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

* Deal would create world's largest aerospace and defencefirm

* France, Germany and Britain battling over state role ingroup

* Britain says will veto merger if priorities not met

(Adds UK defence minister quotes)

BIRMINGHAM, England, Oct 7 (Reuters) - The proposed $45billion merger between EADS and BAE Systemsmust ensure British security and jobs are preserved, financeminister George Osborne said on Sunday, just three days before adeadline 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.

"Our approach to this has been to make it very clear thatour priorities are of course the national security of the UnitedKingdom, second: jobs and investment in the UK," financeminister George Osborne told Sky television.

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

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

The merged aerospace-defence group had to be free from thecontrol of any one government, he 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," Hammond said.

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

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

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

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 and Mark Potterand Ron Askew.)

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Keywords: EADS BAE/BRITAIN