“It cannot be that a Franco-British company is created out of a Franco-German company,” Joachim Pfeiffer, a spokesman for Merkel’s CDU party told Reuters on Wednesday, saying that he would not accept it if the merged company based its commercial activities in Toulouse and its defence operations in London.

EADS employs almost 50,000 people in Germany at 29 different sites. German media reports this week that EADS boss Tom Enders offered job guarantees to the group’s 20,000 defence workers have been dismissed as “nonsense” by officials and by EADS.

In the state of Bavaria, where EADS employs 15,000 people, the regional economy minister said a merger might improve the firms’ competitive position but his focus was on securing jobs.

Keeping jobs and technology expertise within Europe’s largest economy should be a key factor for the government in deciding whether to approve the deal, a politician from the German opposition Social Democrats said on Wednesday.

“There seems to be some advantages,” Hubertus Heil told a German radio station, adding that the government should make an unbiased review of the economic benefits.

NEW PROSPECTS

One of the benefits for EADS in joining with BAE is that it would dissolve a cumbersome shareholder pact dictating that the percentage of shares held by German and French investors must be equal.

For France though, a combination of EADS with Britain’s BAE could result in it having to give up influence in a company it has controlled since it was set up, as it would see its stake in the combined group shrink to 9 percent from 15 percent currently.

For Britain, the key is to ensure that the creation of a European group would not affect BAE’s strong sales in the United States, which have benefited from the “special relationship” between the two countries.