By Adrian Croft
BRUSSELS (Reuters) - European Union leaders agreed on Thursday to cooperate more closely on making falling defense budgets go further, while President Francois Hollande failed to win any promise of EU help to pay for French military operations in Africa.
Austerity-hit EU countries have slashed spending in response to the financial crisis, scaling back on ships, tanks and fighter jets and undermining Europe's military strength, much to the concern of the United States, its most important ally.
EU leaders, discussing defense at a summit for the first time in five years, called on member states to work together to spread the cost of developing expensive military kit.
They pledged to launch projects to develop a European drone by 2020-2025 and to look into a new generation of government satellite communications.
They also promised to increase the continent's air-to-air refueling capacity, after the 2011 Libya conflict demonstrated a shortage of tanker aircraft, and strengthen cyber defense.
Cameron said Britain, one of Europe's most capable military powers but one that has also scaled back spending, would support cooperation but drew the line at a European army.
"It isn't right for the European Union to have capabilities, armies, air forces and the rest of it. We need to get that demarcation correct between cooperation which is right and EU capabilities, which is wrong," he told reporters.
Britain has always been suspicious of giving too big a military role to the EU, fearing it could undermine NATO.
France, which has deployed 1,600 troops in Central African Republic to prevent worsening violence between Christian militias and largely Muslim Seleka rebels, has called for a permanent EU fund to be set up to finance military interventions like the French actions in Central African Republic and Mali.
While some European governments have lent logistical support, the funding proposal has received scant sympathy from France's EU allies, who say the bloc's funds can only be used to finance EU military missions, not national ones.
Aware his proposal stood little chance of success, Hollande did not raise the proposal directly, but told fellow EU leaders there was a need to look at financing for future missions, diplomats said.
Under a change France secured in the communiqué, EU foreign policy chief Catherine Ashton will draw up a report on improving the system of financing EU overseas operations.
Hollande said other countries, notably Poland, had said they were willing to send soldiers to Central African Republic. Leaders would return to the issue on Friday, he said.
"That should make it easier to get agreement tomorrow (Friday) to have the operation declared a European operation, opening the way to European financing," he said.
However, German Chancellor Angela Merkel made clear that would not necessarily be the case.
"We cannot finance any mission where we are not involved in the decision-making process," she said.
Hollande said Poland had agreed to send 50 air force technicians to maintain aircraft in Central African Republic.
Belgium, which had been considered a candidate to send troops to the country, would only consider sending soldiers as part of a European mission, Prime Minister Elio di Rupo said.
EU officials say the bloc could consider sending a future mission to Central African Republic, possibly a military training mission similar to the one it set up in Mali.
(Additional reporting by Paul Taylor, Robert-Jan Bartunek, Justyna Pawlak, Andreas Rinke, Tom Koerkemeier, Robin Emmott; editing by Luke Baker)