Auditors warned the centre was in danger of insolvency

The �106m arts venue in Cardiff Bay has been struggling to deal with its overdraft and a funding gap.

Heritage Minister Rhodri Glyn Thomas told AMs the historic debt would be written off with unspent funds in the assembly government's coffers.

Mr Thomas said the rescue would not be at the expense of other arts projects.

A government guarantee of the debts had been due to expire next month.

The centre's auditors had warned that its ability to continue as a going concern was in doubt.

But Mr Thomas said the arrangement would "not be at the expense" of the arts budget or the arts outside Cardiff, as each of the cultural organisations he was responsible for would receive an increase in funding.

He said the �106m venue had attracted more than a third of a million paying customers in each of its first three years.

"It has succeeded in growing the audience for cultural events by attracting customers from all over Wales.

The auditorium inside the Wales Millennium Centre

"I am pleased to announce today that the finance minister has agreed to pay the �13.5m loan that the project received from HSBC.

"We are also increasing the annual recurrent revenue funding from Government by �2.5 million to �3.7m next year and succeeding years to financial year 2010-2011."

He said it would bring "greater financial security" to the centre and would "safeguard the future of the widely recognised and respected institution".

The Conservatives welcomed Mr Thomas' announcement but suggested "proper scrutiny" of future budgets and financial management was needed.

Shadow Culture Minister Paul Davies said: "We cannot be expected to bail out the centre every few years, especially using public money.

"The WMC must stand on its own two feet or it runs the risk of becoming Wales' answer to the Millennium Dome".

"We are also committed to ensuring other arts projects are not penalised as a result of more public money going into the centre," he added.

Three weeks ago Mr Thomas told AMs financial support for the centre was being considered but warned there would be no "open- ended commitments".

The iconic venue stages musicals, dance and comedy and is home to the Welsh National Opera and Urdd eisteddfod.

'Considerable uncertainty'

The warning from auditors that the arts complex was in danger of insolvency emerged on BBC Wales' Dragon's Eye programme last month.

The programme obtained an unpublished review which said the debt could not be repaid by the venue and should be removed.

The centre said it had been in negotiations with the assembly government for some time.

In its annual accounts for 2006 the centre's auditors KPMG said "considerable uncertainty" in achieving a settlement with the assembly government "may cast significant doubt about the group's ability to continue as a going concern."

The venue said 6% of its �13 million turnover, around �750,000, comes from public subsidy.

It is understood the WMC hopes the assembly government will increase the subsidy to between �3m and �4m a year and repay the �13.5m loan.

Meanwhile, the WMC's management had said it was "business as usual" at the venue.