Europe is heading for the worst of all worlds in its high-minded determination to press ahead with Galileo, the satellite navigation system that it believes should rival the US Global Positioning System.

The European Union is paying too much (of taxpayers’ money) for an overcomplicated system that doesn’t yet work, in which private companies have refused to take part, and which may be overtaken by its rivals before it starts. In the deal thrashed out last week, and to be confirmed on Thursday, it is dividing the enterprise into six, not for reasons of engineering or competitiveness, but simply so that a slice can go to each of the main donors (one might as well use the vocabulary of development aid, as that is what the project is).

In conception, Galileo was not a disaster. It was sensible to think of developing a rival to the US system, given that the normal commercial dangers of losing that competition were always there. The best that can be said is that it has already prompted the US to improve GPS. But the EU’s decisions display its least commercial reflexes.

Galileo is a plan for a network of satellites to help those on the ground – from ordinary people, to commercial and military users – pinpoint exactly where they are. It arose out of a loose conviction among some EU countries that they would prefer not to rely on the GPS – devised for the US military, still its primary user. American retains the right to reduce or scramble the signal.

The plan is for Galileo to have a network of 30 satellites by 2013, beaming radio signals to receivers on the ground. Its advocates boast that it will be more precise than GPS – specifying position to the nearest metre, rather than 5 metres – and will fill gaps in coverage in far northern Europe. That’s the idea. But only one satellite has been launched, in 2005. Another, last year, short-circuited before launch. Critics say that the advantages over an updated GPS are illusory, and that Russia and China are also developing their versions.

Meanwhile, rows about funding have got worse. The original idea in 2003 was that eight private companies, including Britain’s Inmarsat, would share the work and meet two thirds of the total cost, thought to be at least €3.4 billion (£963 million) – taxpayers have already supplied €1 billion. But the group disagreed on how to divide the work, and how to share the risk with the EU.

The latest plan is that EU taxpayers will pay for it all – at least €2.4 billion more, although costs have risen at every stage. After all-day talks on Friday, EU members agreed to use leftover bits of the farming budget and some spare science and technology funds, to cover the shortfall. The deal is due to be agreed formally on Thursday in Brussels, at a meeting of transport ministers, for agreement in the budget on December 3, and formal approval at the next EU summit on December 14. If at any stage the deal falls apart, Galileo may be scrapped.

Britain and the Netherlands have insisted that taking unused funds from elsewhere should not set a precedent, and Germany that the work will be split into six, to help its companies to get a share.

The best option for Galileo would have been to get a simple version running and gradually to make it more sophisticated if demand warranted. By trying to fashion the world’s best system, the EU has bought one that has. literally, failed to get off the ground. It has not yet demonstrated that Galileo’s rescue is the best use of unspent funds.

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