Galileo satellite project goes into orbit

Blair changes tune, supporting a £2bn European space system opposed by US military

Tony Blair is expected to sign up this week to a £2bn European satellite navigation system which is designed to rival America's dominance of space-age technology. After years of stalling over the costs of the EU's Galileo project – which would compete with the US global positioning system (GPS) – the Prime Minister is likely to throw his weight behind the scheme when he meets other EU heads of government in Barcelona on Friday.

Officials in Brussels say Britain has been reassured about the costs of the project and other specific objections are being addressed. The decision is likely to be greeted with hostility in Washington which opposes the development of an EU satellite system. But Mr Blair knows he may now have to accept Galileo under EU voting rules, and a shift this week could help win concessions from one of its backers, France, on other issues such as liberalisation of energy markets. "A trade-off between the two subjects is one possibility," one EU diplomat said.

An official added: "When you have opposed something and it becomes inevitable, it is always better to come on side and try to win concessions rather than being the Last of the Mohicans".

America's opposition to the European project has been set out in letters and statements, the most recent of which was issued last week. Galileo has also provoked divisions within the Cabinet in London, where the Treasury has taken a tough and critical line,

Along with Germany, The Netherlands and Denmark, the UK delayed Galileo, insisting on a consultant's report by PricewaterhouseCoopers to the European Commission. It estimated that the project would cost £800m to develop, plus a further £1.5bn to deploy through a network of up to 38 satellites, and that member states would have to fund the running costs in the early years because revenues would be insufficient.

But following a decision by the German cabinet to back Galileo, and a softening of opposition from Denmark, the project now has enough backing to go through under the EU's qualified majority voting rules, and could be agreed at a meeting of transport ministers later in the month. "There is no longer a blocking minority," an official said last week.

Spain, which holds the EU presidency, is desperate for a success story to announce at Barcelona, and needs Mr Blair's approval for the scheme. Germany and the UK have been reassured that the €3.2bn (£2bn) budget will not, in any event, be stretched further than €3.4bn, and promised regular reviews to check that costs are not escalating.

A British official said that the UK had backed the principle of the idea but is "very keen to get the detail right before giving it the green light".

The Government will be wary of European rhetoric, however, aware of the potential for worsening transatlantic tension. The transatlantic divide became apparent last year when the French President, Jacques Chirac, claimed that Europeans risk "vassal status" if they abandon Galileo and other space projects. The chairman of the US military joint chiefs of staff claimed Galileo could compromise Nato security.

Under discussion since 1994, there has also been an intense debate about the economics of the Galileo project. Critics say it will never make a profit, but the European Commission points to the massive potential of the spin-offs it could create. More than 100 commercial applications have been identified, from direction-finding systems for cars to the dispatch of information about local shops and services to consumers through receivers built into their mobile phones.

Other technical problems the UK has voiced include how private companies would be involved with the project's first stages, and the extent it would favour them in later development.