* Rheinmetall to sign contract in coming weeks - paper
* To make Fuchs military vehicles in Algeria - paper
* Contract is part of 10 bln euro deal approved in 2011
* Rheinmetall shares pare gains
(Adds economy ministry and Merkel's comments)
FRANKFURT, June 18 German defence group
Rheinmetall is set to sign a 2.7 billion-euro ($3.7
billion) contract in the coming weeks to start production of
Fuchs military vehicles for Algeria, German business newspaper
Handelsblatt said on Wednesday.
The deal is part of a package of arms contracts with Algeria
worth 10 billion euros that was approved by the German
government in 2011.
At the time industry sources told Reuters that Rheinmetall's
joint venture RMMV was to build Fuchs vehicles, while Daimler
would sell trucks and off-road vehicles and
ThyssenKrupp would build frigates for Algeria.
According to Handelsblatt, there has been concern in recent
years about the risk of terrorist attacks and kidnappings in
Algeria, but the groundwork has now been done for the new
factory where more than 900 Fuchs vehicles are to be built.
Rheinmetall, ThyssenKrupp and Germany's Economy Ministry
declined to comment directly on the report. Daimler said
production of truck and bus parts in Algeria started this year.
Tobias Duenow, a spokesman for the German Economy Ministry
said while there had been many media reports on German arms
deals with Algeria of late, the approvals had been issued by the
previous German government.
"In the context of this complex, the Economy Ministry does
not currently have any applications for export permits so that
means there are no permits pending," he said.
Shares in Rheinmetall earlier rose as much as 3.6 percent to
the top of Germany's mid-cap index but had pared gains
to trade 2.16 percent higher at 52.02 euros by 1439 GMT.
Chancellor Angela Merkel said on Wednesday Algeria played an
important role in fighting extremists but avoided commenting on
the report about the Rheinmetall deal.
In a news conference with Tunisian Prime Minister Mehdi
Jomaa in Berlin, Merkel offered him German help training the
police and delivering bulletproof vests to boost security on the
border with Libya to stop Islamist militants infiltrating
"It is in all of our interests that Tunisia is able to
continue on a stable path," said the German leader.
(Reporting by Harro ten Wolde and Maria Sheahan; Additional
reporting by Tom Kaeckenhoff, Anneli Palmen, Ilona Wissenbach
and Berlin bureau; Editing by Mark Potter and Greg Mahlich)