It was planned to be the merger of the decade. A deal that would make the European corporate aerospace and defence giant bigger than Boeing. We are talking of course of the EADS-BAE merger, which was called off today, owing partly to the lack of enthusiasm from Angela Merkel, the German chancellor.

With 225,000 employees and 75 billion euros in revenues, the combine group would have been bigger by half than Boeing. But it needed the go-ahead from the governments of France, UK and Germany - plus the green light from private shareholders. The British government has a so called Golden Share in BAE while the other governments have direct or indirect shareholding interests: in BAE for the British government, and EADS for the French and German governments.

An EADS company spokesman said it was primarily the fault of the German government, according to the news agency AFP. But actually the story is more complicated than that. You could argue that the root of the problem was this.

The French government did not want to sell its 15% stake in EADS (which would have been nine percent of the merged group). and even talked of extending it by buying the 7.5% share owned by the French media conglomerate Lagardère. But because Germany did not want to lose its political influence in the group, it refused to renounce its intention to buy Daimler's 15% shareholding in EADS. Meanwhile, EADS's chief executive Tom Enders wanted a European aerospace company without any political involvement. So did the British.

Berlin might have had other motives. While dirigisme is in fashion again, the truth is Germany's experience with capitalism is that their companies have grown best without political interference. Their "interest" (via Daimler) in the current EADS share set up mainly to check the French instincts for fidgeting with the running of EADS and putting Frenchmen in a disproportionate number of company positions. Further, in recent international mergers with the French, the Germans see themselves as having drawn the short straw.

Many Germans are convinced that the 1999 Franco-German merger between Germany's Hoechst and France's Rhone Poulenc to create pharma giant Aventis was to France's advantage. One merger later France had a national pharmaceutical champion while Germany was left with nothing at all. What happened was this. In 2004, the Franco-German management of Aventis called for a merger with Swiss pharma giant Novartis, perhaps the world's best run pharma company. But the French government, pushed by then finance minister Nicolas Sarkozy, opted for a "French solution" to create a French pharma champion: merging with French pharma company Sanofi Synthelabo, without any mention of German interests.

In doing so they created a national French pharma champion. As German commentators saw it, the German government was ignored and reduced in role to a spectator.

The Germany CDU party's economic spokesman said today that his country ploughed billions of euros in developments costs for EADS and was deeply uncharmed by the current proposal to site the headquarters of the new group jointly in London (for the military division) and Paris (for the civilian division). According to a leak to Der Spiegel, the German counterproposal to make Munich the new headquarters was flatly rejected by the British and French governments. Maybe the Germans remember how earlier this year the European patent court was divided up between London and Paris - Paris getting most of the business - despite Germany having the biggest patent industry in Europe.

Nor was the commercial logic all that appealing to the Germans. BAE,a defence company suffered from the defence spending downturn in the UK and the US.

EADS has, through Airbus, ten years' worth of orders in backlog, but still had a desire to diversify unto defence in a big way and also crack the US market.

The Pentagon is said to be hostile to any EADS merger with a US defence giant so BAE it had to be - except it not clear whether the new Franco-German-British group would find the same profuse access to Pentagon contracts than a purely British company had and has. The new merged EADS BAE might find doors closed to it in Washington that were open to BAE, that access being one of BAE's strengths and attractions, ironically, for EADS. Put bluntly, the Pentagon may have some trust problems with Paris; just as Berlin does.

However, it is Britsh BAE - lacking EADS's surfeit of orders - that may suffer the most from the failure to merge.

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Pelle Neroth -- EU correspondent