European nations are divided over conditions for a new round of talks on the delayed A400M troop plane and are racing to ease the deadlock ahead of a ministerial meeting on Monday, sources following the matter said on Friday.
After threatening to pull out of the 20 billion euros ($27.84 billion) Airbus project, Britain has signalled commitment in principle to the European transporter but has put forward financial conditions that other partners are unlikely to accept, the sources said.
"Britain has made a two-fold financing proposal which is highly unlikely to be acceptable," a source familiar with the project said. Details of the proposals were under wraps, but a UK military source defended them as a "sign of commitment and pragmatism".
Manufacturer Airbus and its parent EADS declined comment. Britain has ordered 25 planes worth about 100 million euros each. It has said it needs the troop and equipment transport planes in Afghanistan but the UK's Treasury is carefully vetting defence spending amid heightened pressure on public finances.
The A400M dispute comes weeks after tough negotiations over the next phase of production of the Eurofighter Typhoon, which went down to the wire before the UK agreed to stay on board. Defence companies have warned Britain could lose thousands of high-tech jobs if its pulls out of the A400M and questions have been raised over how long Airbus, the world's largest civil planemaker, would keep aircraft wings production in the UK.
The A400M transport plane is designed to carry troops and equipment to combat zones like Afghanistan but has been delayed about four years. Facing losses on the plane, Airbus parent EADS, has asked for a renegotiation of the contract.
Buyers agreed a three-month moratorium preventing either side from taking drastic action over the project but this expires at the end of June with no sign of a common approach. Defence ministers from the seven European Nato nations that ordered the plane - Britain, France, Germany, Spain, Belgium, Luxembourg and Turkey - meet in Seville, Spain, on Monday to decide whether to extend the moratorium.
France and Germany last week backed the A400M and called for a further freeze of six months to allow more negotiations. Often described as a laggard in European negotiations, Britain is anxious to avoid being boxed in and has surprised some partners by being particularly active on the A400M talks.
If the project collapses, EADS would be forced to repay 5.7 billion euros in advance government payments. It has said it has spent the money on development and is now burning some 100 million euros a month of cash to keep the project in readiness. Some 4,000 engineers are involved in keeping the project afloat pending a decision on its future, an industry source familiar with the situation said on Thursday.