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ESA needs to 'tighten the belt' amid budget crisis

Posted: June 8, 2010

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The European Space Agency's spending freeze is not delaying missions yet, but all options will be on the table as the cash-strapped agency prepares for even tighter budgets in 2011 and 2012, the organization's top financial official said.

Ludwig Kronthaler, ESA's director of resources management, said the space agency should have enough money to avoid a moratorium on contract signings this year. But more serious consequences may be in store for the next two years.

"For 2010, I don't see a huge problem in the budget," Kronthaler said. "But it's clear we have to prepare ourselves that 2011 and 2012 might be tighter."

ESA is freezing spending for 2010 and 2011 at last year's level of 3.35 billion euros, or $4 billion. The space agency's budget remains higher, but ESA's expenditures will be stretched out through contract modifications.

"The payment profiles will no longer be as front-loaded as they were in the past," Kronthaler said in an interview with Spaceflight Now. "I assume that industry would prefer a contract which is not as front-loaded as it was in the past, than not having a contract. We don't intend to reduce the speed of implementation, but try to shift the payment profiles to the right, so that we can go ahead with the normal program implementation without reducing industrial activities."

But Kronthaler cautioned ESA's 18 member states are still evaluating their budgets, and he wouldn't rule out some delays to the agency's missions.

"The limiting factor will be in the second half of the year when the member states are taking stock of their budget situation, and then we have to see how we might have to also stretch the implementation speed, but this is not the subject for today," Kronthaler said.

European governments are suffering from mounting budget deficits, sending a wave of concern some ESA member states could fall into default.

"This is an exercise which is permanently ongoing, but now we have a new focus to maybe even take measures which might be not so popular," Kronthaler said.

According to Kronthaler, there is already a gap in funding from member states in 2011 and 2012, but that is not uncommon.

"It's clear that when we start to discuss the member states about the budget of 2011, we also need to take into account the 2012 situation," Kronthaler said. "We all know the alternative plans of our member states. In the end, of course, we have to comply with the affordability. There's no way out if our member states say we have to reduce the implementation speeds, but we are not yet there."

No member states have explicitly indicated their intentions to reduce contributions to ESA, and France is planning to boost its funding by 12 percent.

"But it's clear we have to tighten the belt," Kronthaler said.

The Meteosat Third Generation weather satellites, a troubled program mired in controversy, could be the first target for ESA's money-saving efforts. The MTG program is managed by the Eumetsat weather agency, but ESA oversees the satellite contracts and provides about 25 percent of its funding.

ESA selected Thales Alenia Space and OHB Technology to build the satellites, but the production contract is still bogged down by Germany's complaints about the distribution of MTG work between France and Germany. Thales Alenia Space, based in France, would be the prime contractor under ESA's decision, beating out Astrium of Germany.

Eumetsat's program board is expected to approve the project this summer, potentially clearing the way for a contract signing.

Kronthaler said the delays in finalizing the MTG contract gives ESA some leeway in altering payment plans.

"The biggest example would certainly be MTG, where we have room to act," Kronthaler said. "Because in contracts which are existing, I would not like to step in to look at renegotiation because that could always create additional costs."