Berlin and Rome have failed to settle the dispute in a new round of talks on the system, named Galileo, ESA spokesman Franco Bonacina said in Paris, confirming a statement given Monday by the German government.

The rivalry threatens to delay the 2008 date to have the global network of 30 satellites, plus ground stations, operational.

The project, in the pipeline since the late 1990s, is budgeted at 3.6 billion euros (dollars).

The ESA's members have already agreed to base Galileo's design and testing headquarters in Brussels, but the location for its manufacturing base -- and the accompanying lucrative contracts -- remains up for grabs.

Germany insists that, under current plans for it to fund 25 percent of the cost of the system, it should take up the reins of Galileo, or have its contribution cut accordingly.

But Italy, which feels it is under-represented in EU institutions, has lobbied hard to become chief of the project.

The United States, which has long sought to hinder the Galileo project, is likely to welcome the European upset.

Its Global Positioning System (GPS) remains the sole such network in the world.

Although it has become a widespread standard for civilian users on the roads, in the air and at sea, it was originally designed for the US military to pinpoint the position of soldiers and targets.

As such, Washington is able to block GPS signals in conflict zones to all but its forces -- an key monopoly advantage it would lose if Europe launched Galileo.

SPACE.WIRE