Back in October Open Europe estimated, based on leaked reports from a couple of European governments, that the EU’s mismanaged Galileo project – aimed at creating a global satellite navigation system – was way over budget (and possibly ten years behind schedule).
Following the publication of our briefing and other reports in the media, the EU Commission hit back with Industry Commissioner Antonio Tajani himself denying – with a straight face – that the project was over budget in any way. In his words:
Tajani described the estimates as “exorbitant” and “unimaginable”, and insisted that the deployment budget (which is only part of the cost) remained at €3.4 billion.
In fact, as Mr. Tajani and the Commission finally admitted yesterday, the Galileo project needs not another €1.5-1.7 billion as we claimed, but an extra €1.9 billion of taxpayers’ cash to cover the booming deployment cost. At the same time, the Commission now puts the annual operation cost at €800 million (not €750 million as we foolishly thought).
Sarcasm aside, what’s going on here? Either Tajani lied to taxpayers back in October or he displayed extraordinary incompetence. We’re not sure what’s worse.
And it turns out that the leaked estimates were more or less spot-on (we’re now eagerly awaiting Tajani’s appearance on the Commission’s euromyths list for spreading ‘half-truths’, ‘rumours’ etc.)
Just to reiterate how badly managed this project has been from the very start. According to our under-estimates from October, the total cost of Galileo from start to completion, and then running it over a 20 year period, is a staggering €22.2 billion – a cost which will be borne entirely by taxpayers and which now has to be revised upwards yet again.
Under the original estimates (from 2000) this cost would have been €7.7 billion, of which only €2.6 billion was to be borne by taxpayers and the rest by private investors (the private investors pulled out in 2007, citing lack of commercial prospects). The project has been beset with delays and cost over-runs at every single stage of its history.
Perhaps it should come as no surprise, then, that even people who are benefitting from the project are raising doubts. According to American diplomatic cables, released by WikiLeaks (first revealed last week by Norwegian paper Aftenposten), Berry Smutny, the CEO of OHB Technology, a company that has a £475 million contract to build 14 Galileo satellites, is claimed to have said:
I think Galileo is a stupid idea that primarily serves French interests.
Mr Smutny also told US officials that in “his opinion the final cost [for the deployment cost] will balloon to around” €10 billion before all is said and done.
It’s not getting any better.
Tajani is now asking European governments to cough up yet more cash to cover the shortfall. Sensibly, the UK Government is saying No – and will probably be joined by several other Governments. And they are right. Not a single penny more should be given to the Galileo project until we see a final, robust analysis of what the project will finally cost relative to the benefits it will generate.
Of course, Tajani is keen to point out that the satellite is expected to bring €90 billion to the European economy over 20 years – and the project will no doubt result in benefits if it’s ever completed. But this has been revised down radically from the Commission’s ridiculous original estimate of €275 billion per year in revenues worldwide by 2020 (in addition to the equally delusional 3 billion users and the creation of 150,000 new jobs).
Forgive us for not quite trusting Tajani on this one.
#1 by Daren on January 19, 2011 - 5:33 pm
I imagine how much money it takes to support space research!
#2 by Betterworld Now on January 20, 2011 - 3:24 pm
We need a satellite guidance system and cannot continue to rely on the US military one we have now. Galileo will give us that. The alternative is that the private sector monopoly supplier that is the US military can switch off their system at any stage and hold us all to ransom. In 5 years time we will be entirely dependent of satellite guidance for everything from transport to surveying to building to navigation. By that stage €250billion will be the annual ransom, sorry operating fee, they will be able to charge us.
This is strategic infrastructure that can’t be provided by other means. Do you really want to pay ransom for it?
#3 by Hoover on January 22, 2011 - 8:22 am
Betterworld says: “This is strategic infrastructure that can’t be provided by other means. Do you really want to pay ransom for it?”
But the Commission told us we wouldn’t have to contribute anything more to the cost of Galileo after 2007.
Specifically, they said. “Guarantee of sufficient financing by 2007. Cost-benefit studies show GALILEO to be profitable and sufficiently attractive for public financing in the form of subsidies not to be needed after 2007.”
#4 by Betterworld Now on January 24, 2011 - 12:43 am
The Commission got its sums wrong … so what? It may even have lied about costs. Slap them with a fine or jail the liars … but don’t stop the project.
The Channel Tunnel cost more, the Panama Canal cost more, broadband roll out, High speed rail, the Court of Human Rights all cost more than originally thought. By your reasoning we’d have none of these now.
What evidence can you present to convince me that you are not a lobbyist for a US outfit with its sights set on collecting an annual ransom from the EU taxpayer?