NATO Seeks Restructured Defense as EADS-BAE Tops Talks

The North Atlantic Treaty Organization favors restructuring Europe’s defense industry by making arms suppliers more effective as austerity measures and budget cuts threaten regional security.

The proposed merger between European Aeronautic, Defence & Space Co. (EAD) and BAE Systems Plc (BA/) will be the focus of discussions among French, German, U.K. and U.S. officials, British Defense Secretary Philip Hammond told reporters in Brussels, where defense ministers from NATO convened a two-day meeting.

“I consider such a merger a commercial decision, and it’s for shareholders and involved governments to figure that out,” NATO Secretary General Anders Fogh Rasmussen told a news conference today. “But let me stress that in general, I’m in favor of restructuring European defense industries with a view to making them more competitive and effective.”

EADS and BAE are mounting a last-ditch push to gain government backing for their merger, with less than 48 hours to meet a regulatory deadline, according to people familiar with the talks. Failure to meet the deadline would reveal the rift that is separating France and the U.K. from Germany, which is concerned about being left short-changed by the merger.

The meeting of NATO’s 28 members will focus on strengthening European defense forces as governments in the region slash budgets and reduce debt.

“At a time when defense budgets are under pressure, we also need to cooperate more on defense planning, training and exercises,” Rasmussen said. “This period of economic austerity poses a challenge to defense budgets, but it also opens an opportunity for strengthened cooperation and new ways to provide security.”

To contact the reporter on this story: Jonathan Tirone in Brussels at jtirone@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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