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The Spanish government is in talks with Panama to try to resolve a row over the expansion of the Panama Canal.

Spain's public works minister Ana Pastor will fly to Panama this weekend, following a meeting between diplomats on Friday.

Work began on the expansion of the shipping hub in 2009, but it has gone over-budget by $1.6bn (£1bn).

The group behind the project, led by Spain's Sacyr, has threatened to halt work unless the extra money is paid.

Sacyr's chairman Manuel Manrique will also fly to Panama to join in the negotiations.

The building group, known as the Grupo Unidos por el Canal (GUPC), is made up of Spain's Sacyr, Italy's Salini Impreglio, Belgium's Jan De Nul, and Panama's Constructora Urbana.

It is in the process of constructing a third lock which will allow bigger ships to pass through.

It gave a 21 day deadline on 30 December to the Panama Canal Authority to make the extra $1.6 billion payment. If it doesn't, GUPC says it will stop work on the expansion plans.

A spokesperson for Spain's foreign ministry said: "Panama is a country that is close and friendly towards Spain, and we share the desire and interest to find a solution as soon as possible".

Spain's ambassador to Panama, Jesus Silva, added that all stand to lose out if the contract fell through.

On Thursday, Panama's President Ricardo Martinelli threatened to demand that the building consortium fulfil its contract to expand the canal.

The president said: "I will go to Spain and Italy to demand these governments take moral responsibility."

Construction is due to be completed in June 2015, nine months behind schedule. The overall cost of the project now expected to be $5.2bn.

Building work is now focused on the creation of a third set of locks to accommodate ships that can carry 12,000 containers. The largest ships currently able to navigate the Panama Canal carry 5,000.

The Panama Canal handles 5% of the world's maritime trade.