Spanish bureaucrat Pablo Garcia-Berdoy allegedly angrily compared British rule over the Rock to that of the Soviet Union’s grasp on East Germany when he lambasted German diplomat Michael Clauss.
The hostility erupted during a meeting of EU ambassadors on Tuesday, according to accounts of diplomats who were present.
Spanish permanent secretary Mr Garcia-Berdoy is said to have raised his voice at his Berlin counterpart when Mr Clauss pleaded with Spain to sign the agreement despite their hesitations over Gibraltar.
According to one diplomat who witnessed the incident, Mr Garcia Berdoy responded by comparing Gibraltar to East Germany.
The Spaniard said: “We supported the unification of Germany as an act of solidarity.
“Where is the solidarity with us now?”
Spain have raised last minute objections to the deal agreed last week over the future relationship with Gibraltar and accused the UK of acting with treachery over the territory which has been under British control since 1713.
The furious exchange comes as another Spanish EU minister accused Britain of acting “almost with treachery” over a Brexit deal on Gibraltar.
Luis Marco Aguiriano, Spanish minister for European Affairs, launched the attack on Theresa May as Madrid fears it will be excluded from future negotiations on the territory which it still lays claim to.
He said Spain still needs “guarantees we can go on with this model”.
Mr Aguiriano told the BBC: “We are asking for an article that is put on the table to be included in the Political Declaration on the future relations.”
The last minute intervention has caused fractious divisions with Spain and the EU which was ready to seal the deal at a special leaders summit on Sunday.
The entire Brexit deal is now on the brink of collapse after it emerged EU sherpas meeting today to finalise their side of the political declaration failed to reach an agreement because of Gibraltar.
Last night, Spanish Prime Minister Pedro Sanchez threatened to “veto Brexit” plunging the previously agreed settlement into doubt.
He said: “Our positions remain far away.
“My Government will always defend the interests of Spain.
“If there are no changes, we will veto Brexit.”
EU officials have made their frustration with Spain clear and Brussels spokeswoman Margaritas Chinas confirmed the bloc’s “work is continuing” as Spain tries to reopen the negotiations.
Another senior diplomat said: “We’re not quite there yet but there is light at the end of the tunnel.”