BRUSSELS, March 4 (Reuters) -

The European Commission proposed on Tuesday new joint EU

borrowing of 150 billion euros ($157.76 billion) to lend to EU

governments for defence as part of an overall 800 billion total

financing effort to boost Europe's defence capabilities.

The 150 billion euros of new joint borrowing is to go

towards building pan-European capability domains like air and

missile defence, artillery systems, missiles and ammunition,

drones and anti-drone systems or to address other needs from

cyber to military mobility, the Commission said.

"It will help Member States to pool demand and to buy

together. This will reduce costs, reduce fragmentation increase

interoperability and strengthen our defence industrial base,"

Commission President Ursula von der Leyen said.

EU leaders will discuss the proposal at a special summit

devoted to defence spending on Thursday.

The Commission also proposed to lift limits imposed by

EU rules on government spending in case of defence investments.

"If Member Sates would increase their defence spending

by 1,5% of GDP on average this could create fiscal space of

close to 650 billion euros," von der Leyen said.

The Commission also proposed that EU countries can use

for defence purposes money they receive from the EU budget in

funds to equalise the standards of living across Europe.

All these elements could provide up to 800 billion euros

for EU governments to spend on defence projects.

"Europe is ready to assume its responsibilities. Europe

could mobilize close to 800 billion euros for a safe and

resilient Europe. We will continue working closely with our

partners in NATO. This is a moment for Europe. And we are ready

to step up," she said.

The Stoxx Europe Aerospace and Defence index

rose on the news to 2284.88 from 2265.36.

($1 = 0.9508 euros)