Britain's defence minister on Monday stressed he would only agree to a tie-up between BAE Systems and European aerospace giant EADS if he could be sure it would not damage relations with the United States.

With time running out before an October 10 deadline for detailing the deal, talks have stalled over the influence Britain, Germany and France will have in potentially the world's largest aerospace and arms group.

Philip Hammond said the government would not assent to any deal that threatened British jobs or security and also insisted that the US, BAE's biggest customer, must be satisfied that European government stakes in any future company would not threaten its security.

"If we can get the safeguards we need for British jobs, for Britain's national security, for Britain's defence industry and, crucially, for its relationship with the US, then we will give the deal our blessing," he told Channel Four News.

"We believe for this to work, this company has to be allowed to operate as a commercial company, not as a branch of the French or the German government.

"And that means a reduction in the stake that the French or the Germans have in the company."

Hammond warned on Sunday that Britain could use its "golden share" to block a planned merger unless France and Germany agree to limit their stakes in the future company.

Fund manager Invesco Perpetual, the biggest single shareholder in the British arms maker, warned Monday it had "significant reservations" over the deal.

Hammond maintained that "the shareholders absolutely have to agree for it to happen" before a deal can be struck.

As the Pentagon is BAE's biggest single customer, a merger with another foreign entity requires the blessing of the Committee on Foreign Investment in the US, a state body chaired by US Treasury Secretary Timothy Geithner.

EADS, which makes Airbus jets, and BAE Systems announced last month that they wanted to create a $45-billion (35-billion-euro) giant to rival US rival Boeing, but Berlin, Paris and London each has a veto right on the merger negotiations.

France holds a 15-percent share of EADS which would be diluted to nine percent in the new entity. Germany wants the right to buy a nine-percent stake in the new group to maintain parity with France.

Hammond will hold three-way talks with his French and German counterparts at a meeting of NATO defence ministers in Brussels on Tuesday.