The agreement envisions a Permanent Structured Cooperation, or PESCO, which is meant to give the European Union a more coherent role in tackling worldwide crises, follows the announcement of a $6.4-billion European Defense Fund last June.
"The UK as a full participating member-state has a veto but hasn't used it".
European Union officials have identified defense as an area where they have made progress on multiple fronts since Britain voted to leave.
This permanent framework for defense cooperation will allow those member states willing and able to jointly develop defense capabilities, invest in shared projects, or enhance the operational readiness and contribution of their armed forces.
"We are agreeing on the future cooperation on security and defence issues ... it's really a milestone in European development", he added.
France and Germany proposed the initiative past year as part of their efforts to breathe new life into the European project after Britain voted to leave the bloc.
A general view on a plenary hall as 23 EU member states sign the notification on Permanent Structure Cooperation (PESCO) on the margin of a foreign affairs council at the European Council. Germany wanted the pact to include as many countries as possible while France wanted it to be as militarily ambitious as possible, they said.
The next step will be for European Union leaders to sign the legally binding agreement in December.
Also, warnings by U.S. President Donald Trump that European allies must pay more towards their security seemed to have propelled the project forward.
The EU stresses that PESCO is complimentary to North Atlantic Treaty Organisation, in which 22 of the EU's 28 countries are members.
The agreement commits countries to "regularly increasing defence budgets in real terms" as well as devoting 20 percent of defence spending to procurement and two percent on research and technology. At launch the focus will be project-driven such as the development new military equipment such as tanks or drones. "I think that European co-operation on defence questions will rather contribute to saving money - we have about 50 per cent of the United States" defence spending in Europe, but only 15 per cent of the efficiency'.