Galileo May Need ‘Too Big to Fail’ Label To Overcome Financial Hurdles

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BRUSSELS, Belgium — Europe’s Galileo satellite navigation system, now confronting the financial trouble its backers have known was coming for two years, might need to be labeled “too big to fail” in the manner of the U.S financial institutions that were saved from ruin by government cash, a European parliamentarian official said Oct. 26.

Edit Herczog, a member of the European Parliament’s committee on industry, research and energy, said brandishing the threat that Galileo would simply be shut down before it reaches operational status may be the only way the project can win the financing it needs.

Herczog said many parliamentarians want the negotiations on the 2011 European Commission budget to include guarantees for 2012 and 2013 that protect the Galileo project and are willing to stand firm against Europe’s finance ministers, who are already pleading empty pockets when it comes to fresh Galileo aid.

“We are not going to close the 2011 budget without clear ceilings for 2012 and 2013,” Herczog said here during a two-day conference on Europe’s space policy, organized by Business Bridge Europe. “The show must go on. Do you think a minister would be willing to stand up and say he is ending the project? The fact is that if it is too big to fail, then it can’t. This is something we can build on.”

Galileo as planned is a constellation of 30 satellites in medium Earth orbit to provide positioning, navigation and timing services worldwide, similar to what the U.S. GPS system does today. The program has repeatedly been on shaky financial ground, and at one point was saved by an unusual — and still-debated — maneuver that included moving surplus agricultural support funds to cover Galileo’s most urgent funding needs.

Currently only 14 Galileo satellites are under contract, plus four more test vehicles that are so late — launches are scheduled in mid- and late 2011 — that they may now be incorporated into the operational network. The program has yet to secure financing to launch four of the 18 satellites, and money to field the rest of the constellation is, for the moment, nowhere to be found. Similarly, the full ground network has yet to be built because of financial constraints.

The European Commission wants these first 18 spacecraft, which will provide a rudimentary service but nothing like what was promised, in orbit in 2014. The rest will be launched as funds are made available.

But the current financial crisis has caused some European government officials to consider once-heretical ideas including seeking a non-European rocket to launch the satellites, and making do with a constellation of perhaps 24 spacecraft.

The European Commission has floated proposals that Galileo be removed from the European Union’s books and placed in a separate fund that could be fed by individual European governments. A bond issue has been suggested as well.

European Commission financial officials, still smarting from the beating they took when they saved Galileo by pulling funds from other commission projects, are saying that absent an event they cannot currently imagine, Galileo is not going to get more money, at least not before the commission’s next seven-year financial envelope takes effect in 2014.

Because of the seriousness of Galileo’s near-term funding needs, European Commission officials are loath to remind their 27 governments that, even before the first-generation constellation is fully in orbit, it will be past time to start financing maintenance and satellite replacement costs.

European Commission officials have estimated that it will cost around 800 million euros ($1.12 billion) per year to maintain the system, including the construction and launch of new satellites as old ones are retired.

Paul Verhoef, program manager for satellite navigation at the commission’s enterprise and industry directorate, said a reduced number of satellites would not enable Galileo to be used for safety-of-life services such as what is being proposed for commercial airlines.

Verhoef, who has been involved with Galileo long enough to be philosophical about the current problems, said: “What big space infrastructure program has not gone through multiple crises? This is not the moment to play a game of political chicken. We need to say to the world that under whatever circumstances, we will deliver on our performance promises.”

Verhoef, in remarks here Oct. 27, said it is always possible that the remaining Galileo satellites and launches and ground infrastructure will need to be put on hold until after 2014 and the start of the new commission budget cycle. But he noted that this would cause costs to increase further as companies now building Galileo spacecraft hardware would shut down operations and then have to restart them.

The European Parliament may be Galileo’s only real chance of finding fresh money anytime soon. The parliament, whose power to influence European Union affairs is increasing, theoretically could simply refuse to sign off on a 2011 budget until the Galileo issue is resolved. It is unclear whether sufficient parliamentary support for such a stance could be found. But it was the parliament whose refusal to abandon the project in 2007 forced a clash with European finance ministers that ended with the unusual financing scheme.