The satellite network will complement the US Global Position System, which was originally developed for military targeting and position finding. The European system was the first to be designed for purely civilian use.

The United States and the EU signed an agreement in Ireland June 26 to adopt common operating standards for the two systems.

Friday's decision was to build and launch satellites and build ground receiving stations following a three-year design and development phase, costing 1.1 billion euros (1.45 billion dollars).

Deploying the Galileo system will cost a further 2.1 billion eurosbillion dollars), with industry putting up two thirds of the investment and the commission one third.

The commission says the globe-girdling satellites will enable the development of new services in areas such as transport, the environment, agriculture and fisheries that are eventually expected to cover the running costs of the system, estimated at 220 million euros (290 million dollars).

Two consortia are fighting to obtain the contract to operate the system, and ministers were expected to decide on the winner by February next year. The Eurely alliance includes Alcatel, Finmeccanica and Vinci, while the iNavsat consortium comprises Thales, EADS and Inmarsat.

Jacques Barrot, a European Commission vice president, said Galileo was "without a doubt the most wonderful European technological project. We are now on the home straight."

He predicted it would be as great a technological revolution as mobile telephony.

"This venture shows how capable Europe is of making a united effort in pursuit of a common goal," he said.

European law already requires or envisages the use of satellite navigation to monitor shipping, operate electronic road toll systems and protect animals during transportation.

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