PARIS/BERLIN - Airbus and buyer nations have intensified efforts to strike a deal this week over the funding of Europe's delayed A400M military transporter, exhausted by months of wrangling, sources close to the talks said.

French Defence Minister Herve Morin said on Monday the two sides moving closer together rather than further apart and a source from another European power said a deal to tackle ballooning costs on the project was closer than ever.

However talks remained fragmented and contingency plans to fanfare a deal on the sidelines of a meeting of NATO defence ministers in Istanbul on Feb 4-5 were on hold as their advisers prepared for negotiations in Berlin on Thursday.

It is not certain that a meeting (on the A400M) will be held in Istanbul, a Spanish defence source told Reuters, contradicting earlier hopes of a formal deal this week.

The idea had been for defence ministers to put the finishing touches to a deal but for now it seems the talks are not advanced enough for one to be ratified in Istanbul.

Engine problems and delays have pushed the European troop and armoured vehicle transporter 11.2 billion euros ($15.7 billion) over budget, casting a shadow over 10,000 jobs.

Last week, European nations offered to put 2 billion euros of extra funds into the A400M, but Airbus parent EADS has asked for 4.4 billion euros to kickstart full production.

The impasse at a time of tight defence budgets is likely to come up in summit talks between German Chancellor Angela Merkel and French President Nicolas Sarkozy in Paris on Thursday.

Also key will be the outcome of a consultation expected between the seven original buyer nations -- Britain, France, Germany, Spain, Belgium, Luxembourg and Turkey -- on Wednesday, a person familiar with the negotiating process said.

That will help determine whether countries that commissioned Europe's largest defence project can present a united front at talks with EADS now set for Berlin on Thursday.

Germany, the largest A400M buyer with an order for 60 planes worth 6.4 billion euros, has consistently criticised Airbus over the delays and cost overruns while France and Spain have called for a compromise deal to prevent the project unravelling.

Talks on the contract, which is worth a total of 20 billion euros for 180 planes, have dragged on for almost a year.

There is a willingness to be rid of this issue. It is not an ideological problem, but it is very complex to agree price and the financial conditions, a person close to the talks said.

The German defence ministry said it was too early to say whether the two sides were closer to a deal.

We'll only know that in the course of the discussions, a spokesman for the ministry said. (Reporting by Tim Hepher, Dave Graham, Julien Toyer, Matthias Blamont; Editing by Sharon Lindores)

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