José Picardo's Public Library

The dispute between the Gibraltar government and London over drug smuggling and alleged money laundering from the colony appears to have been resolved. The Foreign Office had held out the threat of direct rule from London if Gibraltar did not "clean up its act". The issue had also damaged relations between Britain and Spain.

Since an effective ultimatum from the then Foreign Secretary, Douglas Hurd, Gibraltar has clamped down on smuggling and is enacting legislation to bring banking standards into line with European law.

"We are pleased with the Gibraltar government action," a Foreign Office spokeswoman said yesterday. "Work is still continuing on legislation to implement outstanding EU directives on some financial and banking issues." But Britain is not satisfied with the Spanish response to the moves, pointing to continued delays at the border which the Foreign Office believes to be unjustified.

Spanish authorities concede that the clampdown on drug and tobacco smuggling via Gibraltar is "very effective" Since Gibraltar introduced anti-trafficking measures just over two months ago "there has been practically no contraband coming to Spain via Gibraltar," said Lieutenant-Colonel Mariano Jorge, head of the Civil Guard in Algeciras, responsible for the coastline adjoining the Rock.