The European Commission has given the eight companies picked to build and run the Galileo satellite navigation system until 10 May to create a single company and choose a chief executive.
The commission is concerned about slipping deadlines and a lack of coordination for Galileo, planned as Europe's answer to the US's global positioning system (GPS). But it remains vague about what it would do if the companies fail to meet the deadline.
"If there's no reaction in time then we'll have to look for alternative solutions," said commission spokesman Michele Cercone. "We'll talk about the alternatives after 10 May if the deadline is missed," he added.
Earlier this week, Jacques Barrot, commissioner for transport, wrote to the companies warning them that there was "a risk to the delivery of the project on the timeline that we envisaged". He added: "We have to fear significant cost increases which could go well beyond the foreseen budget."
Galileo was supposed to be up and running in 2010. However, 2011 now looks more realistic, Cercone said, but added that the launch could slip further. "I do not exclude that we will have to revisit some fundamental aspects of our earlier assumptions and approach," Barrot added.
Cercone denied that this meant stripping the companies of their contracts. "There are worries but there still is time," he said.
"The companies just have to accelerate their work," he said. The commercial viability of Galileo was questioned late last year when it emerged that a satellite system being developed by China would compete with Galileo in some commercial markets. However, the commission denies that this has anything to do with the current problems besetting Galileo.
"There's absolutely no linkage here," Cercone said. "There is a degree of complementarily between the different systems that exist and ones that are being developed by Europe, China, India and Russia. It is potentially such a huge market that there will be space for all actors," he added.
He likened the satellite navigation market to the market for mobile phones which emerged in the 1990s. "Satellite navigation could become as useful to daily life as mobile phones and there are numerous operators in that market," he said. The companies in the Galileo consortium are EADS, the Franco-German parent of Airbus, Thales Navigation and Alcatel-Lucent from France, Inmarsat of the UK, Italy's Finmeccanica, Aena and Hispasat from Spain and a German joint venture led by Deutsche Telekom.
Galileo is intended to be a more accurate version of the GPS system currently in use around the world. It is also intended to be for purely civilian use. The GPS system can be shut down by the Pentagon when the US military needs it.