5 hours ago by: Arthur Beesley in Brussels

Brussels is finalising plans to deploy the EU budget for the first time for military purposes, as Britain’s looming departure removes a significant obstacle to increased defence co-operation among its members.

The proposed European Defence Fund would finance the development of prototype military kit such as drones, robots and cyber defence technology. The European Commission will in the coming weeks ask member states and MEPs to back the plans, which appear to stretch EU law to its limits.

France and Germany, the main backers of the drive for deeper defence integration, believe the UK’s planned withdrawal from the EU presents an opportunity to deepen its military activities. Britain has always resisted such moves, warning against the risk of wasteful overlap with Nato.

As part of a wider drive to boost EU defence co-ordination as Brexit approaches, remaining members will be asked to pool military spending to reinforce the bloc’s anti-terror defences and its external borders.

Diplomats expect the new fund to stake a big claim for defence expenditure from the EU budget at a time when Brussels will be under pressure to make up an annual budget shortfall of €10bn when UK contributions stop after Brexit.

The plan will be unveiled in early June by the European Commission, which believes the fund could spend €500m per year on research from 2020.

Foreign and defence ministers will attempt to advance the project at separate meetings this week in Brussels, but it remains contentious.

Although ministers resolved in March to set up an EU military command to lead non-lethal missions, the UK has objected to the expression “operational military headquarters” being included in the legal text that will give effect to that decision. €500m Proposed annual research budget of the European Defence Fund from 2020

One European diplomat said other member states had formed “the impression” that the UK stance follows recent tensions over Brexit between Brussels and London. However, another official insisted that the UK has not threatened to veto the text.

Diplomats said legal advisers to the bloc and its member states have stressed that, under EU law, the bloc’s budget cannot be used to fund any military operations.

Various financing proposals have been examined, among them the use of European “defence bonds”.

Brussels has now concluded that there is scope within European law to set up a dedicated fund that can tap the EU budget to develop high-tech military prototypes. “This is reaching the limits of the treaty, as far as it can go,” said an official familiar with the proposal.

The plan assumes the new European Defence Fund would provide money in partnership with groups of member states. The fund’s involvement would be strictly limited to the financing of prototypes, said diplomats familiar with the plan. Once the designs for drones or robots were complete, the fund would not be allowed to provide money to member states to procure the new technology in bulk. EU defence Germany calls for more joint European military initiatives The Brexit vote gives the EU a chance to increase security and foreign policy co-operation

When it puts forward the plan, the European Commission will rely on treaty provisions that give Brussels the right to take “any useful initiative” to promote co-ordination between member states to promote the bloc’s industrial competitiveness.

As part of the wider push for greater defence integration, officials are discussing the possibility that the European Investment Bank, which lends to member states for infrastructure projects, might become involved in financing military technology projects.

France has asked other member states to scrap restrictions that prohibit the EIB from backing projects that have purely military uses. But there has been concern within the EIB — and among other member states — that such a change could cut off money the bank brings in from “ethical” investment funds.

An EIB official said: “We do much that is linked to security already and we are considering ways of increasing our contribution based on our current policies and mission. This can give a strong support to new European initiatives, complementary to the planned defence fund.”