By Johan Ahlander

STOCKHOLM, March 6 (Reuters) - Europe's defence sector has the capacity to meet rising demand for military equipment as EU member states scramble to boost defences, the CEO of Swedish defence company SAAB SAABb.ST said on Thursday, but contract talks needed to be sped up.

Europe is racing to boost military spending in a "sea change" moment for the bloc as Washington threatens to pull back aid. European Union leaders are set to discuss a proposal to mobilise up to 800 billion euros ($840 billion) at an emergency defence summit on Thursday.

That sparked a rally in the share prices of regional defence companies, which have been bullish about their ability to ramp up production, though cautioned this will take time and will rely on governments turning rhetoric into solid contracts.

"We can do it, absolutely," SAAB CEO Micael Johansson told Reuters, when asked if Europe's sector could step up in the wake of Donald Trump's suspension of military aid to Ukraine, locked in a years long war after its invasion by Russia.

"It's not done in a week or a month ... but I'm completely convinced that it can be done."

While European defence firms are in a stage of rapid expansion, the top five arms producing companies were all American in 2023, according to the latest data from the Stockholm International Peace Research Institute.

SAAB, which makes jets, submarines and anti-tank systems, has seen its share price soar 60% this year. It competes with defence giants such as U.S. firm Lockheed Martin LMT.N, France's Dassault AM.PA and Britain's BAE Systems BAES.L.

Johansson said concrete volumes and orders would need to be discussed earlier during talks with national governments to give firms confidence to expand. He added there remained bottlenecks in supply chains for certain components and gunpowder.

"Then we can from an industry side start to take a little more risk ... while we actually negotiate the contracts. That needs to be a lot faster, that loop," he said.

(Reporting by Johan Ahlanderl; Editing by Adam Jourdan and David Evans)

((johan.ahlander@thomsonreuters.com; +46 707 211027; Reuters Messaging: johan.ahlander.reuters.com@reuters.net))