Spain is threatening a ‘congestion charge’ on traffic crossing the border with Gibraltar as relations with Britain worsen.
The move follows Britain rejecting a call by Spain to hold one-on-one talks over sovereignty of the contested British Overseas Territory.
The EU warned Spain that any move to impose a tax at the border would be deemed "illegal".
Madrid had said a 50 euro frontier levy and a ban on Gibraltar aviation traffic from using Spanish airspace were measures under consideration, reports the Daily Telegraph.
But Spain may get around this by imposing a London style "congestion charge" on frontier traffic in La Linea de la Concepcion which would comply with current EU legislation.
Jose Manuel Garcia-Margallo, Spain’s foreign minister, declared that bilateral negotiations over sovereignty "have been on hold for too long" as the diplomatic row threatened to escalate further.
But a spokesman for David Cameron, the Prime Minister said Britain would not enter into any such talks.
Six hour tailbacks hit the Spanish/Gibraltar border last month after Spanish customs officers stopped thousands of vehicles trying to leave Gibraltar, see previous story.
