"The party is over," Garcia-Margallo told the ABC newspaper on Sunday (4 August), referring to years of softer policy on Gibraltar under the previous Socialist government.
The minister said Spain was mulling a €50 border-crossing fee and tax investigations of thousands of Gibraltarians who own property in Spain. A border fee would affect tourists and Gibraltarians who cross the border for work.
Gibraltar has complained to the European Commission over what it says are unreasonable controls at the border, saying they violate European Union rules on free circulation.
Spain was also considering closing airspace to planes heading for the airport in Gibraltar and changing rules to wring taxes from on-line gaming companies based in Gibraltar, he said.
Spain disputes Britain's 300 years of sovereignty over Gibraltar, which is home to close to 30,000 people with an economy dominated by off-shore banking, internet gambling operations and tourism.
Gibraltar Chief Minister Fabian Picardo issued a statement attacking Garcia-Margallo's reported comments. The British Foreign Office said it would seek explanations from Spain regarding the measures it might impose.
"The statements ... are the most backward-looking and threatening since before the frontier closed and are clearly reminiscent of the politics and tactics on Gibraltar deployed by the fascist regime led by Franco in the '50s and '60s," Picardo said in a statement. He called the Spanish foreign minister's words "belligerent rantings."
The 1.2-km frontier between Spain and Gibraltar was closed for most of the 1970s and the first part of the 1980s due to the dispute over the status of the territory.
Under the previous Socialist government Spain softened its stance, discussing other issues without bringing up sovereignty while agreeing to give Gibraltar a voice in any talks with Britain over its status.
But the centre-right government of Spanish Prime Minister Mariano Rajoy has taken a harder line regarding its claim on the territory.
The latest tensions between Spain and the British territory began 10 days ago after Gibraltar boats began dumping blocks of concrete into the sea near the territory. Gibraltar said it was creating an artificial reef that would foster fish populations.
Spain said the reef would block its fishing boats and ramped up border checks, creating long lines at the border between Spain and the territory.
Picardo called for proportionate customs and immigration controls at the frontier, saying they had been excessive in recent days.