* Islamist militancy in Sahel spreading
* West sees need to contain instability
* EU plans mission, faces budget constraints
By Justyna Pawlak
BRUSSELS, March 14 (Reuters) - The European Union is considering sending security experts to Niger to help combat a growing threat from al Qaeda and regional instability after the rebellion that toppled the Libyan government, EU diplomats said on Wednesday.
EU foreign ministers will discuss the idea at a meeting on March 23, diplomats said. If the plan is approved, it could see a small mission deployed to train local police and security officials in the coming months.
"Our objective is to support local governments in the region in ensuring better security," said one diplomat. "The aim is to get something operational this year."
Western concerns over instability in the southern Sahara have grown in recent months, with a spate of kidnappings of Westerners by al Qaeda's North African wing, and expectations of deepening food shortages later this year.
Since the end of the Libyan rebellion which ousted Muammar Gaddafi, an influx of arms and nomadic ex-fighters into the region has raised concern that Islamist groups may exploit lawlessness and expand their influence.
Security experts say international support in counter-terrorism is urgently needed in a remote region that has long been a safe haven for smugglers and rebels, and where governments can struggle to assert their authority.
But many EU governments are reluctant to commit themselves to another foreign security mission while existing projects face funding and equipment shortages at a time of domestic austerity.
Among existing schemes, the EU plans to reduce its police mission in Kosovo by a third, even though critics say the project already lacks the necessary clout to stamp its authority in the largely lawless northern regions of Kosovo.
And the bloc is also short of warships for its counter-piracy mission off the Somali coast.
Diplomats say EU capitals are ready to back an overall mission plan for Niger, largely because of a strong push from France, which has strong historical links to the region.
But the project could face staffing problems later, even if, as expected, it involves just a small group of trainers.
"Many governments are reluctant about the idea, arguing we should first spend more resources on existing missions rather than jump around the world with new projects," one EU diplomat said.
"But the French seem to be determined to have a mission on the ground already in the first half of the year."
Broader plans for the mission envision involving the authorities in Mali and Mauritania at a later stage.
Niger said in December it had deployed elite forces in the Sahara and Mali announced increased security in its northern town of Kidal - in a region where Tuareg nomads who had fought for Gaddafi were believed to be gathering.
Analysts say regional rifts complicate security efforts and that militants can work to gain support by accusing governments in the region of collaborating with the West.
"There is no doubt that there is international concern over the rise of Islamist extremism in the Sahel," said Thomas Wilson of africapractice, an Africa-focused consulting firm.
"It would be best for the international community to train African organisations to be more effective, by working through regional bodies, but many of the countries do not see eye-to-eye." (Reporting by Justyna Pawlak; editing by Rex Merrifield)