EU agrees public funding for satellite project

By Paul Taylor and Jeff Mason

BRUSSELS (Reuters) - European Union nations clinched a deal late on Friday to fund an ambitious satellite navigation project to rival the U.S. Global Positioning System using unspent cash from the EU budget, a presidency spokesman said.

The Portuguese spokesman said budget ministers agreed to finance a 2.4 billion euro ($3.55 billion) shortfall in start-up costs of the Galileo system by redeploying unspent money for farm subsidies and competitiveness projects.

"We have an agreement. All the money was taken out of unspent funds, mostly for agriculture," he said.

An EU diplomat said Germany, the biggest net contributor to the 27-nation bloc's coffers, voted against the agreement but was outvoted.

The presidency spokesman confirmed the decision was not unanimous but declined to comment on who had voted against it.

The deal came after the European Commission proposed redividing the tenders for Galileo in a bid to meet German demands that no one aerospace firm should dominate the project.

The EU executive warned it would have to drop the prestige industrial project if there was no agreement among member states on public funding by the end of this year.

Supporters say it is a vital technological platform for Europe, but critics say it could be a costly white elephant because the U.S. system already has a dominant market position and Russia and China are working on their own systems.