German Chancellor Angela Merkel speaks during a session at the lower house of parliament Bundestag in Berlin, Germany November 21, 2018. REUTERS/Fabrizio Bensch

BERLIN (Reuters) - Germany will back an agreement on Sunday on Britain’s withdrawal from the European Union, and hopes Spain’s objection to wording over the disputed British territory of Gibraltar can be resolved by then, Chancellor Angela Merkel said.

Spanish Prime Minister Pedro Sanchez said on Tuesday his government would vote against the EU’s draft Brexit agreement if the included text on Gibraltar was not changed.

Gibraltar is due to leave the European Union along with the United Kingdom in March, although 96 percent of its population voted in the 2016 referendum to remain in the bloc.

“We know how difficult the discussions are in Britain, but I can say for Germany that we will agree to this exit agreement,” Merkel told German lawmakers on Wednesday during a budget debate.

“We still have an objection in Spain. I can’t say exactly how we solve this issue, but I hope it will be solved by Sunday.”

The EU is due to hold a summit to discuss Britain’s draft Brexit deal on that day.

Merkel said her government regretted but respected Britain’s decision to leave, adding: “We want - and that is in our fundamental interests - to have a good relationship with Britain in the future too.”

On the Irish ‘backstop’, an insurance policy to avoid a return to controls between the British province of Northern Ireland and EU state Ireland, she said this presented a situation that was “very, very difficult to solve.”

“I think rightly, we have placed value on Britain not being able to decide unilaterally when it ends the customs union, but rather that Britain together with the EU defines this date and afterwards the future relationship comes into effect,” she said.