BERLIN (Reuters) - Germany opposes a proposal by France and Italy to use bonds to finance a new 5 billion euro (4.32 billion pounds) European Union defence research fund, saying it would not be a viable way to finance European military projects, according to the Handelsblatt newspaper.
Such a plan would "violate the basic principles of good budget practices and therefore is not a viable option for financing European defence efforts," the paper quoted a German government paper as saying in its Monday edition.
Germany also argued in the paper that it would be unacceptable to view national contributions to the fund, which was first proposed in November, as one-time measures to obtain exemptions from European stability and growth requirements.
The European Commission first proposed the fund in late November as a way of allowing European governments to lower costs by joining forces to buy new helicopters and planes.
Paris and Rome back a proposal from the commission that would allow money for the fund to be raised on capital markets, underwritten by capital or governmental guarantees, but Germany is strongly opposed, the newspaper reported.
It said Berlin could block any agreement to move in that direction.
The German defence ministry referred questions to the finance ministry, which could not be immediately reached for comment.
(Reporting by Andrea Shalal; Editing by Ros Russell)