David Cameron's Government has warned France and Germany they must cut their stakes in European defence giant EADS if the proposed £30 billion merger with BAE Systems is to go ahead.
Defence Secretary Philip Hammond dramatically intervened in the negotiations, warning the issue was a "red line" for the Coalition. The Government has a "golden share" in BAE, meaning it has the power to block any potential deal.
There is increasing tension between some of Europe's most powerful governments over the proposed merger, ahead of a key deadline this Wednesday.
At the weekend 45 Tory MPs wrote to the Prime Minister urging him to force the French and Germans to drop their stakes in EADS.
Former Labour Chancellor Alistair Darling has also waded into the row, warning that the UK will be "taken to the cleaners" unless other governments reduce their control over what would be the world's largest defence contractor.
Mr Hammond said: "We have made very clear that we do have red lines around the BAE-EADS merger and that if they can't be satisfied, then we will use our special share to veto the deal."
He said it was not "necessary" for France and Germany to give up all of their interests in the proposed new company. But, he added: "It is necessary to reduce that stake below the level at which it can control or direct the way the company acts."
There are fears any such merger could have a direct impact on thousands of jobs across the UK. Around 40,000 people in Britain are employed by BAE Systems, around 5000 of them in Scotland. The company has told unions the potential merger would not result in job losses at Clyde shipyards.
However, there have been increasing fears that if French and German interests in the newly created defence giant were too powerful, then any deal could ultimately result in jobs being moved abroad.
Another senior Cabinet minister, Chancellor George Osborne, yesterday made clear jobs would be an important part of the considerations over any deal.
Mr Osborne said: "Our priorities are of course the national security of the United Kingdom; second: jobs and investment in the UK."
The warning from the Coalition Government comes amid reports that the deal is also under pressure from shareholders.
A number are thought to have expressed concerns at the continuing wrangling between governments.
Tom Enders, the chief executive of EADS, has suggested the merger could be an opportunity to cut political influences on the business.
By Wednesday BAE Systems will have to agree the deal, abandon it or apply for more time from the UK Takeover Panel, which oversees company mergers.
The SNP has said an independent Scotland should be entitled to part of the UK's "golden share" in BAE.
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