by Spain that this section of the isthmus was never ceded by Spain; rather, it was gradually occupied de facto by the British,[38] this section of the isthmus together with the other half of it north of the Gibraltar-Spain border was once labelled as neutral territory separating Spain from Gibraltar.[citation needed][when?][who?]

text: The growth of Gibraltar onto the southern half of the isthmus began with the construction of two forts in the northernmost part of the ceded territory. In 1815, Gibraltar suffered a yellow fever epidemic. This led to a Spanish concession so a temporary quarantine health camp could be built on the isthmus. After the plague was over, the British did not remove the camp. In 1854, a new epidemic prompted more health camps, which eventually gained Gibraltar these extra 800 metres of land. The occupation of the isthmus culminated in 1938 with the construction of the aerodrome during the Spanish civil war.[citation needed]

text: The Treaty of Utrecht did not mention British sovereignty over Gibraltar beyond the fortified perimeter of the town as it was in 1713. However the Treaty ceded the town "together with the port, fortifications, and forts thereunto belonging", which included several forts along the line of the current frontier. The United Kingdom further claims title to the southern half of the isthmus based on continuous possession over a long period.

text: The northern half of the neutral territory was also taken over by Spain in the 1960s, during dictator Francisco Franco's regime, and now forms an integral part of the Spanish municipality of La Línea de la Concepción.[citation needed]

text: Territorial waters[edit]

text: The treaty of Utrecht did not confer any territorial waters because Spain exclusively yielded the castle and the city of Gibraltar.[39]

text: Both the United Kingdom and Spain have ratified the United Nations Convention on the Law of the Sea of 1982, which governs countries' oceanic territorial claims. Both countries made statements regarding Gibraltar in their declarations upon ratification of the Convention. The Spanish statement was:

text: 2. In ratifying the Convention, Spain wishes to make it known that this act cannot be construed as recognition of any rights or status regarding the maritime space of Gibraltar that are not included in article 10 of the Treaty of Utrecht of 13 July 1713 concluded between the Crowns of Spain and Great Britain. Furthermore, Spain does not consider that Resolution III of the Third United Nations Conference on the Law of the Sea is applicable to the colony of Gibraltar, which is subject to a process of decolonization in which only relevant resolutions adopted by the United Nations General Assembly are applicable.[40]

text: The British government responded to the Spanish statement in their own statement:

text: With regard to point 2 of the declaration made upon ratification of the Convention by the Government of Spain, the Government of the United Kingdom has no doubt about the sovereignty of the United Kingdom over Gibraltar, including its territorial waters. The Government of the United Kingdom, as the administering authority of Gibraltar, has extended the United Kingdom's accession to the Convention and ratification of the Agreement to Gibraltar. The Government of the United Kingdom, therefore, rejects as unfounded point 2 of the Spanish declaration.[41]

text: However, Articles 309 and 310 of the Convention state that "No reservations or exceptions may be made to this Convention unless expressly permitted by other articles of this Convention", and that if a signatory state makes a declaration upon ratification, that declaration must "not purport to exclude or to modify the legal effect of the provisions of this Convention in their application" to that state.[42]

text: The dispute over territorial waters, which was rekindled in 2013 following a fishing dispute[43] seems likely to become more important with the discovery of a British treasure ship, HMS Sussex, and the Black Swan Project controversy.

text: Questions about the waters have previously been asked in the House of Commons, and answered as follows:

text: Under international law, States are entitled, but not required, to extend their territorial sea up to a maximum breadth of 12 nautical miles. Where the coasts of two States are opposite or adjacent, the general rule is that neither is entitled, unless they agree otherwise, to extend its territorial sea beyond the median line. The UK Government considers that a limit of three nautical miles is sufficient in the case of Gibraltar.

text: The Government of Gibraltar for its part holds that there is no economic or social need for more than three nautical miles of territorial water.

text: At the end of 2008, the European Commission included most of the territorial waters that surround Gibraltar under a marine conservation area known as the "Estrecho Oriental" that will be maintained by Spain. The UK initiated legal proceedings with the support of Gibraltar, which were initially rejected by the General Court on procedural grounds. A 2011 appeal was dismissed, again on procedural grounds.[44] The European Court of Justice had again ruled against that appeal in 2012.[45]

text: There have been disputes concerning Spanish patrol boats inside these claimed territorial waters. In May 2009 there was a number of Spanish incursions into British-claimed waters around Gibraltar, including by a Spanish Navy fisheries protection vessel, leading to intervention by police and a diplomatic protest by the UK.[46][47]

text: Economy[edit]

text: The Spanish government argues[48] that Gibraltar's tax schemes harm the Spanish economy. In January 2005, the European Commissioner for Competition requested the UK (responsible for Gibraltar's external relations) to abolish Gibraltar's tax-exempt company regime by the end of 2010 (at the latest) on the basis that it constitutes illegal state aid that could distort competition.[49] Unlike other tax havens like Andorra, Gibraltar has not signed a mutual agreement with Spain to exchange fiscal information, although such an agreement has been offered by the Gibraltar Government, but Spain has declined to accept it because does not consider Gibraltar as its diplomatic counterpart.[50][not in citation given] Another concern[who?] is that each day thousands of Spaniards buy goods at cheaper prices in Gibraltar due to exchange rates and lack of VAT, contributing to the Gibraltar economy instead of that of Spain.

