Dafydd Wigley has raised concerns about the debacle

It leaves them with a �500,000 shortfall and a massive question mark hanging over the site.

Caernarfon Assembly Member Dafydd Wigley said he was "furious" and questioned the Culture Minister Jenny Randerson during questions in the Welsh Assembly chamber Thursday morning.

Mr Randerson explained that the Department for Trade and Industry in London is now regarding Millennium Commission hand-outs as "public" money.

She said the change had arisen in response to cash bids in other parts of the UK.

It was implemented after a change in European Union state aid regulations which prohibit the public sector from bankrolling projects to the tune of over 50%.

Left in limbo

But it now bars the Wales Tourist Board from giving the centre a planned �500,000 grant, which would cause a breach in the rules.

It has left developers in north Wales smarting and at a standstill.

We assumed our lottery funding was non-public funding, so we were well under the 50% benchmark

Gwynedd Roberts, Cwmni Tref

They planned to create a theatre, cinema, cafes and spaces for artists to practice.

Chief Executive of the planners Gwmni Tref Gwynedd Roberts said he was "in the dark".

"We assumed our lottery funding was non-public funding, so we were well under the 50% benchmark," he said.

"If anything, lottery money is a charitable donation - we are very confused.

"We don't know when this directive will be operated from or whether it will be retrospective."

He said there were at least four other planned arts projects in Wales which could be left in limbo by the ruling.

Funding knock

It could have wide-ranging implications for hopeful lottery bidders across the UK.

The �114m Millennium Stadium received �50m from the Millennium Commission, just meaning it would sneak passed the new rules by �14m.

This new row is just the latest arts funding controversy in Wales.

The planned centre has been left in limbo

Answering culture questions in the assembly chamber Thursday morning, Ms Randerson said she was "extremely concerned" that the Arts Council for Wales was not bankrolling a nationwide mobile theatre tour by Theatr Clwyd.

The council is charged with distributing money to arts projects from the assembly's public purse and employs a panel of experts to decide on worthy causes.

But Ms Randerson also stoked controversy last month when she and Finance Minister Edwina Hart bypassed the council in handing �20,000 directly to the fledgling National Chamber Orchestra for Wales.

Capital project

There has already been disquiet from the north over the concentration of investment in south-east Wales.

Cardiff has had to mount its bid for European Capital of Culture on the back of an all-Wales image blitz in order to win assembly backing.

Just three months ago, the city's flagship Wales Millennium Centre was given �31m by the commission and �37m from public sources including the devolved government.

But it appears Cwmni Tref will have to find its missing �500,000 from private sources if the centre is to go ahead.

Ms Randerson said she would be having urgent discussions with the economic development minister.

Planners will meet DTI representatives on Friday.