BERLIN/PARIS, Nov 18 (Reuters) – France, Germany and Spain have reached an agreement on the start of the next phase of development of a new combat aircraft dubbed FCAS, the largest defense project Europe at an estimated cost of more than 100 billion euros ($103.4 billion). ), Berlin said on Friday.

Germany’s Defense Ministry said in a statement that an industrial deal had been reached after intense negotiations, confirming an earlier Reuters report that the three countries and their respective industries had reached an agreement.

The ministry said it was agreed at the highest government level that a cooperative approach on an equal footing would be pursued in the project, which is under the overall responsibility of France.

“The political agreement on FCAS is a big step and – especially in these times – an important sign of the excellent Franco-German-Spanish cooperation,” said German Defense Minister Christine Lambrecht.

“It strengthens Europe’s military capabilities and secures important know-how not only for our, but also for European industry.”

Earlier, sources said the next phase of development of the Future Combat Air System (FCAS) is expected to cost around 3.5 billion euros, to be shared equally between the three countries.

French Dassault (AM.PA)Airbus (AIR.PA) and Indra (IDR.MC) – the latter two representing Germany and Spain respectively – are involved in the replacement program for the French Rafale and the German and Spanish Eurofighters from 2040.

“Now a number of formal steps in the respective countries need to be taken in order to allow for a quick signing of the contract which we will have to adhere to,” Airbus said in emailed comments.

French President Emmanuel Macron and then German Chancellor Angela Merkel first announced plans for the SCAF in July 2017, which will include a fighter jet and a range of associated weapons, including drones.

Lately, the project – originally intended to unite Europeans after the migration crisis and Britain’s decision to leave the European Union – has been a source of tension between the two countries.

Last month, Macron canceled a joint Franco-German ministerial meeting over disagreements with Berlin over a wide range of issues, including defense and energy plans.

The two sides had been struggling for more than a year to agree on the next stage of SCAF’s development, although the French and German governments largely agreed on the project.

Some sources saw the blame lay with Dassault, as the company had refused to budge in a long-running dispute over intellectual property rights.

Other sources have criticized Airbus for pushing for a bigger share of the Dassault-led project, insisting it should be “on an equal footing” with the French company.

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Written by Sabine Siebold; Editing by Kirsti Knolle, Christoph Steitz, Louise Heavens and Emelia Sithole-Matarise

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