Wednesday, October 17, 2007

Galileo should be financed through EU budget, says Commission

The European Commission has recommended that the European Community take complete responsibility for funding the deployment of Galileo, Europe's satellite navigation system, warning of the consequences of shelving the project.

Galileo is a joint EU-European Space Agency (ESA) initiative, and was to be financed through a public-private partnership. It will see a network of 30 Galileo satellites beaming radio signals to receivers on the ground, enabling users to pinpoint exact locations.

Unfortunately the companies within the Galileo consortium were unable to agree on how to share the financial risks involved in the project and so this method of financing the deployment phase was abandoned. Since the early summer, the Commission has been looking into alternative funding scenarios, which it presents in the communication 'Progressing Galileo: re-profiling the European GNSS [Global Navigation Satellite System] programmes'.

The Commission, Parliament and Council have rejected the occasional call for the project to be written off on account of its inherent costs.

'Failing to take the appropriate decisions on a European GNSS programme, Europe would decide to rely for the mid to long term on foreign GNSS signals with little to no control over quality, availability or price of the latter. In addition, the ensuing loss of resident European expertise on GNSS would be coupled with a major loss of macro-economic opportunities for European manufacturing and service companies,' reads the Commission communication.

Jacques Barrot, European Commission Vice President, reinforced this view as he presented the communication. 'I am still convinced that Europe needs Galileo,' he said.

The Commission suggests that the €3.4 billion that is needed to get Galileo up and running could come from Community funds, ESA, or the EU Member States. The first option is favoured by the Commission.

ESA is already financing half of the development phase of Galileo. This model could in theory be extended to the deployment phase, but the Commission finds three problems with this scenario:
- not all of the EU Member States are members of ESA, and vice versa. This raises the issue of material and immaterial property rights in relation to Galileo;
- ESA financing would conflict with the Community character of the programme as the Budgetary Authority exercises no control over the part financed directly by ESA member countries;
- co-financing has an impact on the public governance of the programme.

The funding could also come in the form of direct contributions from the EU Member States. These contributions could not be received in the form of loans however, as the European Community is not allowed to borrow. 'The possibility of setting up such contributions needs to be studied in much detail as no easy transferable precedent exists,' says the Commission.

The document goes on to state that 'for legal, institutional and programmatic reasons, the Commission considers that only the European Union, as owner of the system, should provide the additional financial resources'.

If these additional resources are however to come from the Community budget, the multiannual financial framework must first be revised. A proposal on how this should be done therefore accompanies the Galileo communication.

The inter-institutional agreement on budgetary discipline is designed so that additional money can be sought when 'unforeseen circumstances' arise. The failure of the negotiations on the concession contract within the private consortium constitutes such unforeseen circumstances.

The two proposals, on the financing of Galileo and the renegotiation of the multi-annual financial framework, will now be passed to the European Parliament and ministers, who should reach a decision on funding before the end of 2007.

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