German austerity threatens fighter jet

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The Independent Online
German penury is endangering Europe's largest joint arms project - the construction of a new generation of multi-purpose combat aircraft in Britain, Germany, Italy and Spain.

It was revealed yesterday that the Bonn Defence Ministry, which has just lost DM200m (pounds 80.6m) from its budget, has no funds set aside for placing a firm order for the aircraft next year, when preparations for production are to begin. Britain and Spain are already committed to Eurofighter, but Germany has yet to confirm that it wants to buy 180 of the single- seat twin- engined jets.

Finances are tight, a Defence Ministry spokesman said yesterday. "We have no room for manoeuvre." Asked about the medium-term outlook, he stated: "We must wait and see".

Alarmed by the prospect of a German about-turn, Britain's Prime Minister, John Major, last week wrote to Chancellor Helmut Kohl pleading for his support. But as Bonn slashes back its expenditure in an effort to qualify for monetary union, the other great European project is sliding down the list of priorities. An assurance by the Finance Minister, Theo Waigel, that Eurofighter would be funded was dismissed by the budgetary expert of one of the governing parties as an "April fool's joke".

Eurofighter was to replace the 40-year-old Phantom jets which saw Germany through the Cold War. With no obvious enemy in sight, however, even some members of the government are wavering in their fondness for what the opposition Social Democrats call an "expensive luxury".

Germany has invested DM6.5bn in research, and 40,000 jobs are estimated to depend on the project, mainly at Dasa, the aeronautics division of Daimler-Benz. According to the financial daily Handelsblatt, Dasa dropped its price last week from DM26bn to 23.3bn, but still came away empty handed.

The company also wanted the government to guarantee DM6.9bn leading up to the start of production in 2001, but again to no avail. Dasa, with a 30 per cent stake in the project, is the second largest constructor, after British Aerospace which holds 37.5 per cent. Altogether, 620 jets are to be built for the four nations.

At a time when even unemployment benefits are being cut, it is hard for the government to justify buying the aircraft. The Defence Ministry, the department hardest hit by this year's austerity budget, has more immediate problems. Tanks lie idle because there is no money for repairs, and the pfennigs are being scraped together for the Bundeswehr's first mission abroad - to Bosnia.

Germany is to decide later this month whether it can bankroll the project. Britain and the other partners are bracing themselves for the worst.

"I am sure Eurofighter is not heading for the rocks," Britain's Secretary of State for Defence, Michael Portillo, insisted yesterday, while conceding that delay was possible. "We would greatly regret a delay to Eurofighter, which would be damaging but not fatal," he said. Which is what the Germans have been saying all along.