30 January 2002

Germany likely to pull out of EU Airbus deal

By Toby Helm in Berlin and Michael Smith, Defence Correspondent

Europe’s plans to create a Rapid Reaction Force suffered a severe setback last night after Germany admitted it could not give a legal guarantee to fund its full share of a fleet of new Airbus military transport aircraft.

The admission from Rudolf Scharping, the defence minister, that Berlin cannot make a watertight legal commitment to provide the £5.1 billion for 73 German aircraft left other EU nations uncertain whether to press ahead.

British defence sources warned that Britain would look again at its involvement in the project if the Germans, who have budgeted for only 40 aircraft, were unable to put up the money for their full commitment.

The contract signed last month by the eight nations involved comes into force at the end of this month only if the Germans come up with the money. "The Germans have to give the guarantee or the thing could be finished," one senior British defence source said.

That not only threatens plans to improve Europe's ability to fly troops into any trouble spot but also thousands of jobs across the EU, including Britain where part of the aircraft will be built.

German opposition politicians claimed that the deal was already dead. Friedrich Merz, parliamentary leader of the centre-Right opposition parties, said: "The German government cannot fulfil its international obligations. The contract cannot come into force on January 31."

Wolfgang Gerhardt, parliamentary leader of the Liberal party, said the deal was "null and void".

The plan to build the Airbus A400M is crucial to the development of its rapid deployment force. It is also an important test of Europe's ability to develop a multi-national defence procurement system.

If Germany buys only 40 aircraft, the cost of each aircraft would go up to such an extent that the project would no longer be viable.

A British defence source said: "This promises to be a very good aircraft but there is already another very good aircraft waiting in the wings in the Boeing C17. It is a proven commodity and there won't be many people in the RAF who will be concerned if we have to buy that instead. The A400M was the best deal at the time but if it ceases to be the best deal we will look again."

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

After budgeting £3 billion for the 40 planes, Berlin, which is struggling to keep its spending within limits set by Brussels for members of the euro-zone, said it had committed the next parliament to make up the difference in 2003.

But Germany's opposition parties, while saying they supported the Airbus project in principle, accused the government of contravening the constitution in by-passing the proper budget procedures.

Fired up by the prospect of an election in September, the opposition filed a case in the country's constitutional court.

Yesterday, after apparently learning that the court was about to rule against him, Mr Scharping struck a compromise deal under which the opposition withdrew its case on condition that he admitted all the money could not be guaranteed.

Mr Scharping insisted yesterday that the necessary political signal had been given that Germany intended to pay for all 73 planes.

The compromise, he claimed, would reassure Germany's partners by giving "firm ground so that the project can now go ahead".

Downing Street, aware that the German government is close to its Maastricht Treaty spending limits, is thought to remain unconvinced.