(Adds program approvals, details, byline)

By Jim Wolf

WASHINGTON, Sept 17 (Reuters) - The U.S. Senate on Wednesday overwhelmingly approved a $612.5 billion defense spending bill for fiscal 2009, including $70 billion for operations in Iraq and Afghanistan.

As passed on an 88-8 vote, the measure would authorize $103.9 billion for Pentagon procurement, $1.2 billion more than President George W. Bush's request. Overall, Bush had asked for $611.1 billion for national defense.

The bill shifts more of the costs of Iraq's reconstruction onto Baghdad. It also puts further restrictions on contractors working in Iraq, including prohibitions on interrogations and the performance of "inherently governmental functions" in combat.

The measure must now be reconciled with the $612.5 billion version passed by the House of Representatives on May 22.

The Senate bill would let the Pentagon spend $70 billion in Iraq and Afghanistan in the fiscal year that starts Oct. 1 and authorize a 3.9 percent pay raise for military personnel, half a percentage point more than sought by Bush.

House and Senate negotiators are due to meet next week on a compromise version that can be sent to Bush for signing into law.

Among sticking points is the Boeing Co <BA.N>-led Future Combat Systems, the centerpiece of Army modernization. The House cut $200 million from the $3.6 billion requested to continue development of a $160 billion system of digitally linked vehicles for air and ground combat.

The Senate approved without major change the Bush administration request for Future Combat Systems. SAIC Inc <SAI.N> is Boeing's co-lead manager on the FCS program.

The Senate bill would authorize $8.9 billion for Missile Defense Agency programs, $411.8 million less than Bush's request. (Reporting by Jim Wolf; Editing by Eric Walsh)

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