*

New definition needed as spending caps eased

*

'Defence-relevant' items will qualify

*

But some countries want broader scope

By Jan Strupczewski

BRUSSELS, March 20 (Reuters) - When do state investments

in arms factories, or the wages of tank crews and pilots not

count as defence spending? Answer: When the EU rules say they

don't.

Until a few days ago that was the case, with the bloc

sticking to a narrow definition of spending on defence hardware.

On Thursday, EU leaders will study ways to mobilise hundreds

of billions of euros to boost the military readiness of the

bloc, which has hastily redefined what it classifies as defence

spending.

The revamp, needed because of Russia's threats to its

eastern flank and concern over the U.S.' commitment to European

security, means the region's 27 national governments will get a

four-year reprieve from EU deficit caps that will allow them to

spend more on defence.

But while that spending - worth around 1.5% of Europe's

total economy each year - will start to make up for decades of

underinvestment in security, it can only be given the green

light if everybody agrees on what defence spending actually

means.

Before a rule change agreed by finance chiefs last week, the

building of an ammunition plant was classified as construction

rather than defence - something Poland discovered when it

pressed ahead with a new 5 billion zloty ($1.3 billion) factory.

Until now, the defence category was quite narrow, allowing

EU governments to apply it only to already-delivered hardware -

tanks, planes, guns - while excluding the costs of training,

hiring and paying new tank crews, pilots and mechanics.

That will change as the EU broadens the category to include

most things that are relevant to defence, including so-called

"dual-use" goods that can be used by both the military and

civilians.

These include stronger roads and bridges to support the

passage of tanks, or the production of drones, helicopters,

satellites, radars and underground shelters.

BORDERS?

The wider definition is more aligned with what NATO

classifies as defence spending as part of a longstanding target

for such expenditure to reach 2% of GDP. But it still leaves a

lot of room for interpretation by national capitals.

"The debate went already very broad and now, of course, what

you're seeing is specific member states coming with their own

specific ideas on what else should be considered as defence,"

one senior EU official said.

While Italy shares no borders with Russia, its

arch-conservative government wants the wider definition to

include what it spends on dealing with migrants coming from

Northern Africa - a request that will not fly, EU officials

said.

EU officials say border protection can be defined as

"defence" only if it is refers to part of a military

installation built to prevent an invasion, rather than normal

border guard spending on patrolling the sea to catch boats

carrying migrants.

Spain meanwhile has asked for climate change projects to be

included in the defence category, an idea the Commission

dismissed in the same way as it did migration-control spending.

While cyber security in general would not make the defence

list, EU officials said, computers bought by the military to

prevent cyber attacks would qualify.

"The idea is that it has to be of defence relevance," a

second senior EU official said.

($1 = 3.8519 zlotys)