COMPLETION OF Madrid's E4bn (£2.7bn) ring road was hanging in the balance last month after the European Commission threatened to pull the plug on funding.
The commission has advised the European Investment Bank (EIB) to withhold a £1.04bn loan for the scheme because Madrid city council failed to carry out an environmental impact assessment (EIA) before starting work.
Construction on the project to put large sections of Madrid's M30 inner ring road into tunnel began in September 2004 and was scheduled to finish in May next year (GE March 06).
It is one of Europe's most challenging tunnelling jobs, with 82km of the 100km of highway works in tunnel.
But work may not be completed because of the council's failure to carry out an EIA, a requirement for all major infrastructure schemes under European Union law.
'This is a major project and represents a serious breach of EU law, ' said Javier Ruiz-Tomas, deputy head of the European Commission's environment desk.
'It's hard to understand why the Environmental Impact Directive wasn't applied.'
The commission has written to Madrid council giving it two months to produce an explanation and carry out an EIA.
A council spokesman said that because Calle 30 is a municipal project the council believes it falls under Spanish legislation, not European Union law.
But Ruiz-Tomas commented that 'the council should have looked harder at EU law'. 'Community legislation applies to all activities of this scale, ' he said.
If no EIA is produced, a second warning letter will be issued, with another two-month response period.
The European Court of Justice would be the nal arbiter.
The project is being carried out for the council under a 30-year private finance initiative deal with Spanish bank Dexia Sabadell Banco Local.
It is understood the concessionaire is putting up £1.7bn with the council nding the other £1bn. It is unclear which party will be claiming the EIB loan. No application has yet been made to draw down funds from the EIB, which are now on hold.
'We never complete any transaction without being satised that all legal criteria have been met, ' added an EIB spokesman.
'The loan was approved in 2004, but is on hold.'