Blair and Aznar fail to break deadlock over Gibraltar

Tony Blair and Jose Maria Aznar, his Spanish counterpart, failed to break the deadlock over the future of Gibraltar yesterday but will try again by meeting three times in the next six weeks.

After a working lunch at Downing Street, the two leaders insisted the negotiations were not in "crisis" and sought to switch the spotlight on to plans to speed up European Union action to tackle the problem of asylum-seeking and illegal immigration.

But it was clear last night that a significant gap remains between Britain and Spain on two crucial unresolved issues in the Gibraltar talks. These are Spain's refusal to renounce its historic claim if the two countries agree on joint sovereignty and Britain's determination to retain its military base on the Rock.

Jack Straw, the Foreign Secretary, set alarm bells ringing in the Spanish camp yesterday by suggesting that any agreement with Spain might no longer be on the table if it were rejected by the people of Gibraltar in the referendum they have been promised. But later Foreign Office officials played down his suggestion, saying that any agreement would still stand. Mr Straw also said that there would a "long process" before any agreement was put to a referendum. The aim of the delay, which could last two years, would be to win over the Gibraltar people.

Although Mr Blair and Mr Aznar enjoy a strong personal relationship, they may struggle to reach an agreement before their target date of early July. The Spanish Prime Minister will return to London on 18 June for further talks, which will continue in the margins of the EU summit in Seville three days later. Mr Aznar and Mr Blair will meet again when they attend a G8 summit in Canada on June 26.

At a brief press conference at Downing Street yesterday, Mr Blair said: "Of course we discussed the issue of Gibraltar where we agreed that the talks would carry on and indeed they have been carrying on in a positive and sensible atmosphere and those talks will continue."

Mr Aznar described the talks as "fruitful", saying: "We know what problems still have to be resolved. We are also fully aware of the difficulties we all face in resolving those".

Officials said the two leaders spent more time discussing the problem of asylum, which will have a high profile at the Seville summit following the advance of anti-immigration policies in France and the Netherlands, after the recent elections, and in Denmark.

In a strongly worded letter to other EU leaders, released last night, Mr Blair said the measures agreed in 1999 to combat illegal immigration and criminal trafficking in asylum-seekers had become "bogged down". He warned: "We cannot let this impasse continue. It is politically imperative that Seville delivers a strong push".

He proposed the EU threaten to cut aid to other countries who are slow to take back asylum-seekers whose applications are turned down. "We should benchmark the performance of third countries and be willing to use the EU's economic and financial clout with those which are not co-operating."

He called for urgent action to strengthen the EU's borders:"We need to provide protection for genuine refugees while discouraging abuse and 'asylum shopping'."