The German government is determined to prevent any consolidation among Europe’s space-hardware companies from reducing Germany’s industrial base, according to the chairman of the German Aerospace Center, DLR.

Sigmar Wittig said that while Germany pursues a generally hands-off policy with respect to private-sector mergers, the government has invested too much in developing its domestic industry to permit the business to migrate from German territory.

“In general, we stay out of industrial affairs,” Wittig said in an interview here April 11. “But space is an important part of tomorrow’s technology society and we need to maintain our industrial base. This is one of the underlying aspects of how we look at industrial developments.”

Wittig was referring to the recent announcement by Thales Group that it would purchase the space business of Alcatel, and might eventually consider a fusion with EADS Astrium to create a single large European prime contractor.

The Thales-Alcatel deal means that two shareholders in the concession that will take over Europe’s Galileo satellite-navigation project will now become one.

Germany’s status as Europe’s biggest economy makes it the biggest contributor to the 25-nation European Union (EU) and thus the biggest contributor in the EU’s 50-percent financing of Galileo. The European Space Agency (ESA) is paying the other 50 percent of Galileo’s early development costs, and Germany has an equal share with Italy, France and Britain in the ESA payments.

To protect the German government’s interests, Germany insisted on taking an equity-ownership stake in the concession that will manage Galileo as a private business for 20 years. The concession contract is expected to be signed late this year.

The German government ownership of the concession is through the TeleOp consortium.

Wittig said Germany’s initial review of the Thales-Alcatel deal has found no particular problems for the Galileo shareholding structure. “We will just have to counter-balance it, and this development is one reason why it was so important that we be a shareholder in Galileo,” Wittig said.

Adding EADS Astrium into Thales, he said, would be another story. “I don’t have a position on this as we would have to see what the effects would be in Germany,” Wittig said. “A big consortium could have its merits, but we would need to be sure that Germany kept its supplier base and its capability of producing new technologies.”

While never saying so publicly, the German government already has reacted to Europe’s space-sector consolidation.

EADS Astrium has a large presence in Germany, and its parent company, European Aeronautic Defenc e and Space Co., is co-managed by German and French chief executives. But EADS Astrium, since its creation in mid-2000, has never appeared sufficiently German in the eyes of Berlin officialdom.

EADS Astrium was part of a series of industrial consolidations that resulted in Britain’s largest space manufacturer being purchased by French companies. To date, the British government has given no sign of protest. EADS Astrium’s British operation remains robust, even if foreign-owned.

Germany has taken another approach. Instead of accepting the consolidation trend as a rational response to government and commercial market conditions, Germany has stimulated the creation of another, all-German satellite prime contractor, OHB-System of Bremen.

The German Defense Ministry bypassed EADS Astrium in awarding OHB the five-satellite SAR-Lupe radar reconnaissance contract, the largest military satellite program ever approved in Germany.

More recently, Germany forced its ESA partners to approve development of a small geostationary-orbiting satellite platform, with OHB as the intended beneficiary.

The satellite-platform development program, approved by ESA governments in December, came several months after EADS Astrium signed an agreement with the Indian Space Research Organis ation’s Antrix commercial subsidiary to join forces in small geostationary telecommunications satellites.

Wittig said the newly installed German government under Chancellor Angela Merkel appears ready to raise Germany’s technology-research spending, and that DLR likely will receive an annual 3-percent budget increase as a result.

He said most of the increase would be directed toward German national space programs and DLR’s in-house research and development program. But Germany’s ESA contribution also will rise, by perhaps 1.5 percent a year, he said.

Germany’s total space budget is about 750 million euros ($907 million) per year. For 2006, German contributions to ESA programs are expected to be about 550 million euros.