The agreed public-private financing plan for Europe's multibillion-euro satellite navigation system, Galileo, "cannot work", the European Commission said. The companies chosen to build and operate Galileo are supposed to cover around two-thirds of the estimated €2.3bn (£1.5bn) cost of launching the satellites into space.
The consortium is made up of European aerospace giant European Aeronautic Defence and Space Company EADS, France's Thales and Alcatel-Lucent, Britain's Inmarsat , Italy's Finmeccanica, Spain's Aeropuertos Españoles y Navegación Aérea (AENA) and Hispasat, and an eighth member that includes Deutsche Telekom and the German Aerospace Centre.
But with doubts about Galileo's commercial viability growing, the consortium members have been reluctant to set up a company to manage the project. In March, the Commission gave the companies until 10 May to set up a single chain of command with one chief executive to manage Galileo. But the Commission has already reached its conclusion: "Our current view is that Galileo cannot work under the current mandate," said Commission spokesman Michele Cercone.
Earlier, German transport minister Wolfgang Tiefensee told a news conference: "I have very little hope that we will come to an agreement (with the consortium)."
The Commission's latest proposals for Galileo are due to be unveiled on 16 May, but Cercone laid out the broad message: the public sector will have to fund more, or even all, of the cost of building and launching the satellites.
"We have to analyse other solutions. We don't think the current scenario will have Galileo working as we want it," he said.
Under the existing financial plan, European taxpayers are supposed to cover the initial €1.5bn (£1bn) cost of designing and building the satellites. After that the consortium is expected to invest two-thirds of the €2.3bn (£1.5bn) needed to launch the satellites, with taxpayers covering the remaining third of the launch costs.
In addition to getting cold feet about investing in Galileo, the companies are also fighting among themselves over how to split up the work.
However, the main concern is that with China and Russia advancing fast with their own satellite navigation system, and with the US Global Positioning System being upgraded, Galileo will face much stiffer competition for commercial contracts.