Gibraltar's chief minister has accused Spain of "sabre-rattling like North Korea" after it threatened to impose sanctions on the Rock.
Fabian Picardo said Spanish foreign minister Jose Garcia-Margallo was being belligerent by threatening to charge workers almost £90 a day to cross the border.
Prime Minister David Cameron has also now weighed in, with Downing Street saying he is "seriously concerned" by the escalating row.
A spokesman said: "The Spanish have not raised the prospect of introducing border fees with us. We are seeking an explanation from them regarding reports that they might target Gibraltar with further measures."
Mr Garcia-Margallo had suggested a levy on workers travelling from Gibraltar could be used to help Spanish fishermen who have lost out because of damage to fishing grounds allegedly caused by Gibraltarian authorities.
But Mr Picardo told Sky News: "The 10,000 Spanish workers that come into Gibraltar every day, they would be on the hook for 100 euros - 50 in and 50 out - when they might earn less than that each day.
"I think this is quite a silly remark for the Spanish foreign minister to have made. He is sabre-rattling a la North Korea. It almost makes you feel like you are listening to the politics of Franco in the 1950s and 60s."