EU should be able to spend 500 billion euros on defence over next 5 years, says Fitch

LONDON, March 28 (Reuters) - The European Union should be able to spend some 500 billion euros ($538.55 billion) over the next 4-5 years on defence, but governments have to think about offsetting measures to contain a rise in budget deficits, Fitch Ratings said on Friday.

"500 billion (euros) is what we estimate is doable or possible in the next four to five years, and this compares to some of the announcements that the EU has done about their estimates of investment needs, which are about 800 billion," said Federico Barriga-Salazar, senior director, sovereigns at Fitch.

"(We've been) getting news in the recent couple of weeks about governments pledging targets, but what we've tried to do here is ... assess what's the capacity of governments to do so."

Europe is dramatically stepping up spending on defence because of concern that the United States, which has guaranteed Europe's security since the end of World War Two, is no longer keen to do so.

Barriga-Salazar added that governments will need measures to offset defence spending to prevent deficits rising to 6% in the medium term.

Defence spending in Europe as a whole will stay at 2.5-2.6% of GDP by 2028, Fitch estimates.

($1 = 0.9284 euros)