Speaking shortly after Vandellos in the northern region of Catalonia lost out to Cadarache in southern France, the Socialist party (PSOE) decried what it termed the "clear failure" of the Spanish bid and blamed Aznar's administration.

France will now seek to win final approval next month in Washington from project partners, including the EU, Japan, the United States, Canada, China, Russia and South Korea, with Cadarache still facing challenges from Canada and Japan.

Amid funding problems in the Canadian bid, France is widely expected to face the Japanese candidate site of Rokkasho-mura -- in the north of the country -- in the run-off.

Jordi Sevilla, PSOE spokesman on economic policy, accused Madrid of having been overly optimistic regarding the siting of the 4.5 billion eurobillion dollar) project in Spain.

"The PSOE wants to make known its consternation at this clear failure of government policy and diplomacy," Sevilla told radio station Cadena Ser.

The leader of the Catalan Socialist Party, Pasqual Maragall dubbed the news as the "the worst technological and political news of the past 25 years.

"It's the worst thing that could happen to us," said Maragall, who saw in the decision a move to punish Madrid for its "policy of alliances," an oblique reference to backing the US-led intervention in Iraq.

The Spanish setback comes after an intense diplomatic campaign for Vandellos to be chosen for the nuclear project.

A week ago the government had told its EU partners it was doubling its contribution to the project to 900 million euros (1.07 million dollars) to take Spain's share to one fifth.

Then Foreign Minister Ana Palacio stepped into the fray, lobbying Italian Prime Minister Silvio Berlusconi.

Aznar and Palacio, speaking just prior to the announcement that the Spanish town had lost out, said Spain should not be despondent.

Aznar said the fact Spain had been in the running showed the "credibility" of its candidature given that "a few years ago it would have been impossible" to even come close to being selected.

"The mere fact we were competing for a project which only about 10 countries were in line for... is palpable evidence of the change" wrought by his government since it took office in 1996, he said.

Palacio echoed that sentiment.

"To be where we are is reason for some satisfaction," said Palacio, who admitted that the French scientific community's tradition was "superior" to Spain's.

The ITER project aims to produce within 30 years clean energy at the pre-industrial stage, notably from hydrogen, through controlled reproduction of the kind of fusion that occurs in the sun and other stars.

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