BERLIN, Aug 8 (Reuters) - 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.