Talks to merge aerospace group EADS and defence contractor BAE Systems are deadlocked, sources close to the talks said on Friday, with the governments of France, Germany and Britain at odds over the outcome.

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According to the source, Germany intends to hold a nine-percent stake in the new company, the same as France, but Britain will accept only France's shareholding with a guarantee that the French state will not later buy shares held by French conglomerate Lagardere. Lagardere is widely understood to be looking to sell its stake in EADS in the medium-term.

EADS, the maker of Airbus jets, and defence giant BAE Systems have until Monday October 10th to announce to British regulators whether a deal has been reached or more time is needed.

"We still have a few days. I don't know how many more meetings these governments would need," the industry source said after another round of talks between advisors to French President Francois Hollande, Germany Chancellor Angela Merkel and British Prime Minister David Cameron.

"We have three states showing us the Europe that doesn't work as opposed to the Europe that works, EADS, and would work even better with BAE Systems," the source said.

The tie-up would create a €35 billion ($45-billion) group to rival US giant Boeing.