Chancellor Angela Merkel branded the original idea divisive because France envisaged a grouping of Mediterranean rim states, including its former North African colonies, drawing on EU funds while sidelining non-Mediterranean EU countries such as Germany.
Faced with such resistance from Germany and other major EU states, French diplomats have been working to adapt the blueprint and assuage suspicions.
Paris has scaled down plans for up to nine new agencies and a Mediterranean bank and symbolically changed the name to the Union for the Mediterranean, EU officials say.
Envoys have toured the Mediterranean assuring Turkey it is not a Plan B to replace its EU accession process, and Israel that it is not a substitute for closer EU bilateral ties.
"They told each country what it wanted to hear," a diplomat from one Mediterranean state said.
"The French were not prepared for such opposition from their European partners," Rosa Balfour and Dorothee Schmid of the European Policy Centre wrote in an analysis of the project.
"Given these tepid or even negative reactions, France has been gradually scaling down its grand vision.".
Some north European states such as Britain and Sweden were frosty because they suspected an attempt to find an alternative to Turkey's bid for full membership of the European Union.
Spain and Italy publicly endorsed the idea but have worked behind the scenes to dilute it into a political umbrella over the existing Euro-Mediterranean partnership for trade, political and cultural cooperation, which involves the whole EU.
Sarkozy aims to launch the organisation at a two-day summit in Paris on July 13-14 during France's EU presidency, with the Mediterranean states attending the first day and other EU states joining to bless the initiative on the French national day.
Prime Minister Francois Fillon tried to defuse EU criticism on a visit to the European Parliament on Tuesday, saying France was working on ways to involve all EU members and institutions.
"The truth is there is a problem of economic development, a problem of security, a political problem in the Mediterranean basin, and the European Union must make its contribution to solving this," Fillon said.
France wanted to go beyond the Barcelona process, born at the height of Israeli-Palestinian peace-making in 1995, "naturally in the European framework and naturally involving all states of the European Union", he told journalists.
EU officials acknowledge that the Barcelona Process does not work well despite billions of euros spent in aid. New challenges such as climate change, energy security and migratory pressures have grown since it began.
The EU created another instrument in 2004, the European Neighbourhood Policy, to allow for closer ties and more aid to individual partner countries that adopt EU-inspired reforms.
But both have been hobbled by the authoritarian and opaque nature of many North African and East Mediterranean states.
French officials believe that, the plans having been scaled down, agreement with Germany is close, despite a rough meeting between Sarkozy aide Henri Guaino and Chancellery officials in Berlin last week. One said Sarkozy and Merkel may bury their differences when they meet on March 3.
They cite the Council of Baltic Sea States as a model. That organisation, created in 1992, groups all Baltic states plus Norway and Iceland -- including EU members and non-members such as Russia -- as well as the European Commission.
It provides a forum for regional cooperation and practical projects, with a small secretariat in Stockholm. Other countries may be observers. Germany is a member, France is not.(Reuters)