BERLIN - The German government could take a stake in arms-makers and defence projects in "strategic cases", according to a draft paper written by the economy and defence ministries, the Handelsblatt newspaper reported on Thursday.

The proposal is part of a new strategy Berlin is developing to strengthen Germany's arms industry, Handelsblatt said, as Europe bolsters its defences following Russia's 2022 invasion of Ukraine.

A spokesperson for the economy ministry said the paper had not yet been finalised.

The defence ministry could not immediately be reached for comment.

If approved, such a strategy could see the government taking stakes in companies and projects that it deems strategically important - already allowed in principle - more frequently, the report added.

The government already has a 25% stake in German defence electronics maker Hensoldt, according to LSEG data.

Sources told Reuters in June that state-lender KfW and private equity firm Carlyle were also in talks to jointly buy a majority of Thyssenkrupp's warship division, adding a deal could be agreed as soon as September if all parties agree.

Russia's invasion of Ukraine in February 2022 prompted a massive ramp-up of defence spending in Germany and other European countries, swelling the order books and market value of arms-makers such as Rheinmetall and Hensoldt.

The paper also contains recommendations across different areas, including promoting key technologies, improving the financial framework of the industry and simplifying regulations, according to the report.

  - Reuters