The new Union for the Mediterranean is completely stalled with no sign of a resumption of its activities following a row between Egypt and Israel.
The Sunday Times has learnt that a summit of foreign ministers of the EU-Arab organisation, scheduled to be held in Istanbul next month, has been postponed indefinitely.
Egypt's Foreign Minister Aboul Gheit refused to accept the presence of counterpart Avigdor Lieberman at the meeting following the Israeli's comment that Egyptian President Hosni Mubarak "can go to hell".
During the past weeks France has failed in its mediation attempts to bridge the differences between the two sides and the summit has been postponed.
"This is very serious," an EU diplomat told The Sunday Times.
"We are risking the death of the Mediterranean Union just after being born. The Union is in complete shambles and no progress has been made since its launch, both on the structure of the organisation and its seat."
The Mediterranean Union was launched during an elaborate ceremony in Paris last year. Malta, which has supported the Union idea from its inception, can lose out if the Mediterranean Union crumbles.
After being outdone by Barcelona to host the seat of the Union's secretariat last year, Malta was compensated by being given the right to appoint one of six deputy secretaries general of the organisation.
The Maltese deputy secretary general was due to be nominated by the government but no one has yet been identified, pending developments on the Union's future.
In a fresh development, Cyprus, a member of the Union, is insisting it should also hold an important position in the organisation, possibly having its own deputy secretary general, since Malta was given such an important post.
"Cyprus is the latest problem for Malta," sources said.
Apart from objecting to Turkey holding any important role in the organisation, Cyprus is also citing Malta's important position in the Union as an example of discrimination, the sources said.
The only concrete project, which until now has been put into motion following discussions among Mediterranean Union members, is the opening of a small liaison office in Malta between the European Commission and the Arab states.
This was another direct result of a compromise offered to Malta in order to withdraw its offer to host the Mediterranean Union's secretariat and make way for Spain.