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UPDATE 2-France, Germany and Spain strike deal over joint combat jet

·2 min read

(Adds more detail, context)

By Tangi Salaün

PARIS, May 17 (Reuters) - France, Germany and Spain said on Monday they had reached a deal over the next steps of the development of a new fighter jet, Europe's largest defence project at an estimated cost of more than 100 billion euros ($121.4 billion).

France in particular has billed the combat jet project -- which includes a next-generation manned and unmanned aircraft -- as crucial for Europe to strengthen its defence autonomy and face competition from China, Russia and the United States.

The next development phase for the Future Combat Air System (FCAS) is expected to cost 3.5 billion euros ($4.25 billion), to be shared equally by the three countries.

"France, Germany and Spain are building one of the most important tools for their sovereignty and that of Europe in the 21st century," French Armed Forces Minister Florence Parly tweeted.

France's Dassault Aviation, Airbus and Indra - the latter two representing Germany and Spain respectively - are involved in the scheme to start replacing French Rafale and German and Spanish Eurofighters from 2040.

The sum will cover finalisation of the designs of both the combat jet and drone by 2024 and the building of demonstrators for both, a French defence ministry source said.

France and Germany had originally set the end of April for a deal, but a dispute over how to share intellectual property rights held up negotiations.

Under the terms of the agreement, the fighter jet will not have a black box to help preserve sensitive commercial know-how, the French defence source said.

However, even with a deal between the governments and aerospace companies, time is short for Berlin to secure the approval of Germany's powerful parliamentary budget committee ahead of September's federal election.

Approval is needed before funds can be spent and the process can take months.

Previously, a source with knowledge of the issue told Reuters the German defence ministry must refer the budget proposal to the finance ministry by May 19.

($1 = 0.8232 euros) (Reporting by Tangi Salaun in Paris and Sabine Siebold in Berlin; Writing by Sabine Siebold; Editing by Richard Lough and Emelia Sithole-Matarise)