From Andrea Shalal-Esa, Reuters:  House of Representatives and Senate negotiators on Tuesday defied the White House and passed a defense budget bill that bans funding for the final year of a joint ground-based missile defense program with Italy and Germany.

The lawmakers prohibited a final U.S. payment of $400.9 million for development of the Medium Extended Air and Missile Defense System (MEADS), saying Washington has no plans to produce the system being built by Lockheed Martin Corp and its partners in Italy and Germany.

Industry executives and foreign officials say the government may face termination fees nearly equal to the money required to finish the system, which is financed by the United States, Italy and Germany.

It has been in development for more than a decade at a combined cost of more than $4 billion. . . .

The White House last month reiterated its concerns about the bill, warning that a ban on MEADS funding could harm Washington’s broader relationship with its allies, jeopardizing the kind of multinational projects favored by the Obama administration as budget pressures mount. . . .

Defense Secretary Leon Panetta and officials from Italy and Germany raised concerns this year about the ban on funding for MEADS, which was intended to replace the U.S. Army’s aging Patriot air and missile defense system. . . .

Italy’s defense minister told [Senator John] McCain in a letter dated December 7 that MEADS was ideally suited to help address "the current and future air, tactical and ballistic missile threats that Italy, Europe and NATO will have to face for many years to come."

Failure by the United States to fulfill its funding commitment for 2013 would be "a unilateral withdrawal of our transatlantic agreement and (memorandum of understanding) and the U.S. would be held financially liable," he wrote.  (graphic: Flight International)