Galileo contracts give boost to delayed project

"With this and the upcoming awards for the remaining procurement packages, we are concluding a critical phase of the Galileo programme," he explained.

"We can now focus on the actual roll-out and demonstrate to European citizens that Europe's own satellite navigation system is firmly underway."

Galileo is the EU's answer to the US Global Positioning System (GPS), widely deployed in a broad range of navigational devices such as those used by drivers to find street directions.

Under Thursday's announcement, German space technology company OHB-System AG edged out larger rival EADS Astrium to secure the €566 million contract to build the first 14 of a maximum of 32 satellites needed for the system.

With the first satellites set to roll off the production line in the second half of 2010, the commission said the two companies would continue to compete for the remaining production tenders.

French company Arianespace was awarded a €397 million contract to launch the satellites, to be carried out using Russian-built Soyuz rockets.

System support to pull the whole project together will be provided by Italy's Thales Alenia Space, under a contract valued at €85 million.

History of setbacks

The important deals, to be signed by the companies and the European Space Agency on behalf of the commission in the coming weeks, will be welcomed by EU and member state officials working on the Galileo project, whose history has been dogged by both financial and political hiccups.

Having overcome initial US concerns that the rival project could be used to attack its armed forces, the project suffered a major setback in 2007 when the public-private partnership designed to develop and run the European initiative collapsed.

A subsequent decision by member states to finance Galileo solely from the public purse helped save the project, but also substantially increased the cost to the taxpayer, initially pencilled in at €1.8 billion but now likely to run closer to €5 billion.

Despite the greater than anticipated strain placed on public coffers, EU governments expect the project to reap considerable gains for the European economy.

Insisting that the project was currently in line with spending forecasts, Mr Tajani refused to rule out the possibility of an eventual overrun.

"I cannot tell you that we will not run over cost because of the increase in the price of the rocket launchers," he told journalists.

The EU has been keen to stress Galileo's role in complementing rather than competing with existing satellite navigation systems.

"We want Galileo to be an international system," said Mr Tajani, stressing its compatibility with the US's GPS and the ongoing discussions with other countries including Russia and China.