Spain has agreed to allow European Commission observers to its border with Gibraltar to assess the legality of checks on traffic that caused a diplomatic row with Britain.
Three Royal Navy ships, led by frigate HMS Westminster, arrived at the British Overseas Territory for a routine stopover as Downing Street declined to rule out the use of retaliatory political action against Spain if the disagreement was not resolved quickly.
More than 40 commercial Spanish boats staged a protest over a controversial artificial reef off Gibraltar which sparked the disagreement and led to the border checks, which have led to hours of delays for those crossing into Gibraltar.
In a statement issued after the telephone call between the two politicians, the Commission said: "They agreed that a Commission fact-finding mission should as soon as possible examine in loco the border control / movement of people and goods questions. President Barroso expressed his hope that Spain and the UK will address these matters in a way that is in line with their common membership in the EU."
It has been reported that UK officials are examining the potential to disrupt Spain's lucrative tourist industry as well as blocking its policy initiatives at the EU.
Pressed repeatedly on the potential for such action, a Number 10 spokesman told reporters: "Our preference here is to resolve this via political means and through dialogue with the Spanish government. We clearly want to reach a quick resolution which is acceptable and brings an end to these totally disproportionate border checks." Asked if David Cameron was confident of securing a swift resolution, he said: "We will do what we need to do to bring this to a satisfactory conclusion."
A Gibraltar government spokesman said it welcomed the intervention of the EU. He said: "As far as we are concerned we feel that they (the border checks) are over the top and the British Government has said exactly the same."
In a statement posted online Mr Rajoy said he would like to see dialogue between his country and Britain and had invited Mr Barroso to send a delegation to Spain. But it added that Mr Rajoy told the EC president Spain was "exercising its legal duties by establishing random, proportional and non-discriminatory controls on the border".
"The Spanish president reiterated that the unilateral act of dumping blocks of cement into the waters of the bay of Algeciras by the Gibraltarian authorities is unacceptable and is a violation of environmental legislation," it said. "In this respect, he mentioned that the government of Spain already reported this violation of European environmental legislation when it took place to the general secretary of the EC. The government of Spain is waiting for the commission to reply. Additionally, Rajoy expressed the need to verify and control that economic activity in Gibraltar does not infringe European legislation relating to money laundering, contraband and taxation. The Spanish president has manifested that his government will apply legal measures in defence of Spanish and European legality and the interests of Spain and the Spanish people."