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Galileo pork punchup takes unexpected twist

UK, Germany in mutual backstab as Spaniards leap in

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Yesterday it appeared that the troubled Euro-collaborative sat nav project Galileo had finally achieved a way forward - but then reports of fresh disagreements surfaced.

The plan at the start of this year was for Galileo to be a public-private partnership, with business interests kicking in a substantial proportion of the initial investment in return for a chance to make money later selling sat nav services.

This fell through, however, because business could not foresee revenues that would justify any large contribution. It was feared that most commercial - and indeed many government - customers would simply use free services offered by the US military GPS system. Negotiations between the European Commission and industry broke down, and this left Galileo short of €2.4bn in funds.

In time a plan was proposed, whereby the missing cash would be found mostly from unspent farm subsidies. These funds would normally have returned to donor nations. The UK, Netherlands and Germany are the main paymasters of the EU, and would normally have expected that the bulk of this cash would return to them.

The three northern European nations initially resisted the EC plan, saying that the extra cash should be supplied by taxpayers but come instead via the European Space Agency. The ESA, despite its name, is not part of the European Union government.

Other countries such as France and Italy, expecting to pay very little and land lucrative Galileo contracts plus (in the case of France, anyway) reaping valuable benefits in terms of guaranteed military capability not dependent on US goodwill, continued to push hard for the EC plan.

Two weeks ago, Chancellor Merkel and President Sarkozy agreed to bilateral negotiations to try and hammer out an agreement. As of last week, it appeared that the UK and Holland had fallen into line with the EC funding plan, and Germany was the only holdout. Germany was said to be concerned that it was paying large, but not getting a fair share of the pork back.

The Financial Times reports today on the reasons why Britain yielded to the EC plan, despite the fact that the UK Commons Transport Committee said recently that it didn't really think Galileo was worth having.

"It became clear that countries were using the prospect of blocking the budget as a bargaining tool to suit their national industries in the procurement process to the detriment of our own," Kitty Ussher, a UK Treasury minister, told the FT.

Presumably this is meant to mean that Germany (and possibly the Netherlands) was saying "agree to give us more pork, and we'll drop our opposition, leaving the UK isolated". Ussher's comments appeared to suggest that the UK had secured lucrative deals in return for pre-emptively breaking ranks with Germany, though whether these would amount to more than the loss to the British Treasury from the farm subsidies not returned was unclear.

In the event it was Germany that ended up isolated, but nonetheless the Germans won concessions. After it was agreed that work would be divided into sixths, with no one country winning more than two, Germany also fell into line. It appeared the deal was done.

But then last night the Spanish suddenly kicked up, according to the FT. It seems that Spain feels it was promised a ground station, though one is already being buildt in Italy.

"After resolving the Franco-German dispute we now have a Spanish-Italian issue," said an EC official. "Spain could be offered something for the operational phase after 2013 but Italy is worried that that will undermine their own station. It will not be easy."

If the transport ministers meeting today in Brussels can't agree, the decision will be deferred until premiers meet next month. ®

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