BALANCE OF INTERESTS

Now analysts say Germany fears being left as a junior partner in a company steered mainly by French and British interests, starving it of future investment and aligning Europe’s defense industry with its two largest military powers.

While a consensus has taken hold that the combined defense operations of the new group would be in London and its commercial aerospace heart would remain in Toulouse, the prestigious headquarters are seen as a prize worth fighting for.

Berlin has presented a demand that the group headquarters should be in Germany to preserve a balance of interests between the three main host nations, the sources said.

Chancellor Angela Merkel’s Bavarian CSU partners specifically want the corporate base to be placed in Ottobrunn near Munich, though they remain minority coalition members.

Sources close to the talks said earlier France was backing Toulouse as part of its conditions for agreeing to the deal.

The German request is likely to be opposed by EADS, whose chief executive Tom Enders established the de facto headquarters in Toulouse on taking office just three months ago.

EADS and BAE also want to minimize outside interference in decisions they regard as a matter for the new company’s board.

EADS declined to comment.

The impasse stems from government concerns over retaining jobs during hard times for Europe’s economy as well as coveted technology needed to drive growth.