Austria leaves door open to try to exit Eurofighter contract

VIENNA, Oct 3 (Reuters) - Austria's defence minister said on Friday he did not rule out trying to exit a 2-billion-euro ($2.5 billion) Eurofighter jet contract should the legal opportunity to do so arise.

In 2012, the Alpine republic ordered a review of business deals linked to its 2003 order of 15 Eurofighter jets, aiming to settle allegations by Austrian politicians and German prosecutors that the deals might have served as cloaks for bribes paid to win the contract.

Austria has said in the past it might try to cancel the deal, or seek damages and a refund - since the Eurofighters have already been delivered - if it found bribes were paid. The contract has a get-out clause in case of bribery.

Defence and Sports Minister Gerald Klug was responding to a question at a news conference where he unveiled plans to cut annual costs in Austria's armed forces by 200 million euros due to budgetary pressures.

Asked whether it would still be a welcome option for Austria to exit the Eurofighter deal if legally feasible, Klug said: "If we have the legal opportunity I will get the best possible result for the taxpayer."

Vienna's defence ministry has been working with the judiciary and prosecutors in the investigation into the deal, but it is not clear when it will be completed.

Earlier this week, European military officials said a manufacturing problem had been discovered with the fuselage of Eurofighter combat aircraft, halting some deliveries, but that none of the jets had been grounded.

Austria said on Wednesday that routine checks detected a problem with a part on Eurofighter fuselages that reduces the life of the component by two-thirds.

Klug said a team of technical experts was investigating the issue and he expected a first interim report on Saturday.

The Eurofighter is built by BAE Systems (LSE: BA.L - news) in Britain, by Airbus Defence & Space on behalf of Germany and Spain, and by Italian aerospace firm Finmeccanica (Other OTC: FINMF - news) .

Austrian authorities said in November 2012 that they had raided sites in Austria, Germany and Switzerland as part of investigations into suspected bribery, money-laundering and fraud in connection with the 2003 deal.

Austria, which describes itself as neutral, does not fight wars but does take part in peacekeeping and humanitarian military operations and is obliged to maintain a fleet of jets to patrol its air space.

Klug said Austria now planned to cut back on heavy weaponry, reduce the armed forces' workforce by about 1,400 - six percent of the total - by 2018 and halve the number of generals as part of a cost-cutting plan that still needs full cabinet approval.7

He said the Austrian armed forces might rent out some facilities in Vienna to a zoo that needs space for its giraffes.

Austria wants to put together a 5 billion euro tax reform package next year, which could promote growth in a sluggish economy without boosting deficits and debt. (1 US dollar = 0.7925 euro) (Reporting By Shadia Nasralla; Editing by Mark Heinrich)