Galileo space project brought down to earth

Date: 08/03/01

By Laurence Frost

THE future of the EU's embryonic Galileo satellite navigation system will be thrown into question when finance ministers express serious concerns over the funding of the Union's largest-ever single project.

Gerrit Zalm of the Netherlands has written to fellow ministers ahead of their meeting on Monday (12 March) to voice doubts after industry leaders rejected the European Commission's call for private investment to cover almost half the €3.5 billion infrastructure bill.

"If there's really no alternative to building it with public money, do we really want to go ahead with it at all?" said a Dutch diplomat.

A political deal to launch Galileo - which is backed by the European Space Agency - is one of the Commission's priorities for the Stockholm summit on 23 March, after transport ministers failed to agree on the go-ahead with the EU executive at their last meeting in December.

There is no shortage of private sector volunteers for EU handouts to carry out infrastructure work including the design, assembly and launch of 30 communications satellites. Hearings organised by the Commission last month attracted a number of companies and consortia led by French giants Alcatel and Thales, along with Italy's Telespazio and Spain's Galileo Servicios - both set up to bid for the lucrative contracts.

But the firms also delivered a stern warning that they would invest their own funds in the project only on condition that the infrastructure was first provided by the public sector.

"We realised it was not going to be possible to get funding from the private sector - even on a fifty-fifty basis," said a Council of Ministers insider. "The bulk of the funding would have to come from the community - and of course this isn't going to be without implications for national budgets."

The project's backers say it will open up huge potential for innovation and job creation - as well as giving Europe a navigation system independent of the American Global Positioning Satellite (GPS).

But critics say the free availability of GPS makes it difficult to see how investments in Galileo could produce an adequate return.

Zalm's letter also questions the accuracy of the €3.5 million budget estimate, which does not allow for the satellite mis-launches that experts say are inevitable. "Launching satellites is a very expensive hobby," the Dutch diplomat said. "Some people already think Galileo will cost more like €6 billion ."

France, Spain and Italy are now keen to include Galileo on the Stockholm agenda. But the UK and Germany are understood to share the Netherlands' view that more conditions will have to be met before a political commitment can be made.

Ministers are also concerned that Commission plans to hand control of the infrastructure project to the contract-winning consortium could undermine governments' influence on spending and technical decisions.

"We want to ensure that the project is financially robust," said another EU diplomat. "Signs from the private sector have not been entirely positive - and we will be approaching the Ecofin discussions from that perspective."

Insiders say talks broke down under the French presidency last December when Transport Commissioner Loyola de Palacio refused to accept the tough financial reporting and monitoring obligations contained in a draft text approved by ministers.

The future of the EU's embryonic Galileo satellite navigation system will be thrown into question when finance ministers express serious concerns over the funding of the Union's largest-ever single project.