At a General Affairs and External Relations Council meeting on 14 June, EU foreign ministers gave the green light for the creation of a European Defence Agency (EDA) to coordinate the bloc's fragmented defence industry.

The task of the EDA will be to coordinate hardware purchases, promote European defence research and end Europe's long tradition of duplication in armaments research, development and procurement.

'The Council reached political agreement on a Joint Action establishing the European Defence Agency. This timely agreement should enable the Agency to begin functioning by the end of the year. The Agency is ascribed four functions, relating to: defence capabilities development; armaments co-operation; the European defence technological and industrial base and defence equipment market; research and technology,' reads a Council statement.

The creation of the agency is part of an ambitious six-year plan to sharpen the EU's military edge in the face of rapidly expanding US defence budgets.

With a combined defence budget of 160 billion euro and 1.6 million troops, the EU boasts the world's second- largest military force. Yet EU countries themselves spend only 30 billion euro on procurement and ten billion euro on research at national level, according to the UK Centre for European Reform (CER).

Pooling defence spending could save European governments five billion euro a year, said Daniel Keohane, security analyst at CER.

Furthermore, while the EU spends just under half of what the US invests in defence, experts say its military capability amounts to only a tenth of what the US gets for its money due to duplicate and incompatible equipment.

The agency will seek to promote research and development, identify equipment needs, propose multilateral projects and strengthen the continent's fragmented defence industry. It will have a staff of 25 and an initial budget of two million euro, rising to 25 million euro and 80 employees by 2005.

Europe three largest defence contractors, BAE systems in the UK, Thales in France and the French-German group EADS have backed the creation of the body, but called for a 'modest budget' to coordinate research spending among members states.