The French defence firm won the 1.2 billion euros ($1.3 billion) contract in 2019 to build four Gowind corvettes and renovate two more in partnership with Romanian company Constanta Shipyard.

But the contract was never signed, despite both NATO countries wanting to boost security on the Black Sea, a strategic point of increasing importance after Russia's full-scale invasion of Ukraine last year.

"The decision to cancel the specific procedure was taken... since the successful tenderer did not sign the framework agreement within the time limits requested by the contracting authority," Romania's Defence Ministry said in a press release.

The Dutch group Damen was also fighting for the contract and came second, but Romania says there are no funds available to match their offer.

"The funds required to declare the next-placed economic operator the winner were not identified," the press release added.

Romanian media reports have speculated that the deal was not concluded due to attempts to change the initial contract terms, especially regarding costs.

The bidding for the contract had previously been beset by scandal.

According to local media, Romanian officials had previously attempted to thwart Naval Group's bid and award the contract to Damen instead for "political reasons".

Spurred by the war in Ukraine, Romania -- a NATO member since 2004 -- has raised its defence spending to 2.5 percent of its GDP in 2023, up from two percent last year.

It has also intensified NATO missions -- with several thousand soldiers on its soil, including a battlegroup led by France.

The country is pushing for the modernisation of the army and planning to buy equipment, such as used US-made Abrams tanks, submarines and anti-mine ships.

Earlier this year Romania acquired 18 Bayraktar TB2 combat drones after signing a $321 million contract with Turkey's Baykar company. ii/jza/gw

NAVAL GROUP