The 20 countries in the European Space Agency made progress towards a deal on budget and a successor to the Ariane 5 rocket at talks on space strategy here Tuesday, delegates said.

Initiating a two-day meeting against a backdrop of financial constraints, many countries backed proposals to keep spending unchanged over the next few years, British Science Minister David Willetts said.

And major ESA players France and Germany seemed to be bridging their differences over a future launcher, he said.

"There is quite a strong view in the council in favour of flat cash," Willetts told reporters, referring to a stable budget.

"My starting point is that... it ought to be able to be possible in tough times to deliver the efficiency savings," he said. "Other major players have made that point as well but as of this moment it is unresolved."

ESA spokesman Franco Bonacina said "progress has been made on certain things" but "for the problematic issues... the debate is still going on", and the outcome would come on Wednesday.

The meeting -- the first at ministerial level in four years -- takes place against a backdrop of money worries, a fast-shifting satellite market and the growing strength of the US private sector in near-Earth space.

ESA Director General Jean-Jacques Dordain told AFP last week he hoped ministers would back a three-year budget of 12 billion euros ($15 billion) but added he would be happy with "something around 10 billion euros".

It would mean a roughly stable budget compared with current levels, "but given the current situation, this is not small beer", he said.

One of the most crucial agenda items is deciding on a future rocket launcher to replace the ageing Ariane 5.

The new rocket should provide more flexible launch options for the swiftly-changing satellite market and wean itself off the 120 million euros a year that the Ariane 5 needs from ESA's budget each year.

France is pushing for a smaller, sleeker Ariane 6, which would require investment of about four billion euros, culminating in a maiden flight in 2021 if all goes well.

But industrialists fear that this timescale is way too long and will give the advantage to fleet-footed rivals in commercial satellite launches.

They prefer a German-backed option, an Ariane 5 ME (for "Midlife Evolution"), which would be ready by 2017 at a putative cost of two billion euros.

"I think we are probably heading towards a compromise, or some kind of understanding, between France and Germany," Willetts told reporters, in remarks confirmed by two other sources.

Those sources said the hoped-for compromise would approve the "ME" and over the next two years study how its technology could be used in a future Ariane 6 to save money.

Weighing on many minds is not just belt-tightening but also the rise of the US private sector.

The bogeyman is the US firm SpaceX, which last month sent an unmanned freighter, Dragon, to the International Space Station under a NASA initiative to delegate resupply missions to private corporations.

In other developments in Naples, ministers agreed to launch a dialogue with the European Union about clarifying what each institution will do in space.

The risk of turf battles has emerged with the EU's Galileo satellite navigation system, which is being launched by ESA.

ESA is an intergovernmental agency that is legally separate from the 27-nation EU; two of its members (Norway and Switzerland) are not part of the EU club, and Canada is an associate member.