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EU sees public money saving Galileo from drifting off course

Brussels, Belgium, 11 May 2007: The European Union sought Thursday to save its troubled Galileo satellite navigation system project from crashing, with new plans to use public money for its construction. A consortium of eight companies was originally to pay for two-thirds of the construction and launch of most of the 30 satellites required, while covering the cost of the investment by operating the network afterwards.

The official sources said, the European Commission and EU member states are being forced to reconsider the original financing plans as the companies demand more public support in bearing the risks and costs.

With China making strides with its own “Beidou” satellite positioning system, pressure is growing on the EU to avoid further delays to the programme, which was intended to rival the United States free global positioning system (GPS).

“The matter is urgent, since Europe faces global competition as a base for technology,” German junior minister for aerospace policy Peter Hintze said. Although the project is becoming more of an embarrassment than a showcase for European technological prowess, European Commission spokesman Michele Cercone insisted that full public funding did not amount to a costly bailout. “This scenario will not require taxpayers to put (in) more money, but is the scenario that would protect best taxpayers,” he said.

The European Commission had given the consortium comprising AENA, Alcatel, EADS, Finmeccanica, Hispasat, Inmarsat, TeleOp and Thales until Thursday (May 17th ) to come up with plans for sorting out the mess.

However, Cercone said that since their proposals were “far from being sufficient,” the next best option seemed to be simply using public money to build the satellite network. “It would be less expensive to take the entire construction of the infrastructure to the public authorities than to guarantee 100 percent of a private loan at the market value” as the consortium wanted, Cercone said.

The construction was originally expected to cost 1.5 billion euros (2.0 billion dollars), but the EU’s executive arm and member states will likely have to cough up an extra 2.4-2.6 billion euros if public money is to pay for it, according to the Commission. If public bodies took over the financing of the project, it could be kept on course to be up and running by the end of 2010 or 2011, he said.

A source at the Commission, speaking on condition of anonymity, said that “there will be new tenders” for building the satellites as well as for their commercial operation and that the companies were still willing to play a financing role once after getting a return on investment.

Inmarsat spokesman Chris McLaughlin said the project became trickier for the companies when the competing consortia were forced to merge their bids last year.