Since the failure of the European Defence Community more than 60 years ago there have been numerous attempts to achieve closer military union, but they have foundered as member states have proven reluctant to hand over responsibility for military matters.
With a focus on reacting and defending against Russian aggression, the new set-up effectively gives Brussels a formal role in the overall strategic defences across the continent.
The possibility of the Permanent Structured Cooperation in the area of defense security and defense policy was introduced by the Lisbon Treaty.
By working together on joint projects, nations hope to use their combined spending power to overcome capability gaps, jointly buying equipment like air transporters or drones.
The EU's diplomatic chief, Ms Federica Mogherini, hailed the agreement as "a new page of European defence", saying countries had already proposed more than 50 projects. "The real problem is not how much we spend, it is the fact that we spend in a fragmented manner".
He explained that PESCO's structure will be more on a defence level.
"I'm a firm believer of stronger European defence, so I welcome PESCO because I believe that it can strengthen European defence, which is good for Europe but also good for NATO", Stoltenberg said.
Poland has chose to join the Permanent Structured Cooperation (PESCO) in the field of defense within the EU. The move, driven by France and Germany, is misguided.
He explained that tomorrow, during the Foreign Affairs and Defence Council in Brussels, those member states who intend to join PESCO are expected to jointly sign the notification letter addressed to the Council and the High Representative. This has led to unease by European allies that the U.S. was not committed to the alliance's mutual defence pact.
The deal is set to be formally launched on the eve of the next European Union summit next month, at which point it will become legally binding. He added that PESCO will remain open to all member states, and noted that it is important that its objectives are achievable regardless of the size of the countries involved.
Under PESCO, EU countries will commit to increase military spending, but not to specifically adhere to NATO's bottom line of moving towards 2 percent of gross domestic product for defense budgets by 2020.