Spanish patrol boats circled the tiny, mist-shrouded island of Perejil yesterday as Spain considered trade sanctions to persuade Morocco to withdraw troops from the disputed territory off its Mediterranean coast. Despite mounting calls from Spain and its European partners for Morocco to withdraw from the barren outcrop, Rabat insists that it set up an observation post on Perejil to tackle illegal migration and terrorism in the 20-km (12-mile) Straits of Gibraltar separating Spain from North Africa. Morocco deployed a surveillance team of up to a dozen soldiers and raised its flag over the uninhabited rock on Thursday. Government sources in Morocco said because of the three-day festivities for the wedding of King Mohammed it was unlikely any official response would be forthcoming before Monday. Spain's Secretary of State for Security Pedro Morenes told a news conference in Spain's North African enclave of Ceuta, some 6 km (4 miles) from Perejil, that he believed Rabat's silence was a sign it was reconsidering its position. I think this situation will be quickly solved because I understand that Morocco is quickly re-appraising the action it has taken and is going to correct it immediately, he said. Spain has sent a naval frigate to Ceuta and two corvettes to Melilla, a second Spanish enclave further along the coast, near the Algerian border. Madrid stopped short of claiming full sovereignty over Perejil - named after the wild parsley that grows on the island - but it has called for a return to the status quo. Relations between Madrid and Rabat have already been strained in recent months by acrimonious disputes over illegal immigration, drug trafficking and fishing rights. Spanish government sources said Prime Minister Jose Maria Aznar was in regular telephone contact with Foreign Minister Ana Palacio and Defence Minister Federico Trillo. They are still considering our next move, but there will not be anything made public until after the state of the nation speech on Monday, one official said. If Morocco refuses to withdraw its troops, sources familiar with the situation said Spain may suspend a 1991 bilateral cooperation and friendship treaty. It could then impose commercial sanctions in coordination with the European Union and tighten requirements for Moroccans entering Spain. If the problem persists, Spain could break off diplomatic relations and as a final resort Civil Guard troops could attempt to remove the Moroccan troops by force, the sources said. The European Union, meanwhile, toughened its stance toward Morocco's occupation of Perejil. A statement from the current EU president Denmark on behalf of the 15-member group expressed its full solidarity with Spain and called for Morocco to withdraw its troops immediately. European Union Commission President Romano Prodi also telephoned Moroccan Prime Minister Abderrahmane El Youssoufi on Saturday to express his grave concern. The Moroccan Prime Minister undertook to keep the situation under control without further escalation, working for a very quick solution, a European Commission press release said. The European Union is by far Morocco's largest commercial partner, with Spain accounting for much of that trade. Spain is also Morocco's biggest donor of foreign aid. Some 200'000 Moroccans live in Spain, while a further 1.5 million regularly pass through every summer on their way to Morocco from other European countries. Local residents say usually the only visitors to Perejil, a whitish barren rock some 200 meters (yards) off the Moroccan coast, are herdsmen who use it to allow the goats to graze. But a cave on the island is also rumoured to be a hideaway for smugglers trafficking people and drugs to Europe.