Italy flags interest in tapping EU SAFE fund for defence

ROME (Reuters) -Italy has asked to tap a new European Union arms-buying fund aimed at helping member states to fund their investments in defence, Economy Minister Giancarlo Giorgetti said on Wednesday.

Together with other NATO partners, Italy has committed to boost its defence spending to 3.5% of national output from the current 2% and commit a further 1.5% to broader security-related spending, meeting U.S. President Donald Trump's demand for a 5% overall target.

Italy was among several countries that have asked the European Commission to tap the fund, Giorgetti told reporters on the sidelines of a parliamentary session, confirming what three government officials had previously said.

By tapping the Security Action for Europe (SAFE) scheme Italy would expect to secure access to funding at lower interest rates than it would pay by issuing sovereign bonds on the market, Giorgetti said.

"If you ask me to choose between paying 3.5% on domestic government bonds or 3% on SAFE loans the economy minister if he is not dumb replies: I pay 3% on SAFE loans and save some interest," he told reporters.

Under the scheme, the EU will issue up to 150 billion euros ($173 billion) of funding over a decade to provide loans to EU countries to support common defence procurement.

Rome wants to use up to 15 billion euros of SAFE loans to finance already planned spending through 2030, one of the officials said.

($1 = 0.8657 euros)

(Reporting by Angelo Amante and Giuseppe FonteEditing by Frances Kerry and Ros Russell)