June 26, 2007 / 6:45 PM / 11 years ago

UPDATE 1-Austria, Eurofighter agree cut in jet purchase

(Adds Eurofighter confirmation, Darabos comment)

By Mark Heinrich

VIENNA, June 26 (Reuters) - Austria has reached a settlement with an EADS-led EAD.PA group to reduce a 2 billion-euro ($2.7 billion) order for Eurofighter jets to 15 from 18, for a saving of some 400 million euros, the government said on Tuesday.

Austria’s purchase in 2002 of 18 Eurofighter jets, approved by the then-conservative government, turned controversial after a parliamentary investigation into the deal launched last year unearthed suspicious payments.

The Defence Ministry and Eurofighter reported the deal a day after an independent legal expert said proposals by the Social Democratic-led government to cancel the deal entirely would expose Austria to punishingly high costs.

Both sides said they had negotiated a deal this week under which Austria would take delivery of 15 instead of 18 jets.

“That corresponds to a saving of around 400 million euros to the taxpayer. The minister will present the agreement to the cabinet on Wednesday,” ministry spokesman Stefan Hirsch said.

In Germany, a spokesman for Eurofighter put the cost reduction at 370 million euros and said the first jet would be handed over to Austria in coming days.

Defence Minister Norbert Darabos, a Social Democrat, told Austria’s ORF state television that the government would realise the saving in cash by 2009 at the latest.

He said he had not obtained the approval of the co-governing conservative People’s Party but hoped to get it at a cabinet meeting on Wednesday.

If not, he would wrap up the deal himself. Officials said Darabos did not legally require the conservatives’ assent but he would do his best to get it in the interest of unity in a sometimes fractious coalition formed five months ago.

The parliamentary inquiry exposed payments by a Eurofighter lobbyist to a family member of an Austrian general overseeing the deal. The general was suspended. Darabos reopened negotiations with Eurofighter in early 2007.

Eurofighter, owned by EADS, BAE Systems BA.L and Finmeccanica SIFI.MI, said it did not violate anti-bribery rules and had observed the purchase contract’s code of conduct. Initially, Social Democratic Chancellor Alfred Gusenbauer’s government wanted to call off the deal, although the conservatives supported the purchase.

Darabos said on Monday he could still guarantee Austria’s airspace was safe even with a lower number of jets. As a neutral country, its main task is to monitor suspicious flight movements by foreign aircraft.

(Additional reporting by Christian Kraemer in Munich)

((Editing by Steve Orlofsky; Vienna Newsroom +43 1 531 12 276)) Keywords: AUSTRIA EUROFIGHTER

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