Negotiations over the multi-billion-euro Herkules project to overhaul the army's information technology infrastructures were proving "difficult", a defence ministry spokesman told AFP.

"Financial demands being made by the consortium are posing a problem, but we're continuing to negotiate," he said.

The two sides would come together again at the end of the week for last-chance talks and have set a Sunday deadline to reach an agreement.

EADS forms the consortium with German telecoms operator Mobilcom and CSC Ploenzke, the German IT services unit of US group CSC.

Should the negotiations run aground, Berlin was not ruling out talks with rival consortium made up of Siemens, IBM and Deutsche Telekom, the spokesman added.

A report in the Thursday edition of Financial Times Deutschland said the EADS-led Isic 21 consortium and the defence ministry were haggling over additional infrastructure costs of some 500 million euros.

SPACE.WIRE