By Jeremy Lovell

BRUSSELS, Aug 29 (Reuter) - The European Union is facing a

dilemma after the collapse of five months of detailed talks

about access to Moroccan fishing grounds.

Is it time for a complete review of its relations with Rabat

or should it continue to try and build better ties with an

important southern neighbour?

The collapse of talks on Monday could not have come at a

worse time for current EU president Spain whose boats are the

most affected, or for the 15-nation bloc which is trying to

negotiate a trade deal with countries on its southern flank.

Announcing the breakdown, European Fisheries Commissioner

Emma Bonino threw her hands up in the air in frustration and

told reporters she would recommend to her fellow Commissioners a

thorough review of trade and political ties.

"I don't have other gestures to make," Bonino said. "I am

going to...propose to the Commission that it make a full

examination of relations between the EU and Morocco."

But Morocco, which has informally applied to join the bloc,

remained defiant on Tuesday.

"We regret that certain EU officials found it necessary to

make declarations on this subject," Foreign Ministry spokesman

Ennahdi el-Idrissi told the official Moroccan news agency MAP.

"As a matter of fact, these declarations only led to

confusion and will not help in any way achieve a definitive

solution to this problem.

"Morocco, which remains ready to honour its traditional ties

with the European Union, nevertheless refuses to have a solution

dictated to it under threats as it will not allow itself to be

influenced by the blockades imposed by some Spanish fishing

organisations which we believe are counterproductive," he said.

The Union is in the throes of negotiating a major trade and

cooperation deal with Morocco as it attempts to piece together a

Euro-Med free trade area involving 12 of the non-EU countries

around the Mediterranean.

The 12 -- Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon,

Malta, Morocco, the Palestinian autonomous territories, Syria,

Tunisia and Turkey -- and the EU will meet in Barcelona at the

end of November to launch the process.

The eventual aim of the EU initiative is to build a wall of

security around its southern borders in the face of a rising

tide of fundamentalism particularly afflicting Morocco's

neighbour Algeria as well as Egypt.

It is a process that looks likely to be dogged by disputes

both among the 12 and with the EU, and it is an inauspicious

sign that even before it has started the bloc has fallen out

with one of its more friendly participants.

Underlining the importance of Morocco to the EU, and

specifically France, President Jacques Chirac's first foreign

visit was to Rabat.

"It illustrates the very special attention which France

means to give to Morocco, a privileged partner due to history,

use of the French language, economic and human potential and its

moderating role in international diplomacy," Chirac's

spokeswoman Catherine Colonna said during the visit last month.

Whether Brussels and Rabat let the dispute over catch quotas

for squid and octopus sour their relations -- as suggested by

Bonino -- or whether they put fish to one side and concentrate

on broader issues -- as suggested by Idrissi -- depends on how

important each sees its relationship with the other.

REUTER