21 January 2002

Germans may ground Airbus defence deal

By Toby Helm in Berlin and Michael Smith, Defence Correspondent

One of Europe's biggest joint defence projects under which Britain and seven other nations hope to build a new Airbus military transport plane was in danger of collapse last night because of a budget crisis in Germany.

The collapse of the contract would leave the European Union's attempts to create a European Rapid Reaction Force in tatters.

The EU declared the Euro army operational at last month's Laeken summit even though it still cannot meet a third of the requirements set down for its creation.

But the lack of transport to move troops into location was the most pressing problem and one of the key reasons behind Britain's decision to back the force.

At the Helsinki summit in December 1999 the EU agreed to set up the force, to put 60,000 troops into any trouble spot within 60 days and keep them there for at least 12 months.

It laid down 144 capabilities required for such an operation, but admitted that Europe still depended on the Americans to supply 55 of them.

EU defence ministers signed a deal last month to buy the Airbus A400M military transport aircraft after two years of prevarication.

But that deal was dependent on the Germans getting the necessary budget passed by the Bundestag.

MPs in Berlin suggested yesterday that Gerhard Schroder's government would not get the agreement of Parliament to fund Germany's £5.2 billion share of the project before a deadline agreed by the eight nations of Jan 31.

Infuriated by lack of progress, Britain has been considering pulling out of the project altogether and buying instead the larger C-17 Globemaster aircraft made by Airbus's chief rival Boeing.

At the heart of the crisis are last minute doubts over whether Germany, already teetering on the edge of recession and with soaring unemployment, can afford to fund its share while keeping within EU spending limits.

Germany has agreed in principle to buy 73 of the 196 planes requested by the eight nations. France is expected to buy 50, Spain 27, Britain 25, Turkey 10, Belgium eight (including one for Luxembourg) and Portugal three.

The aim is to have the first planes ready for service by 2008. A total of 180 is seen as the minimum to make production viable.

Tension between the finance ministry in Berlin, which is struggling to keep spending in check, and the defence ministry, which is pushing the project, were said to be adding to the complications.

Many MPs claim that Rudolf Scharping, the defence minister, over-committed Germany too early before the matter had been decided by parliament or the financing agreed.

In the past fortnight the German government has been forced to cut its estimates for economic growth to around 0.7 per cent.

Unemployment has also leapt back up to almost four million and is threatening to reach 4.3 million by March.

Oswald Metzger, a budget expert for the governing Green Party, told Welt am Sonntag newspaper: "We will not be able to give a legally binding agreement for the project in the current legislative period."