text: The Spanish government wants to increase the exchange of fiscal information[48] in order to prevent Gibraltar banks being used for tax evasion and money laundering. The United Kingdom House of Commons Foreign Affairs Select Committee has directed an inquiry that determined that Gibraltar has always complied with all international and EU requirements to prevent such activity.

text: We conclude that the series of allegations which Spain makes against Gibraltar appear almost wholly to be without substance. In many cases, it is not just the Government of Gibraltar but the British Government as well which is traduced. It is deeply regrettable that allegations are made that cannot be sustained by a basis in fact. If concrete evidence of wrong-doing were produced, the British Government should act promptly to deal with the problem. But so long as allegations are unsubstantiated, the British Government should continue to rebut them promptly and decisively.[51]

text: Referred to as an "international financial centre",[52] Gibraltar was among 35 jurisdictions identified by the Organisation for Economic Co-operation and Development (OECD) as a tax haven in June 2000.[53] As a result of having made a commitment in accordance with the OECD's 2001 Progress Report on the OECD's Project on Harmful Tax Practices, Gibraltar was not included in the OECD's list of uncooperative tax havens.[53] However, in its April 2009 progress report, the OECD listed Gibraltar in the list of jurisdictions that, although committed, had not "substantially implemented" yet the internationally agreed tax standard.[54] Following Gibraltar's signing of 12 additional Tax Information Exchange Agreements (TIEAs), as of October 2009, with jurisdictions including the UK, USA and Germany,[55] Gibraltar was listed in the OECD "white list". It is currently listed as "largely compliant" by the OECD's Global Forum on Transparency and Exchange of Information for Tax Purposes.[56]

text: Along with the Isle of Man and Cyprus, Gibraltar has been used as an international finance centre by the Russian conglomerate Yukos/Menatep.[57]

text: There have been claims that some Gibraltarian motorboats are engaging in drugs and tobacco smuggling.[58] However, since 1996 there has been a law in Gibraltar controlling fast launches licensing their ownership and importation and prohibiting the entry of unlicensed craft into Gibraltar waters. In 2014, inspectors from the EU's fraud office OLAF wrote to the Spanish governments urging an investigation of tobacco smuggling, amid revelations that Gibraltar, with a population of less than 30,000, imported 117 million packets of cigarettes in 2013.[59] In 2015, Spanish authorities broke up a major tobacco smuggling operation, seizing 65,000 packs of cigarettes, five boats, two firearms, communications equipment and €100,000 cash.[60] Authorities estimated the group was smuggling 150,000 packs of contraband tobacco into Spain every week.[60]

text: Military importance[edit]

text: Military control of the Strait of Gibraltar has historically been the most important use of Gibraltar, allowing Britain to defend its trade lanes to the East. The British admiral Lord Fisher stated that Gibraltar was one of the five keys that locked the world, together with Dover, Alexandria, Cape of Good Hope and Singapore, all of which were once controlled by Britain.[61]

text: Its military relevance has reduced with the construction in 1953 of the US Naval Station Rota (the biggest Allied base in the area) and with the end of the Cold War, but it is still an important position as more than one quarter of the global maritime traffic transits through the strait every year.[citation needed] Controlling the strait is of vital importance to NATO. The task of controlling the strait has been traditionally assigned by NATO to the UK, but the recent advances that Spain has made in its armed forces and the bases Spain has in the zone have made NATO reconsider this.[62] However, the tense relations that Spain had with the American administration under George W. Bush and the special friendship of the US with the UK have caused NATO to take a more favourable position towards the UK and Morocco for control of the strait.[63]

text: Re-emergence of dispute[edit]

text: 1953: Rekindling the dispute[edit]

text: In May 1954, despite objections by Spain, Queen Elizabeth II visited Gibraltar. Spanish dictator Francisco Franco had renewed claims to The Rock. British National Archives files from 1953 show that Franco claimed that Spain had been promised The Rock in return for not attacking the territory during the Second World War. The Foreign and Commonwealth Office conducted a full review of their files to see whether Franco's claim had any foundation. A confidential memo called the Spanish communiqué "a flimsy and unconvincing document", and the Government put an end to the dispute by refusing to comment on the claims.[64]

text: 1967 and 2002 referendums[edit]

text: In a 1967 referendum on sovereignty organised by the British Government, 99.6% of voters voted to remain under British sovereignty.

