German officials believe a proposed tie-up of British arms maker BAE Systems and European aerospace giant EADS could fail because it does not comply with European law, a news magazine said Sunday.
Spiegel, citing an unnamed source familiar with discussions at the German chancellery on the planned merger, said the potential problem focused on the issue of so-called golden shares.
Under the plan being discussed, the two groups would issue special golden shares in BAE Systems and EADS to each of the French, German and British governments.
The French and German governments hold big stakes in EADS, while the British state has a golden share in BAE that allows it to veto deals that it perceives not to be in the public interest.
But Spiegel said the European Union only allowed golden shares for armaments divisions when it was a question of protecting national security interests.
"For the civilian part of the company, that contravenes EU law," the news weekly cited the source as saying.
On Thursday, a spokesman for the German economy ministry said Berlin had been "informed" of the merger negotiations and had been "asked to support this merger."
"The federal government is currently examining all relevant questions," the spokesman said.
But German news agency DPA also reported on Thursday that the government had expressed scepticism.
"It is questionable whether the proposed structure can actually be agreed to," DPA said citing government sources, and spoke of "serious reservations".
"Alongside questions of European law, there is also the question as to the value of such an arrangement," DPA quoted sources as saying.