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Germany scuppers EADS-BAE merger

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Germany scuppers EADS-BAE merger
Photo: Ronnie Macdonald
14:18 CEST+02:00
Germany feared being left on the sidelines of any tie-up between European aerospace giant EADS and British arms maker BAE Systems, analysts say, after Berlin was blamed for blocking the deal.

Talks on the potential €35 billion ($45 billion) mega-merger, which BAE Systems abandoned on Wednesday, were blocked by Germany, a source close to the matter told AFP.

In public, officials stressed that Paris, Berlin and London were striving for a common line, but behind the scenes, negotiations appeared to have become much more strained.

The often turbulent relations within EADS between France and Germany were complicated this time by the involvement of Britain, with all three European powers holding a veto right over the planned merger.

"The Germans are worried that there will be a duopoly with Toulouse (Airbus headquarters in southern France) in charge of civil matters and London for defence," said Henrik Uterwedde, deputy director of the German-French Institute in Ludwigsburg, before the talks collapsed.

"They want a fair share of the pie," he told AFP.   

Since the potential merger was announced last month, Berlin has repeated almost daily the official line: they are in talks with all players and the deal is so complex that no public statements would be made before a final decision.

But German Economy Minister Philipp Roesler also insisted that "Germany has to preserve its interests" while recognising that this merger was an "undoubted opportunity."

With possibly less than a year to go until national elections, Berlin was sensitive to the need to protect its factories and tens of thousands of EADS-linked jobs in Germany.

There are sizeable Airbus assembly plants in Bremen, in the north of the country, as well as factories building the Eurofighter combat plane in the southern state of Bavaria.

Berlin was also at pains to defend its research and development capabilities and feared being relegated to a mere cog in a wider machine whose main wheels were turning in Paris and London, analysts said.

The head of the European Aeronautic Defence and Space company Tom Enders, a German, already ruffled feathers in Berlin government circles by shifting the group's headquarters to Toulouse, when it was previously split between Germany and France.

Berlin wanted to revisit this decision, a demand considered "unreasonable" by EADS since "the choice of headquarters is an economic decision."

Enders sought to calm tempers by pledging, in the country's most widely-read daily, Bild, that he would consider job guarantees if the merger went ahead.

"I am so convinced of the merits of our project that I am prepared to talk about attractive job and headquarters guarantees that I could not consider for EADS (on its own)," Enders said.

Others on the German political scene were concerned that Berlin would lose control of its say in the defence operations of the group.

"My fear is that the defence activities of the firm will be divided between France and Britain," said Martin Lindner, parliamentary vice-president of the Free Democrats, junior coalition partners in the German government.

"I do not want us to be completely dependent on outsiders for such a key industry," he told the Frankfurter Allgemeine Zeitung daily.

Analyst Uterwedde said that the deal was always about politics rather than economic or commercial considerations.

"EADS is and remains a political company," he said.    

Writing before the final collapse of the deal, newsweekly Spiegel, however, pointed to the human side of the failed merger.

"What happened between the three European countries last week is nothing short of a political-economic earthquake -- a seismic tremor that potentially puts thousands of jobs at risk," said the magazine.

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