Fresh funding wrangles embroil Galileo

Luxembourg: Galileo, the European rival to the US global positioning system (GPS), is now embroiled in a fresh round of dispute with some European countries threatening to reopen a divisive budget deal unless their companies are guaranteed business.

EU transport ministers are expected to agree this Friday to end negotiations with a private consortium and pay for the Galileo system with public money, but are caught up in a dispute as to where the extra €2.4bn ($3.2bn) would come from.

Most of the 27 member States insist on using the existing EU budget rather than raising fresh cash. This, however, would mean sacrificing some of the €70bn of other research and transport projects funded in the 2007-13 framework.

Germany, the union's biggest paymaster, is arguing for the money to be channeled through the European Space Agency (ESA), which ensures that companies in contributing States receive contracts worth 90 per cent of their payments.

But the eight non-ESA member states and France oppose Germany's argument on the ground that ESA, which was in charge of the early phase of the project, has mismanaged the whole affair. According to these members, the project needs to undergo competitive tendering by companies, allowing the best one to win.

This approach would also allow members of the original consortium, which won the contract in 2005, but failed to deliver, as its members were not sure whether the project would make money, to bid.

The original consortium consists of European aerospace group EADS, France's Thales and Alcatel-Lucent, Britain's Inmarsat, Italy's Finmeccanica, Spain's AENA and Hispasat, and a German group led by Deutsche Telekom.

EU finance ministers will discuss the matter at a meeting on Tuesday in Luxembourg with Jacques Barrot, the EU transport commissioner. EU countries have already spent €1bn on Galileo. An October summit of European leaders would then take the final decision.