The money, equivalent to $9.5 billion, is to be spent over the next seven years on backing joint research and development projects aimed at improving Europe's defences, with up to eight percent going on new "disruptive technologies".

"We must increasingly be able to take our own security into our own hands, and to be a security player on the world stage," EU internal market commissioner Thierry Breton told the European Parliament.

"The European Defence Fund is an essential building block in increasing independence for Europe."

Debate has raged for decades over what role Brussels should play on defence, and EU member nations -- most of which are also NATO allies -- have often been reluctant to agree moves to integrate military capabilities.

Agreement on the fund comes as France spearheads a push for EU "strategic autonomy" -- arguing the coronavirus pandemic, a resurgent Russia and former US leader Donald Trump's threats to cut off allies show Europe has to be able to stand alone.

Ambitions on common defence have gathered steam in recent years, and all but two EU nations signed up to the landmark PESCO (Permanent Structured Cooperation) pact in 2017 to increase cooperation.

The departure of Britain from the bloc saw the EU lose some military and diplomatic heft, but also removed a fierce opponent of anything that might lead to a European army from the Brussels conversation.

The European Parliament's pointman on the fund, Zdzislaw Krasnodebski, sought to dismiss "urban legends" that the new programme set the bloc on the path to a united military.

"It's not the first step to create a European army and the monies will not be used by member states to purchase military equipment together," he said.

"The dreams of the first European platoon, or legion, or any other sort of formation will have to be left for the future."

The defence fund was first proposed by previous EU chief Jean-Claude Juncker, who initially wanted 13 billion euros for the programme.