French exit from tank project with Germany cannot be ruled out, Rheinmetall CEO says

FRANKFURT, June 13 (Reuters) - France could exit the Franco-German tank project MGCS, the CEO of Rheinmetall, one of the initiative's shareholders, was quoted as saying on Saturday, in what could be the latest blow to defence cooperation on the continent.

"There is always a risk, but nothing has been decided yet," Armin Papperger told Welt am Sonntag, commenting about the project in which Franco-German tank maker KNDS and French group Thales also hold stakes.

• Papperger said that France was considering drastic cuts to the project's budget, adding talks included the idea to reduce spending to "less than half" of previous plans.

• So far, the shareholding companies have received just €25 million ($29 million) since the project's inception, Papperger added.

• A French government source close to the matter said the project remains important for France and Germany as well as for KNDS. The source spoke on the condition of anonymity to discuss a sensitive matter.

• Berlin and Paris agreed in 2017 to work on the Franco-German Main Ground Combat System (MGCS) tank to succeed the German Leopard 2 and the French Leclerc, but the project has been hit with delays.

• Papperger's comments come days after Germany and France scrapped the FCAS joint fighter project while KNDS's governance structure has also created tensions between the two countries, sources have said.($1 = 0.8645 euros)

(Reporting by Christoph Steitz; Additional reporting by Elizabeth Pineau; Editing by Emelia Sithole-Matarise)