Britain, Holland Oppose Galileo Bailout

The pair's confidential joint statement rejects public financing of the project for a European satellite navigation system

The European Union's planned satellite navigation system Galileo is in trouble. Agreement seemed to be reached Friday on bailing the project out with public money -- but now the UK and the Netherlands are arguing against that, according to a media report.

Those pesky pan-European aerospace projects just never seem to go smoothly. First Airbus ran into all kinds of turbulence. Now the European satellite navigation system Galileo -- planned as a competitor to the US Army's GPS system -- appears to be in danger of crashing and burning.

According to a report in Monday's edition of the Germany business daily Handelsblatt, the United Kingdom and the Netherlands have rejected financing the beleagured project with public money -- contradicting what had appeared to be a consensus reached at a meeting of European Union transport ministers Friday.

In a confidential joint statement obtained by the Handelsblatt, the UK and the Netherlands said they believed that financing the project with public money would "probably increase long-term costs instead of reducing them." In addition, the statement continued, public financing would "increase the risks for the EU budget." Other projects could suffer if Galileo needs more public money, they said. Both countries argued that a public-private partnership is the best approach for such large infrastructure projects.

However, EU transport ministers meeting Friday had apparently agreed to abandon Galileo's existing public-private consortium, after squabbling between the eight companies in the consortium led to delays and increased risks that the project would go over budget.

The next phase would be conducted using public money, announced German Transport Minister Wolfgang Tiefensee, who chaired the meeting -- without saying how exactly the project was going to be funded. Ministers said a final decision on funding would be made in early autumn after Portugal takes over the six-month rotating EU presidency from Germany.

In the light of the new British-Dutch statement, it is looking increasingly likely that the EU will fail to reach an agreement on how to go forward with Galileo. Even Tiefensee admitted Friday that the project -- seen as a key high-tech venture for Europe -- was not guaranteed to succeed. It could "not be ruled out that no agreement will be reached and that the project will fail," he said.

Galileo is intended to be a competitor to the existing GPS satellite navigation system, which is owned -- and ultimately controlled -- by the US Army. Galileo would have a network of 30 satellites and would more than double existing satellite navigation coverage as well as offering far more precision to users.

The price for the project has been estimated at between €3.4 billion and €3.6 billion -- a price tag which will rise if further delays occur. The launch, initially planned for 2008, will now probably not take place until 2012 at the earliest.

The project was originally intended to have purely civilian applications, but there has been a recent shift to considering potentially lucrative military applications in order to make the project more commercially viable.

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