The companies said in a statement they had signed a memorandum of understanding to develop a "new main battle tank" for Rome's forces and supply them with Lynx armed infantry fighting vehicle.

The combat vehicles and their support systems would be "developed and produced by Leonardo according to the requirements of the Italian client", the companies said.

Rheinmetall's recently developed Panther tanks and its latest Lynx models provided the "basic technology on which to build in both programmes".

The new entity -- ownership of which would be spit equally between Rheinmetall and Leonardo -- would be based in Italy, they said.

Final assembly lines and 60 percent of the overall production would also be based in Italy.

The tie-up between the two defence firms was a "fundamental contribution to the creation of a European defence space", Leonardo CEO Roberto Cingolani said in the statement.

The new tanks would provide the basis for a future joint-European tank model, being developed with the support of the Franch and German governments, the two companies said.

Leonardo was previously in talks with the Franco-German defence group KNDS about a potential partnership to produce Leopard 2 tanks.

The discussions, which begun in December 2023, were however abandoned last month after the two sides failed to find an agreement on the "configuration" of the project, according to KNDS.

Rheinmetall and other defence groups have seen a rush of orders as European countries look to rearm in the wake of Russia's invasion of Ukraine.

The German group has announced plans to build a host of new factories and has agreed a joint venture to produce ammunition in Ukraine.

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RHEINMETALL