The long-range Arrow-3 air defence system is designed to intercept ballistic missiles outside of the Earth’s atmosphere.

The long-range Arrow-3 system is designed to destroy ballistic missiles above the Earth’s atmosphere and is reported to be powerful enough to offer protective cover to Germany’s neighbouring European Union states.

The budget committee in the lower house of the German parliament gave the green light on Wednesday for an initial payment of 560 million euros ($607m), news organisations reported, citing a member of the budget committee and sources.

The announcement marks a major turnaround for Germany after years of under-investment in its armed forces and comes amid Russia’s war in Ukraine, which has exposed a shortage in Western nations of ground-based air defence systems to counter missile and drone attacks.

Funds for the purchase of the Arrow-3 system will come from a landmark 100-billion-euro ($108bn) fund unveiled by German Chancellor Olaf Scholz to bolster the country’s defences in the wake of Russia’s invasion of Ukraine.

Berlin aims to strike a government-to-government deal with Israel on the purchase of the Arrow-3 system at the end of the year, according to procurement documents by the finance ministry that were prepared for parliament. But Germany could lose part or all of its advance payments should the deal fail, according to the papers, as the initial funds would be used to compensate Israel for costs incurred by then.

If the deal goes ahead as planned, a contract will be signed by the end of 2023, and Berlin expects the Arrow-3 system to be delivered in the final quarter of 2025. The initial payment is intended to set up manufacturing and production in Israel.

Scholz told a government press conference earlier on Wednesday the investment was “a big project that doesn’t just relate to Germany itself”.

Asked if he thought there was any risk in making the initial payment, Scholz said things were “progressing bit by bit and we believe that everything will also be approved”.

According to a report in Germany’s Tagesspiegel newspaper, the federal audit office had warned against releasing funds before initial construction work for the system had been completed in Germany.

Germany has led a push to bolster NATO’s air defences in Europe after seeing Russia’s relentless missile strikes on Ukraine, urging allies to buy deterrence systems together.

More than a dozen European countries have so far signed up to the so-called European Sky Shield Initiative.