text: In a second referendum on sovereignty held in November 2002 by the Government of Gibraltar, 187 voted yes (1%) and 17,900 voted no (99%) on the proposal of sharing sovereignty with Spain.[65] The question put was:

text:
On the 12 July 2002 the Foreign Secretary, Jack Straw, in a formal statement in the House of Commons, said that after twelve months of negotiation the British Government and Spain are in broad agreement on many of the principles that should underpin a lasting settlement of Spain's sovereignty claim, which included the principle that Britain and Spain should share sovereignty over Gibraltar.

Do you approve of the principle that Britain and Spain should share sovereignty over Gibraltar?

text: Spanish reaction varied from questioning the validity of the process, to observing that no Spanish government has done enough to make joint sovereignty or integration with Spain an attractive prospect.[66]

text: It is reported that Spanish "secret funds" were used to create a favourable opinion in Gibraltar to the Spanish sovereignty claim.[67] How the money was spent remains uncertain.

text: Spanish restrictions[edit]

text: After the Spanish constitution, Spain was still reluctant to re-open the border because of the consequences it might have.[citation needed] However the border was re-opened in 1984, allowing free access between both sides, although Spain did not open ferry services until later. Further problems have been encountered regarding the airport, as it is placed on disputed neutral land. Under the Lisbon Agreement of 1980:

text: Both Governments have reached agreement on the re-establishment of direct communications in the region. The Spanish Government has decided to suspend the application of the measures at present in force.

text: This was to include reinstatement of a ferry service between Gibraltar and Algeciras. This was finally reinstated after 40 years, on 16 December 2009, operated by the Spanish company Transcoma.[68]

text: At the end of 2006, the restrictions on the airport were removed as a result of the Córdoba Agreement (2006) and direct flights from Madrid by Iberia started operation.[69]

text: However, On 22 September 2008, Iberia announced that it would cease its flights to Madrid by 28 September due to "economic reasons", namely, lack of demand. This left Gibraltar without any air links with Spain,[70] until May 2009 when Air Andalus opened a service.[71] Air communications with Spain ceased again in August 2010, when Air Andalus lost its licence.

text: Spain demonstrated opposition to Gibraltar's membership of Union of European Football Associations.[72]

text: Disputes prior to Brexit[edit]

text: 2000 – An issue of contention was the repair of the nuclear powered submarine, HMS Tireless. The Government of Spain expressed its concern about the effective safety for the inhabitants of Gibraltar and those living in the Campo de Gibraltar the adjacent area in Spain, some 250,000 people.

text: The inhabitants of the area saw this repair as a precedent of future repair operations in Gibraltar rather than the one-off emergency the British Government has claimed (no other nuclear submarine has been repaired in Gibraltar since). On the other hand, the Government of Gibraltar accused Spain of using this incident as an excuse to justify its 300-year-old sovereignty claim to Gibraltar. Despite many protests, the Government of Gibraltar allowed the work to be done after employing its own experts to confirm it could be undertaken safely. The submarine was in Gibraltar for a year before leaving, during which the repair was completed without incident.

text: Subsequently, Spanish politicians have complained about every nuclear submarine visit to Gibraltar, and have tried unsuccessfully to get a reassurance that this would totally stop. There have been no further protests against nuclear submarines in Gibraltar. Commenting, the Government of Gibraltar said: "Nuclear submarine visits to Gibraltar are a matter for UK and Gibraltar. Visits for operational or recreational purposes are welcome by the Gibraltar Government ... To our knowledge, it is not the position of the present Spanish Government or any previous Spanish Government, that it is opposed to visits by nuclear submarines."[citation needed]

text: 2002 – In the months that predated the referendum called by the Gibraltar government on the joint sovereignty agreement disagreements could be categorised as:

text:
Control of the military installations. Spain wished to control the military installations of the territory, even in the event of joint sovereignty. This pretension was considered unacceptable by the British Ministry of Defence.
The referendum itself. Both the Spanish and British governments stated that the referendum had no legal effect, but it clearly indicated the democratically expressed will of the people of Gibraltar to "not be Spanish". As the British Government is committed to respect those wishes, the idea of a joint sovereignty deal has been abandoned.

tag: ul

text: 2004 – A visit by The Princess Royal in June 2004, the brief return of HMS Tireless in July 2004, together with the Tercentenary Celebrations of the capture of The Rock were subjects of complaint by the Spanish Government.

text: A new round of talks on a tri-lateral basis were proposed in October 2004 to discuss regional co-operation. In February 2005 the first talks took place at a meeting held in Málaga and subsequently in Portugal and London.

