WRAPUP 4-Loans offered to help solve A400M row

* EADS founder nations offer loans to narrow cost gap

* Sarkoy, Merkel say everything must be done to save A400M

* Core funding positions still 2.4 billion euros apart
(Recasts with French comments; previously PARIS/BERLIN)

By Julien Toyer and Ilona Wissenbach

ISTANBUL, Feb 4 (BestGrowthStock) – France, Germany and Spain are
ready to offer loans to help defuse a crisis over funding for
the A400M troop plane, but only if Airbus owner EADS digs
deeper into its own pockets, a French minister said on
Thursday.

The loans, from the countries that founded Europe’s largest
aerospace group 10 years ago, would be drawn from a proposed
package totalling 1 billion to 1.5 billion euros in a bid to
narrow gaps left by inconclusive talks held in Berlin on
Thursday. Other buyers of the aircraft are Britain, Belgium,
Luxembourg and Turkey.

“We decided on a system of reimbursable advances between 1
and 1.5 billion euros which the (purchasing) states would put
on the table,” Herve Morin told reporters following
seven-nation talks with EADS (EAD.PA: ) in the German capital.

“It is possible that this system will be shared between the
countries which have the most important industrial involvement
— France, Germany and Spain,” he said.

The remarks came after negotiators failed to agree on a
multibillion-euro bailout for Europe’s largest defence
project.

Technical problems have pushed the 20 billion euro ($27.75
billion) project four years behind schedule and 11.2 billion
euros over budget, threatening up to 10,000 jobs and sparking
testy exchanges between leading buyer Germany and Airbus.

In Paris, French President Nicolas Sarkozy and German
Chancellor Angela Merkel called for urgent solutions to the
row.

“Everything must be done to reach a solution. It is a
decisive project that must be resolved very quickly,” Sarkozy
told a joint news conference after a Franco-German summit.

“With regard to the A400M project, I think that the
negotiations should be continued, and we agreed that this is a
project of strategic significance, and that everything should
be done to find a solution,” Merkel added.

The A400M is designed to transport soldiers and heavy
equipment to rugged combat zones like Afghanistan, and some
backers view it as a prop to Europe’s efforts to forge its own
defence identity.

EADS has appealed to the buyers for extra support to start
full production of the plane, which first flew in December. But
governments are unwilling to let taxpayers foot the whole
bill.

Talks broke off last week after EADS sought 4.4 billion
euros to keep the project afloat while buyers offered 2
billion.

NEGOTIATING GAP

German Defence Minister Karl-Theodor zu Guttenberg said
after Thursday’s fourth round of crisis talks in Berlin that he
was “not unhappy” with discussions on the project.

“Progress was made, but the negotiations must continue,”
Guttenberg said as he arrived at a NATO meeting in Istanbul.

However, a person familiar with the matter said the two
camps had failed to bridge a 2.4 billion euro gap in core
demands.

Nations offered EADS talks on a package of credits or loans
and on a disputed inflation formula, the person said, asking
not to be named because of the sensitivity of the talks.

Morin said the two sides could reach a deal in two to three
weeks but that this would require extra effort from EADS.

The timetable puts increased pressure on EADS, which had
set a Jan. 31 deadline for a deal and is anxious to draw a line
under its biggest crisis since delays to the A380 superjumbo.

The group faces major A400M provisions in its 2009 earnings
due on March 9, and an industry source said urgent
clarification was needed for its auditors. EADS declined
official comment.

EADS shares fell more than 2 percent to 14.25 euros.

It was not immediately clear how far EADS would resist
loans on its balance sheet rather than increased direct
support, but an industry source said “it all depends what the
terms are.”

One person close to the talks said nations remained split
on whether to offer loans, which were first proposed by
Germany.

Airbus recently threatened to shut down the A400M if a deal
could not be reached soon, risking a major confrontation with
the countries now offering loans and that formed it in 2000.

EADS is controlled jointly by French and German interests,
and the French and Spanish governments directly own stakes.

Germany’s defence minister, who has taken a harder line
than most on the row, warned the company against overplaying
its hand.

“There is a contract and we have an interest in not
allowing ourselves to be pressured unduly,” Guttenberg said
.

U.S. rival Lockheed Martin (LMT.N: ) has said it expects to
sell more C-130J Hercules planes due to A400M delays, and
analysts say a collapse could also benefit Boeing (BA.N: ), whose
larger C-17 jet-powered transporter faces a U.S. budget axe.

Stock Market Advice

(Additional reporting by Tim Hepher, Tracy Rucinski, Sophie
Hardach, Dave Graham, Matthias Blamont and Rene Wagner; Editing
by Greg Mahlich, Elaine Hardcastle and Steve Orlofsky)

WRAPUP 4-Loans offered to help solve A400M row