COMPLETION OF Madrid's E4bn (£2.8bn) ring road was hanging in the balance this week after the European Commission threatened to pull the plug on funding.
The Commission has advised the European Investment Bank (EIB) to withhold a E1.5bn loan because Madrid city council failed to carry out an environmental impact assessment (EIA) before starting work.
Contractors began working on the project to put large sections of the M30 inner ring road into tunnel in September 2004 and the scheme is scheduled to be completed in May next year.
Calle 30, as it is known, is one of Europe's most challenging tunnelling jobs, with 82km of the 100km of highway works in tunnel (see feature page 16).
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 city council giving it two months to produce an explanation and carry out an EIA.
he council said that because Calle 30 is a municipal project it did not believe it falls under European Union law, but was governed by Spanish legislation, a council spokesman told NCE.
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 a further two month response period. The European Court of Justice would be the final arbiter.
The project is being carried out for the council under a 30 year private finance initiative deal, signed with Spanish bank Dexia Sabadell Banco Local.
NCE understands that the concessionaire is putting up E2.5bn with the council finding the remaining E1.5bn.
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 in any case now on hold.
'We never complete any transaction without being satisfied that all legal criteria have been met, ' added an EIB spokesman. 'The loan was approved in 2004, but is on hold.'