The public inquiry into Grosvenor is believed to have left Merseytravel's Neil Scales with the decision on when Paradise Street bus station will be demolished to make way for the new development.
If the trams do not proceed, Mr Scales may not approve that demolition because the proposed new bus station would not be big enough to cope with passenger numbers without tram support - destroying Grosvenor's chances of being ready for Capital of Culture in 2008.
Rod Holmes, project director for Grosvenor, said: "The current differences between Liverpool City Council and Merseytravel have the potential to disrupt the Paradise Street project, and that's why we are working intensively with the council and Merseytravel to make sure that does not happen and I am optimistic that we can avoid any knock-on effects on to the Paradise Street development."
But an intensely frustrated Mike Storey, leader of Liverpool Council, last night urged the two chief executives of the organisations to work out a way forward.
Although both men deny a personality clash, many people believe they have a strained relationship.
Cllr Storey said: "We cannot go on like this. We owe it to future generations on Merseyside.
"These are powerful and highly experienced chief executives and I am surprised they have not done more to sort out their differences.
"They hold £920m of investment and the future prosperity of many people on Merseyside in their hands.
"This scheme is too important not to happen for Liverpool and future generations and any personal differences that these two men may have should be put to one side in the best interests of Liverpool and Merseyside.
"David Henshaw has done fantastic things for Liverpool in the past, and I believe he will do so in the future.
"We are going to be European Capital of Culture in 2008 and we need a proper tram system either started or completed. We also need the Paradise Street project, the biggest retail development in Europe.
"Sir David is back from leave on Wednesday and I will arrange for us to meet Mr Scales and Mark Dowd (Merseytravel chairman) to sort this out."
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