Germany faces defence industry job cuts beyond those already planned and could even see factories closed or moved abroad if the government insists on toughening restrictions on arms exports, the head of Airbus Group said.
The company's defence and space division already plans to shed some 2,000 industrial jobs in Germany.
"I am concerned about the increasingly restrictive arms export policy of Germany. This might trigger additional layoffs in Germany, beyond our current reduction plans," Airbus’s Chief Executive Tom Enders told Reuters.
"Eventually, we might have to consider closing down entire sites or product lines or moving them outside of Germany."
Earlier this week, German Economy Minister Sigmar Gabriel vowed a much more cautious approach to licensing arms exports, signalling a change in policy from the previous coalition government under which sales rose.
Airbus Group is in the midst of cutting a total of 5,800 jobs, mainly in its Defence and Space division.
Enders said it was too early to say how many extra job cuts might be involved since the Berlin government has been in power less than six months.
"This is a very recent development," he said. "It just appears that this government is even more restrictive than previous ones, and Germany is already known in Europe and beyond for a very restrictive export policy."
Arms exports have been a sensitive issue in Germany since the end of the Second World War, but have come under even more scrutiny in recent years because of the increased sums and because a greater number of arms are heading to non-European Union or NATO partners, and potentially unstable regions.
The Economy Ministry said most of the deals so far this year were approved by Chancellor Angela Merkel's 2009-2013 coalition government with the Free Democrat Liberals (FDP).
The ministry is now run by the Social Democrats (SPD) who criticised arms sales whilst in opposition. They formed a coalition with Merkel's conservatives in late 2013.
Earlier this month German media reported Gabriel wanted to block two deals to sell arms to Qatar and Saudi Arabia worth billions of Euros.
But Enders said deals waiting for approval included "non-lethal sensors" in which Airbus hoped to act as a lower-tier supplier to contractors in another NATO-member country.
In 2012, Airbus Group acquired optronics maker Carl Zeiss Optronics, which employs about 780 people.
The latest standoff is seen by the industry as a test for Germany's ability to compete for future defence deals.
However, any move to close or move factories from Germany could also provide the first test of recent Airbus governance changes that give Berlin a veto over some of the country's sensitive technology. Germany owns 11 percent of Airbus Group.
Enders, who has clashed in the past with Berlin over defence issues, said the combination of weak spending and the threat to exports could damage small and large businesses alike.
"Our job is not to make politics. If the government wants a very restrictive armament policy we will not be able to prevent them from doing so," Enders said.
"Our job is to show very clearly and up-front what the consequences of that will be. We cannot have a substantial defence industry, and no exports and no (domestic) orders, and believe this is something you could thrive on."
The German defence and space industry employs 105,000 people and reported combined 2013 revenues of €30.6bn.
Airbus Group, Europe's largest aerospace company, employs 144,000 people including about 12,000 in what used to be its Cassidian defence branch in Germany.
Enders, a former German defence ministry planner who backs more European integration on foreign and security policy, said the best solution would be a common policy on arms exports.