Spain told Britain on Tuesday it must remove a concrete reef laid in the waters off Gibraltar before Madrid will agree to dialogue in a row over the British outpost.

Spanish Foreign Minister Jose Manuel Garcia-Margallo sharply criticised Gibraltar's laying of 70 concrete blocks to form the reef last month in disputed waters that were used by Spanish fishermen.

Spain is willing to restart a dialogue with Britain and will accept talks that include Gibraltar and the neighbouring Spanish region of Andalusia for issues relating to residents on both sides of the border, Garcia-Margallo wrote in the Wall Street Journal.

But he added: "It is first necessary for the UK to show that it intends to undo the damage that has already been caused, in particular by removing the concrete blocks."

The small self-governing enclave of Gibraltar, strategically placed at the mouth of the Mediterranean on Spain's southern tip, was ceded to Britain under a 1713 treaty, but Madrid has long argued that it should be returned to Spanish sovereignty.

London says it will not do so against the wishes of Gibraltarians, who are staunchly pro-British.

Britain shrugged off Garcia-Margallo's call, with a Foreign Office spokesman telling AFP that the Gibraltar government, not London, was responsible for environmental and fisheries issues.

The Gibraltar government says the concrete reef in the bay will regenerate marine life and argues that the Spanish illegally raked for shellfish in Gibraltar waters.

But Garcia-Margallo called the reef a "violation of the most basic rules of environmental conservation".

Spain has filed a complaint with the European Commission saying that the concrete blocks are in a conservation area, according to a summary of the complaint sent to AFP by the agriculture ministry.

Garcia-Margallo added that local fishermen who relied on the area for a quarter of their activity had been deprived of their livelihoods.

Spanish environmental campaign group Ecologists in Action says the laying of concrete blocks is a common practice off Spain's shores that allows the marine environment to regenerate and protects it from trawling.

In a statement on August 9 the group accused the government of using environmental issues to "justify the new conflict with Gibraltar".

A spokesman for the agriculture ministry acknowledged that Spain had built similar reefs off its shores to prevent over-fishing, but Spain "tried to avoid putting them very close to the shore" to protect boats' keels.

The European Commission said it was investigating a formal complaint by Spain that the reef breached EU environmental norms, a first step towards a potential "infringement procedure", according to spokesman Olivier Bailly.

Spain stepped up checks at the border with Gibraltar this month, creating hours-long traffic queues. Madrid said it was cracking down on smuggling but Britain accused it of using the border to retaliate over the reef.

The European Commission has said it will send observers to the border at the invitation of both Madrid and London.

Bailly told reporters in Brussels on Tuesday that the observers would provide EU "legal expertise" but would not address the issue of the reef, which it is investigating separately.

It is the latest in a string of diplomatic rows over Gibraltar, which measures just 6.8 square kilometres (2.6 square miles) and is home to about 30,000 people.

Critics said the row was fanned by Spain to distract attention from a corruption scandal that has engulfed the country's Prime Minister Mariano Rajoy in recent months.

Garcia-Margallo also protested against the refuelling of ships in waters off Gibraltar which he called a pollution threat, smuggling over the border from Gibraltar to Spain, and the "opacity" of Gibraltar's tax regime.

He said Spain had "no doubt" about its sovereignty over the waters around Gibraltar, arguing that they were never included in the 1713 Treaty of Utrecht under which Spain ceded the territory to Britain in perpetuity.