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* Joint defence research to renew fleets, end waste
* "We face multiplying threats and we must act"
* 5 bln euro fund would allow governments to develop assets
* EU budget could invest in military research for first time
* Fund, if approved, could issue bonds on financial markets (Updates with British, German reaction)
By Robin Emmott
BRUSSELS, Nov 30 (Reuters) - The European Union unveiled itsbiggest defence funding and research plan in more than a decadeon Wednesday to reverse billions in cuts and send a message toU.S. President-elect Donald Trump that it wants to pay for itsown security.
Part of a broader push to revitalise defence cooperation,the European Commission proposed a 5 billion-euro ($5.3 billion)fund to let governments club together to buy new helicopters andplanes to lower costs.
Another plan to let the EU's common budget and itsdevelopment bank invest in military research would open the doorto new drones, cyber warfare systems and other hi-tech gear, EUofficials said.
"This is not about an EU army, this is not about spending onthe military instead of social security," European CommissionVice President Jyrki Katainen said. "We face multiplying threatsand we must act," the former Finnish premier said, stressingthat all assets developed would belong to national governments.
The main proposal is an investment fund for defence, whichcould allow EU governments that pay in to also borrow from it.
There were no immediate details on how the bloc planned topersuade member states to move away from the current system,where many pursue their own defence projects, favouring localmanufacturers and duplicating efforts.
"Only new common armaments' programmes will guarantee thesurvival of our defence industry," said German centre-right EUlawmaker Michael Gahler. "What is missing are cooperativeprogrammes," he said.
The bloc has 19 types of armoured infantry fighting vehicle,compared with one in the United States. Wasted funds amount to25 billion euros a year, according to Commission data.
However, big EU countries such as Germany, which has one ofthe world's largest defence industries, stand to gain most fromthe Commission's proposals, with smaller nations at greater riskof losing business, some EU officials concede.
One proposal is for the fund, which would require anintergovernmental treaty to be set up, to raise capital onfinancial markets by issuing bonds, with the Commission offeringto run the fund but taking no ownership of it.
In a gesture to indebted France and Italy, governmentcapital in the fund that is not spent directly on purchasingequipment could be excluded from national budget deficits thatEU rules require to be less than 3 percent of economic output.
BEYOND BREXIT
The Commission said it was also time to lift restrictions onusing its budget for military research - proposing 500 millioneuros a year could be spent on innovation from 2021.
A 90-million-euro pilot plan is set to get under way nextyear and the Commission could potentially allocate 3.5 billioneuros from the budget between 2021 and 2027.
"It won't be easy but we need to spend better by spendingtogether," said EU Industry Commissioner Elzbieta Bienkowska,adding that money would be for agreed projects, not an openinvitation for broad research.
To help smaller companies, the European Investment Bankcould also finance innovation if a majority of governments agreeto remove the ban on backing military projects, possibly asearly as next year.
Defence research spending by EU governments has fallen by athird since 2006, leaving the EU reliant on the United Statesfor advanced warfighting equipment.
During the U.S. election campaign, Trump questioned whetherthe United States should protect allies seen as spending toolittle on their defence, raising fears that he could weakensupport for NATO at a time of heightened tensions with Russia.
A report by the German military seen by Reuters showed itsTornado jets were ready for use just 44 percent of the time andits newer Eurofighters had a readiness rate of 52 percent.
An earlier Commission plan in 2003 failed to win overgovernments; Britain, especially, has argued that deeper EUdefence integration could undermine NATO. This time around,France, Germany and Italy are hoping that Britain's decision toquit the bloc will remove a barrier to deeper cooperation.
Britain's pending departure removes one of the biggestcontributors to the EU budget, but a British diplomat said thatLondon may seek to collaborate on defence research from outsidethe bloc because it sees the need for European capabilities.
"We have made clear that we are likely to want a closerelationship on foreign and security policy, so it is possible,"the diplomat said.
In what could be a precedent, nations outside the EuropeanUnion can take part in the bloc's non-military researchprogramme, called Horizon 2020.
Involvement in the proposed defence fund was less likely,the diplomat said. But Geoffrey Van Orden, a former British armybrigadier who is now a Conservative Party lawmaker in theEuropean Parliament, said Britain would not want to lose accessto EU markets as a major weapons manufacturer.
"We wouldn't want to see a major market being closed."($1 = 0.9438 euros)
(Additional reporting by Andrea Shalal in Berlin and Tim Hepherin Paris; Editing by Alastair Macdonald and Alison Williams)