Expansion work on the Panama Canal has been suspended as negotiations between the Spanish company leading the works and the waterway's authority broke down.

Scheduled to be completed next year, the project has been bedevilled by disputes over costs.

Negotiations over who should pay an extra $1.6bn for over-runs, has put the project and up to 10,000 jobs at risk, the Spanish firm Sacyr said on Wednesday.

The completion date could be delayed by three to five years if no agreement is reached, Sacyr warned, citing an estimate by insurance group Zurich.

The EU's executive deplored the breakdown in talks as bad news for jobs and the global economy and urged the parties involved to reconsider "in the coming days," the AFP news agency reported.

Ana Pastor, Spain's public works minister, called for an agreement be found quickly "what is at stake is infrastructure that has an impact not only on the economy [of Panama] but also the world".

The canal facilities are being widened to permit the passage of ships carrying up to 12,000 containers, twice the current limit.

Extraordinary achievement

The consortium of companies undertaking the work, called GUPC, says that unforeseen costs total $1.6bn, beyond the initial $3.2bn value of the contract.

GUPC is in dispute with the Panama Canal Authority mainly over who was responsible for the quality of geological information, and who should bear the cost of problems and delays arising from unexpected geological difficulties.

The consortium is proposing that the two sides each pay half of the extra costs until the project is completed.

They would then go before an international arbitration court for a decision on who is responsible for the unforeseen costs and who should pay.

The consortium warned at the end of December that it would suspend work in three weeks if Panamanian authorities did not provide the extra finance demanded, and the deadline for progress in the talks ended on Tuesday.

The project to widen the canal, comes on the 100th anniversary of its opening, considered an extraordinary achievement of engineering.

Completed in 1914, the canal offers a short cut and safer journey for maritime traffic travelling between the Pacific and Atlantic oceans. It is about 80km long and is used by 13,000-14,000 ships each year, five percent of world shipping.

Source: Agencies