Italy has rejected Germany joining the UK-Italy-Japan GCAP fighter jet project as a full partner, offering instead observer status in Berlin with no development role.
Italy and Japan fear that German participation could delay the project and reduce work for their aerospace industries.
Germany considers observer status "unacceptable" and wants a significant industrial role in return for funding.
Berlin is looking for alternatives after its €100 billion fighter jet partnership with France collapsed in June.
Source: FT