A herculean push to merge aerospace giants EADS and BAE Systems received a much needed boost on Tuesday with a reported last minute compromise between France and Britain to limit state influence in the proposed new company.

An agreement between states, which is key for talks to continue past a Wednesday regulatory deadline, now hangs on Germany which could still keep negotiations to create the world's biggest aerospace and defence company from moving any further.

The two groups, EADS dominated by Germany and France, and BAE Systems which is important to British and US defence policy, intend to say before the day is done if they want to go on with the tie-up.

The heads of the two groups, "Ian King (BAE) and Tom Enders (EADS) will discuss the situation later today and then decide, jointly with the respective company boards, the way forward," a spokesman for the European Aeronautic Defence and Space Company said on Tuesday.

EADS said earlier in the day that France and Britain had made significant progress on a major sticking point that had bogged down talks on tying up the major aerospace and defence companies in recent days.

In France, French Finance Minister Pierre Moscovici also voiced confidence matters were moving forward.

"We belive we have defended the interests of France and Europe well and completely in this complicated merger," French Finance Minister Pierre Moscovici told lawmakers.

It was up to management to "reveal where we stand" he said. "They will do so shortly."

Whatever the case, the two firms must announce the state of play by a deadline of 05.00 pm London time (1600 GMT) on Wednesday under British takeover rules.

A marriage would change the global shape of the two sectors since the new group would be present on land, sea and in the air, building tanks and missile systems, torpedoes, airliners, rockets and satellites.

EADS wants to expand in the United States better and gain better access a civil aviation market which is forecast to grow in coming years, to boost its arms industry activities, and to broaden its cost base from euros into dollars, the currency of aviation sales.

--Boardroom power, golden shares --

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The negotiations on the tie-up, announced on September 12 to create a group valued by the firms at $45 billion (35 billion euros), are complex and are known to have run into deep reservations by the German, French and British governments.

The main question bedevilling the talks has been whether the deal can be structured to satisfy Germany and France over their boardroom power in the new entity and over retaining the industrial base and employment.

This consideration has fueled concern within the British government of undue political interference in the merged group, and problems which might arise over BAE Systems' role as a major supplier to British and US defence forces.

Interests in France and Germany representing the two governments each vote on behalf of 22.35 percent holdings in EADS. Spain owns 5.45 percent.

Until six years ago, BAE Systems owned 20 percent of the Airbus aircraft maker, EADS' main asset, but pulled out to focus on the US market and also owing to weariness with the political structure and in-fighting at the top of EADS.

A critical second question is whether the tie-up makes strategic and industrial sense and is likely to generate benefits for shareholders. Shares in EADS have fallen heavily since the proposed tie-up was announced and BAE Systems shares have slipped.

EADS stock has fallen 12 percent since Sept. 11, the day before the deal was announced. It stood at 29.65 euros and now stands at 26.08 euros.

The two firms present the tie-up as a merger even though EADS shareholders would have a 60-percent stake.

BAE employs 83,600 people, mainly in Australia, Britain, India, Saudi Arabia, and the United States, and reported sales last year of 17.77 billion pounds (22.4 billion euros, $28.8 billion).

EADS employs about 133,000 people at more than 170 sites worldwide, and posted 2011 sales of 49.1 billion euros.