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The EU will back Spain over its territorial claims to Gibraltar in the next phase of Brexit negotiations by giving Madrid the power to exclude the British overseas territory from any trade deal struck with Brussels.

The Observer has learned that the Spanish government has insisted on reference to the Rock in the EU’s opening negotiating position, which will be published in draft form on Monday.

Boris Johnson will be presented with the choice of reaching agreement with the Spaniards about Gibraltar’s future or exposing its citizens to economic peril by pushing it outside any EU-UK trade deal.

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