text: This is the first sign of formal recognition of the Government of Gibraltar, and has been generally welcomed. The main issues of the talks have been a new agreement on the airport, the pensions of the Spanish workers that worked in Gibraltar during the sixties, and the removal of Spanish restrictions on telecommunications.

text: 2006 – Those issues were successfully resolved in September 2006 in the Córdoba Agreement. The process continues.

text: 2007 – A bulk carrier, the MV New Flame, ran aground south of Europa Point in Gibraltar and broke up on the reef in August 2007, generating accusations of pollution in Spain and claims not only against the Government of Gibraltar but also against that of Spain.[73] Its cargo was scrap metal and the vessel's fuel was promptly drained.[74][75][76] The Government of Gibraltar claimed in December 2007 that the operation did not represent a material risk to the environment since the vessel had been defuelled and only small, remnant amounts of fuel remained in the engines themselves.[77] The Spanish branch of Greenpeace claimed that, as late as February 2008, fuel spills from the New Flame had polluted Spanish beaches around the Bay of Gibraltar.[78] Official Spanish sources played this down stating that the fuel reaching the beaches of Algeciras was in "insignificant amounts".[79]

text: 2009 – The dispute over British-claimed territorial waters gained prominence with deliberate incursions by Spain, triggering angry headlines in the UK tabloid press.[80] In December 2009, four armed Civil Guard officers were detained after three landed in Gibraltar in pursuit of two suspected smugglers, who were themselves arrested. The Spanish Interior Minister Alfredo Pérez Rubalcaba personally telephoned Chief Minister Peter Caruana to apologise, stating that there were "no political intentions" behind the incident. The Chief Minister was prepared to accept it had not been a political act. The Spanish officers were released by the police the following day, who said that "Enquiries established that the Guardia Civil mistakenly entered Gibraltar Territorial Waters in hot pursuit and have since apologised for their actions."[81][82]

text: 2012 – Queen Sofía of Spain cancelled plans to travel to the United Kingdom to participate in the Diamond Jubilee of Elizabeth II. The cancellation was a protest in response to a planned visit to Gibraltar by Prince Edward. The Spanish government also lodged a protest to the planned visit by Prince Edward, Earl of Wessex. Relations between Britain and Spain reportedly "returned to a state of growing confrontation" following the election of Spanish Prime Minister Mariano Rajoy of the Spanish People's Party in December 2011.[83] Plans for a 100-boat flotilla to sail around the peninsula to mark the Queen's Diamond Jubilee were adopted in Gibraltar as "a show of defiance against Spain."[84] Additional protests followed in August 2012 after Gibraltar abrogated an accord that allowed Spanish fishing boats to operate in its waters.[85][86]

text: 2013 – Disagreements between Spain and the United Kingdom Government re-surfaced in July 2013, initially after the Gibraltar Government placed a number of concrete blocks in the sea off the coast of Gibraltar, intending to form an artificial reef. The Spanish Government protested however stating that it had a negative impact on fishing in the area, restricting access for Spanish fishing vessels. At the end of July the Spanish Government introduced extra border checks for people going in and out of the territory into Spain. The British Government protested as the checks were causing major delays of up to seven hours while people waited to cross the border, and on 2 August the Spanish Ambassador was summoned to the British Foreign and Commonwealth Office in London to discuss these developments.[87]

text: On 2 August 2013, Spanish Foreign Minister José Manuel Garcia-Margallo gave an interview to ABC newspaper in Spain. He announced possible plans to introduce a 50 euro border crossing fee for people going to and from Gibraltar, in response to the creation of the artificial Reef. Plans to close Spanish airspace to Gibraltar bound flights were also reported, as were plans for an investigation by Spanish tax authorities into property owned by around 6,000 Gibraltarians in neighbouring parts of Spain. The Spanish Foreign Minister also mooted plans to changes in the law meaning British online gaming companies based in Gibraltar would have to base servers in Spain, meaning that they would come under Madrid's tax regime.

text: The British Foreign office responded to these comments : "The prime minister has made clear that the UK government will meet its constitutional commitments to the people of Gibraltar and will not compromise on sovereignty."[88]

text: The effect of Brexit[edit]

text: After the United Kingdom voted to leave the European Union, despite a strong vote to remain in Gibraltar, on June 23, Spain reiterated its position that it wanted to jointly govern Gibraltar with the United Kingdom and said it would seek to block Gibraltar from participating in talks over future deals between the UK and EU.[89] The European council released a series of guidelines on negotiations for withdrawal, with core principal number 22 stating that any agreement affecting Gibraltar needed the agreement of Spain[90] suggesting that Spain had been given a veto while the United Kingdom re-iterated its commitment to Gibraltar.