This is totally unexpected and quite extraordinary. Either the EU does not understand the relevance of Gibraltar to British history and the strength of feeling there regarding remaining British, not Spanish. Or the EU does understand and wants these negotiations to get very nasty very quickly.The EU have said no agreement on the EU's future relationship with the UK would apply to Gibraltar without the consent of Spain. Gibraltar has accused Spain of manipulating the European Council for its own political interests.
If the EU does not back down, this could derail the negotiations before they get started. The EU has no right to intervene in the dispute between the UK and Spain over Gibraltar.
My own gut reaction to this is to threaten to simply walk away from the negotiations and withdraw security and intelligence co-operation with EU. Great big middle finger.