After weeks of bitter wrangling, Germany's ruling coalition parties decided yesterday to pull out of the project, on which Bonn has been jointly working since 1986 with Britain, Italy and Spain.
Volker Ruhe, Germany's Defence Minister, said that the proposed aircraft was 'too expensive' in its current form and that it was no longer appropriate in the post-Cold War era.
If the German decision leads to the collapse of the project, more than 100 UK defence contractors, led by British Aerospace (BAe), will be affected. The value of their workshare in the development phase is pounds 5.5bn but this would rise to between pounds 7bn and pounds 10bn when production begins next year.
John Major, the Prime Minister, said that Britain and the two other partners, Italy and Spain, would now have to review the EFA programme, although BAe maintained it was still 'perfectly viable' to go ahead with the aircraft as a three-nation venture.
Mr Ruhe insisted that Germany remained committed to developing a new fighter aircraft to meet the defence needs of the next century, and that it fervently hoped to be able to continue co-operating with its former EFA partners in forging a more modest and cheaper model. It has already committed DM5.85bn ( pounds 2.02bn).
Mr Ruhe, a driving force behind the withdrawal, insisted that despite the down-payment, the projected DM134m price-tag on each jet produced was unacceptable and the planes in the new, as yet unspecified, project should not cost more than DM100m.
Last week Jonathan Aitken, the Minister of State for Defence Procurement, said the idea of replacing EFA with a 'lighter, cheaper aircraft' was 'an extravagant piece of nonsense'. A senior RAF officer said last night that to produce a less capable aircraft now when the EFA prototype is about to fly would probably produce 'something costing more and doing less'.
Britain has contracted to buy 250 of the 765 aircraft due to be built and has a one-third stake in EFA. BAe is building the front fuselage and cockpit and part of the right-hand wing. Other large defence contractors include Rolls- Royce, which is developing the aircraft's engine as part of a European consortium, GEC-Ferranti, which has a pounds 300m contract to develop its radar, Marconi Defence Systems, supplier of EFA's electronic warfare system, and Smiths Industries, which is working on a pounds 450m avionic systems order.
About 2,500 workers at BAe's Warton military aircraft division in Lancashire are involved in EFA. The same number again are employed by equipment suppliers and support industries. But the total jobs figure would rise to more than 32,000 in the aerospace and support industries once production began.
Mr Major told the Commons yesterday that he and his ministers had been in close touch with the German government to try and persuade it to stay in the project. 'I did that again in my discussion with Chancellor Kohl at the weekend,' the Prime Minister said at Question Time. He said there was a 'clear and continuing need' for an aircraft with EFA's capabilities. Malcolm Rifkind, the Secretary of State for Defence, said it was 'difficult to see how there would necessarily be any savings' in whatever option the Germans ultimately chose. He wanted the project to continue, irrespective of the German position.
Apart from the possibilty of financial savings - an important factor given the strains imposed on the German budget following unification - one of the main factors behind yesterday's decision was the overwhelming sense in Germany that there should be some sort of peace dividend following the collapse of Communism. According to one recent opinion poll, 84 per cent of the German population were in favour of scrapping EFA.
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