French, German tank-makers in defence tie-up

French and German arms manufacturers Nexter and KMW on Wednesday sealed a tie-up to create a European tank-making giant that hopes to become a leader in the international market.

After 10 years of discussions and a year of intensive negotiations, often overshadowed by reservations from the German side, the deal was inked at the defence ministry in Paris.

France's state-owned Nexter and the privately-owned Krauss-Maffei Wegmann (KMW) -- which will not merge but instead create a new joint venture -- together have an annual turnover of some two billion euros ($2.2 billion) and employ 6,000 people.

The future entity does not yet have an official name, but will become the world's fourth biggest manufacturer of land arms, such as tanks, armoured vehicles and cannons.

It will come in behind American giant General Dynamics whose land arms branch has a turnover of six billion euros, Britain's BAE Systems and America's Oshkosh Defense.

"The idea is to create a champion in this market slot, a European leader which can hold sway in a very fractured international market," said a source at the French defence ministry.

The enterprise is the latest in a line of European industrial tie-ups from the aeronautics industry such as Airbus and missile and defense systems manufacturer MBDA.

The tie-up between Nexter and KMW has however raised concerns among politicians and industrialists in Germany who fear losing control of their "Made in Germany" know-how.

"For key sectors such as tanks, artillery and intelligence, it is important to have a high level of national technology," said Roderich Kiesewetter, a lawmaker with Chancellor Angela Merkel's CDU party.

The issue of arms exports, much more restrictive in Germany than France, is also still a sensitive topic for Germans 70 years after the end of WWII.

However a spokesman for the German economy ministry said that "German rules will continue to apply" in terms of exporting arms to undesirable regimes -- particularly in the Middle East.

In France unions have raised concerns about employment, but the defence ministry said the tie-up was in fact likely to create jobs.

The new venture will be based in the Netherlands and will be up and running by December, according to a government source in Paris.