By Sabine Siebold and Andreas Rinke

BERLIN (Reuters) -German government leaders on Friday pledged to raise regular budget outlays for defence to ensure Berlin meets its NATO spending target of 2% of economic output even after a special 100 billion euro ($106 billion) defence fund has been exhausted.

Defence Minister Boris Pistorius said Germany would incorporate higher spending into medium term financing plans.

He was speaking a day after the government pledged to make the German military the "backbone" of European defence as part of a major policy shift to boost spending and modernise its forces following Russia's invasion of Ukraine in 2022.

Germany has for years been criticised for spending too little on defence, effectively relying on the United States to underpin its security despite being Europe's biggest economy.

A pledge to hike defence spending comes at a time when German Chancellor Olaf Scholz's three-way coalition is haggling over spending commitments for next year's budget.

NATO expects Germany to spend 1.57% of its GDP on defence this year but that is likely to rise to 2% in 2024 thanks to a special defence fund that Scholz launched in his "Zeitenwende" or policy shift after the outbreak of war in Ukraine.

But the 2% rate can only be sustained with higher regular spending. Pistorius said the first steps to increase the regular defence budget would be taken next year and be effective for the 2025 budget and mid-term financial planning after that.

In a speech on Friday, Scholz said the government would adapt its budget "in such a way that the (military) gets the resources it needs – even after the special fund runs out."

Scholz and Pistorius also both underscored their commitment to the project known as FCAS to develop a combat jet with France and Spain as an example of closer European cooperation on defence.

Pistorius denied reports suggesting Germany could walk away from the deal due to disputes over design and financing.

"It is my strong intention to continue the projects of the future fighter jet system FCAS and the tank system MGCS together with France, and make them a success," he told a meeting of German generals.

($1 = 0.9369 euros)

(Reporting by Sabine Siebold and Andreas Rinke, Writing by Miranda Murray and Matthias Williams; Editing by Linda Pasquini and Tomasz Janowski)