As delays and cost over-runs piled up, EU transport ministers who gathered in Luxembourg also put off tackling the delicate question of where the new taxpayer money will come from, according to conclusions from the meeting.

While the project is intended to be a shining example of European technological cooperation, it has become a growing embarrassment amid bickering in the private consortium building it and member states trying to push their own industrial interests.

Agreeing that the project "would need additional public funding" to be operational by 2012, the ministers stuck the European Commission with the tricky task of working out financing details before their next meeting on October 1 and 2.

Although the scheme, which is supposed to create a European rival to the free, military-run global positioning system (GPS) in the United States, is deeply mired in trouble, the ministers rallied behind it as a "key project for the European Union."

Describing Galileo as being of "colossal importance" to Europe, German Transport Minister Wolfgang Tiefensee told a news conference: "We must prove our worth in this field of technology in competition with the United States, Russia and Asia."

While Europe has dithered over Galileo, Russia and China have been working hard on getting similar projects into the sky and at the same time the United States is updating GPS, which is already used widely in boats and planes.

Urging EU governments to show "flexibility" on financing, Tiefensee said: "We need a large degree of willingness to move towards one another to find a solution."

Under the original plan, public money was supposed to pay for the first four satellites and then the private consortium companies building the satellites were to pay for two-thirds of the 26 remaining satellites.

The companies -- AENA, Alcatel, EADS, Finmeccanica, Hispasat, Inmarsat, TeleOp and Thales -- were to cover their investment costs by then operating the satellites and collecting the fees once they were in operation.

However, after successive deadlines were missed as the companies argued over their share of the pie, the European Commission recommended a shake-up to member states last month that would see the whole project financed with public money.

The companies, increasingly worried that future fees may not cover their investment lay-outs, have welcomed the idea, hoping that they would be retained in future tenders on a more classic basis as private contractors.

EU Transport Commissioner Jacques Barrot said: "We want the private sector to continue to be involved to the develop the applications."

"Obviously there is a financial problem but I simply can't believe that Europeans and their governments can't find a solution to those problems," he added.

Funding the project entirely with public money would mean that the EU will have to cough up an additional 2.4 billion euros (3.2 billion dollars) over the 2007-2013 period on top of one billion already earmarked for Galileo.

The European Commission is promoting the idea of using unspent money in the EU's joint budget and which is usually given back to member states in the form of credits, although some countries including Germany are not keen on the idea.

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