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PANAMA CITY, Feb 23 (Reuters) - The Panamanian government said on Tuesday it had agreed the cancellation of a $125 million radar contract with a subsidiary of Italy's Finmeccanica SpA that had become mired in a dispute over alleged corruption.
After flagging suspected bribery and saying the radar equipment did not meet requirements, the government last year sought the approval of Panama's Supreme Court to cancel the contract with Finmeccanica unit Selex. The deal was signed in 2010 under former President Ricardo Martinelli.
President Juan Carlos Varela, who has been locked in a bitter feud with Martinelli since succeeding him in 2014, told a news conference the contract was cancelled by mutual consent and that all legal actions over the case had been halted.
"This agreement represents savings of more than $100 million for the Panamanian state and also resolves other problems caused by the previous administration," said Varela, who fell out with Martinelli after being elected alongside him as vice-president.
Selex could not immediately be reached for comment.
Martinelli, a multimillionaire supermarket tycoon who has been out of Panama since January 2015, has cases pending against him in the isthmus nation for alleged embezzlement, wiretapping and illegal pardons during his 2009-2014 tenure.
He has rejected the allegations.
Panama's Supreme Court in December issued a warrant for the arrest of Martinelli. (Reporting by Elida Moreno; Editing by Kenneth Maxwell)