UPDATE 4-UK says prepared to veto EADS-BAE merger

* Deal would create world's No.1 aerospace and defence firm

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

* Britain concerned over national security and jobs

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BIRMINGHAM, England, Oct 7 (Reuters) - Britain will blockthe proposed $45 billion merger between EADS and BAESystems if key "red line" priorities are not met,defence minister Philip Hammond said on Sunday, just three daysbefore a deadline for detailing the deal.

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

"We want to see this company ... prospering as a commercialbusiness, focussed on doing things that are right for thebusiness, not beholden to or controlled by any one government,"Hammond told BBC radio.

"It is not necessary to have no French or German governmentinterest in the company. It is necessary to reduce that stakebelow the level at which it can control or direct the way thecompany acts," he said.

EADS and BAE announced plans for a merger last month, buttheir efforts have become snagged on differences over controlbetween France and Germany, while there are also politicalconcerns about jobs.

"We have made very clear that we do have red lines aroundthe BAE-EADS merger and that if they can't be satisfied then wewill use our special share to veto the deal," Hammond said,referring to Britain's so-called "golden share" in BAE thatgives it the power to block a transaction involving the company.

Britain would judge the deal against how it protected thecountry's security and jobs, added finance minister GeorgeOsborne.

"Our priorities are of course the national security of theUnited Kingdom, second: jobs and investment in the UK," Osbornetold Sky television.

EADS is controlled by a pact between the French state andtwo core industrial shareholders, France's Lagardere and Germancarmaker Daimler. The trio collectively owns 45 percent.

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

Investors in both companies are also concerned about thelevel of political influence within the combined group, fearingit could hamper its chances of winning business from othercountries.

EADS chief executive Tom Enders sees the tie-up as a chanceto reduce government influence within a more commercialbusiness.

Enders and his counterpart at BAE Systems, Ian King, havevowed that the new company would have normal "governancestructures".

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

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

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

(Reporting by Guy Faulconbridge, additional reporting by GernotHeller and Tim Castle, Editing by Matt Falloon, Ron Askew andMark Potter.)