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 (Reuters) - 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. (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)