A month ago it appeared likely that the #116 million metro tram extension through Birmingham city centre was in danger of running off the rails.

Many hours of discussions between the passenger transport authority Centro and Birmingham City Council had failed to reach agreement on submission of the metro business case to Government.

The council's Tory-Liberal Democrat coalition made no secret of its concerns that Centro's decision to increase the number of trams running through the city centre from ten to 15 an hour would have serious consequences for traffic management.

Trams would cross over major road junctions once every two minutes rather than once every three minutes, with traffic lights being used to give trams priority.

The council fears it will be landed with massive congestion problems, with cars and other vehicles having to be diverted away from the metro route.

Coalition leaders were horrified to discover that the council would be expected to pick up the cost of the road improvements that would be needed to cope with vehicles diverted away from the metro route.

Even more worryingly, there had been no work carried out calculating the cost to the council.

At one stage, council development director David Pywell wrote to Centro stating that he did not see how the problems could be resolved.

But resolved they have been - to a certain extent.

The council has agreed that the business case for the city centre extension from Snow Hill to Five Ways can be submitted, although a number of "outstanding issues" still need to be resolved.

The council cabinet will back the business plan at a meeting on June 1, while calling for discussions on sorting out the traffic and cost implications to continue with Centro.

A senior council source admitted yesterday that, while scepticism about whether the metro extension will ever be built still exists, it had been decided that it would be too politically damaging to block the project any further.

"It is chaotic, but we are where we are.

"We have to try to make it work," the source added.

The city centre extension and the Black Country metro route, with a combined estimated cost of #430 million, were given planning approval by the Secretary of State last year following two public inquiries.

Centro expects to receive conditional approval of the business case from Government by October.

The project will then be put out to tender.

The successful bidder to supply the trams will be selected by May 2007, while the tender for track construction will be approved by January 2008.

Final Government approval for the business case, signalling the green light for construction to begin, is expected in the summer of 2008.

About three-quarters of the total cost of the metro extensions will be met by the Government.

The remainder will come from local councils and the private sector.

Developers in Birmingham city centre have already pledged #46.8 million in return for planning application approvals along the metro route.