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UPDATE 3-UK says security and jobs key to EADS-BAE merger

* Deal would create world's largest aerospace and defence firm

* France, Germany and Britain battling over state role in group

* Britain says will veto merger if priorities not met

(Adds UK defence minister quotes)

BIRMINGHAM, England, Oct 7 (Reuters) - The proposed $45 billion merger between EADS and BAE Systems must ensure British security and jobs are preserved, finance minister George Osborne said on Sunday, just three days before a deadline for detailing the deal.

Tensions over the supermerger have spilled into the open in recent days as France, Britain and Germany jockey over the role of the state in what would be the world's largest aerospace and arms group.

"Our approach to this has been to make it very clear that our priorities are of course the national security of the United Kingdom, second: jobs and investment in the UK," finance minister George Osborne told Sky television.

"Those are the tests against which we are judging the proposal brought to us by these two companies," Osborne said.

EADS and BAE announced plans for a merger last month, but their efforts have become snagged on differences over control between France and Germany, while there are also political concerns about jobs.

British Defence Secretary Philip Hammond said Britain would veto the deal if its "red line" conditions were not met.

The merged aerospace-defence group had to be free from the control of any one government, he told BBC radio.

"It is not necessary to have no French or German government interest in the company. It is necessary to reduce that stake below the level at which it can control or direct the way the company acts," Hammond said.

EADS is controlled by a pact between the French state and two core industrial shareholders, Lagardere and German carmaker Daimler. The trio collectively own 45 percent.

France wants to keep a stake but will not rule out adding more, while Germany wants to match France's role.

Britain's stake in BAE Systems is limited to a "golden share" that gives it the power of veto over the merger.

A person familiar with the negotiations said one of the points in dispute was where the new group would be based.

The German government would like an important part of the company, or indeed possibly its headquarters, to be based in Germany, the source said, adding: "It's like a round of collective bargaining".

Time is running out before a UK regulatory deadline of Oct. 10 for a blueprint of the deal, which affects national security interests on both sides of the Atlantic.

(Reporting by Guy Faulconbridge, additional Reporting by Gernot Heller and Tim Castle, Editing by Matt Falloon and Mark Potter and Ron Askew.)

((guy.faulconbridge@thomsonreuters.com)(+442075424758))

Keywords: EADS BAE/BRITAIN

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