updated 6/8/2007 7:32:16 AM ET 2007-06-08T11:32:16

European Union governments on Friday threw a lifeline to the problem-plagued Galileo satellite navigation system, deciding to fund it themselves and abandoning earlier plans for most of the costs of the multi-billion project to be carried by major European businesses.

The project was envisaged as a rival for the U.S.-run GPS system and touted as a key high-technology venture for the EU.

But it stalled after the group of eight companies from France, Germany, Spain, Britain and Italy that were charged with developing the system disagreed on how to share out work and failed to make headway.

“Ministers decided to abandon the public-private partnership and start again from scratch,” said European Commission transport spokesman Michele Cercone.

Public funds were originally set aside to cover about one-third of Galileo, with the private sector penciled in to provide the rest. The total price tag has been estimated at between $4.59 and $4.86 billion by various EU institutions. The cost would rise should the project suffer more delays.

A German official said that if the EU had stayed with the consortium, the construction phase of the project would have cost $2.7 billion more.

Galileo would comprise a network of 30 satellites beaming radio signals to receiving devices on the ground, helping users pinpoint their locations.

A final decision on exactly how to finance Galileo is likely to be made later this year after Portugal takes over the six-month rotating EU presidency from Germany. It was yet to be decided whether the private sector would have any role in the construction phase of the project.

Only one of Galileo’s satellites has been launched, in December 2005. The second satellite missed its autumn 2006 launch date after it short-circuited during final testing.

The GPS system has 24 satellites.

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