Merseyside's much-troubled plans for a tram system will not go ahead, the government has announced.
The first trams were planned for 2008
A £170m fund promised for Merseytram by Transport Minister Derek Twigg has now been withdrawn.
He said assurances from local councils that no more funding would be requested once the lump sum had been put forward were "not forthcoming".
Liverpool City Council said it was "bitterly disappointed", and the government's demands were too rigid.
It was hoped that the first tram line from Liverpool city centre to Kirkby would be on track for Liverpool's year as European Capital of Culture in 2008.
Two further routes to Whiston Hospital and Liverpool John Lennon Airport were to follow.
Mr Twigg said that the government remained committed to investing in Merseyside.
"If there are good value schemes that can be taken forward quickly to benefit Merseyside - we will look at them," he said.
Both Liverpool and Knowsley councils had already agreed to underwrite a £24m contingency fund.
Mr Twigg added: "The councils have only offered a capped commitment. Above that they have asked us to rely on assurances from Merseytravel.
"This is not what we have asked for. Therefore we cannot be confident that there will not be further requests for funding, and we have decided that the scheme should not proceed."
Acting council leader Paul Clein said the government's decision not to add any more than £170m made it difficult to save the scheme.
He added: "This is a real blow to Liverpool and Merseyside's attempts to have a more efficient and environmentally-friendly public transport system and the responsibility for that lies squarely with the government.
"Merseytram has run into the buffers because of the intransigence of the government."
Earlier this month, plans for a tram system through the streets of Leeds were also turned down by the Department of Transport.