The commission concluded that the contracts violated terms set out in the code for public contracts, and that a new tender would have to be issued if the project were to continue, although it recognises contractors will have to be paid for work already completed. The Elos consortium is seeking a settlement of Euros 300m.

In a statement, the government said the country's priority in terms of developing international rail links is the new freight line between Aveiro and Sines, which is seen as a means of "strengthening the conditions for increasing the competitiveness of Portuguese exports."

Spain's development minister is to hold talks with his Portuguese counterpart regarding the future of cross-border passenger services between the two countries, while the president of the European Commission, Mr José Manuel Barroso, says that EU funding for the line will be redistributed to other projects in Portugal.