Greece plans to modernize a total of 85 outdated F-16 fighter aircraft amid tensions with neighbouring Turkey, the government said.

The arrangement with the US for the upgrades will cost 1.1 billion euros (1.34 billion dollars), according to Greek defence sources.

Turkey and Greece, both members of the NATO military alliance, have for decades disputed their territorial boundaries in the Aegean Sea and on the divided island of Cyprus.

Turkish and Greek jets have been intercepted in the region on a near-daily basis, and in February a Turkish coastguard boat rammed a Greek ship in the south-west Aegean.

As part of the arms build-up, Athens also plans to buy two French frigates, Defence Minister Panos Kammenos said Wednesday.

Greece is one of the few NATO countries that spends more than 2 per cent of gross domestic product on its defence budget, a target agreed to by member states in 2014.