France is facing a significant challenge in rearming while managing tight public finances. President Macron emphasizes the need for increased military spending, advocating for a rise to 3-3.5% of GDP, which could require an additional 30 billion euros annually. With scrutiny over its public deficit, France plans to grow its defense budget significantly, yet faces obstacles in mobilizing European funds and garnering public support for necessary fiscal sacrifices amidst political fragmentation.
Rearming France: A Challenge Amid Fiscal Constraints
The French government is grappling with the complex task of rearming the nation while navigating the delicate landscape of already strained public finances. With the 2025 budget just approved, President Emmanuel Macron has underscored the urgency of this issue, labeling the situation as a “threat” posed by Russia.
In a recent televised address, Macron outlined the pressing need for reforms and courageous choices, emphasizing that European nations should elevate their military expenditure to between 3% and 3.5% of GDP, up from the current 2% in France. This shift could require an additional 30 billion euros annually, posing significant challenges given existing budgetary constraints.
France is under scrutiny from Brussels for its public deficit and is tasked with curbing expenditures across ministries to adhere to a target deficit of 5.4% of GDP by 2025, a reduction from approximately 6% in 2024. In stark contrast, Germany is preparing to allocate hundreds of billions of euros for its military enhancements, a strategy championed by the future Chancellor, Friedrich Merz.
Fiscal Dilemmas and Defense Budget Growth
According to Economy Minister Eric Lombard, achieving national independence necessitates a careful management of public debt. François Ecalle, president of the financial analysis platform Fipeco, cautions that even before considering an increase in military funding, the government is already facing a precarious fiscal situation.
The defense budget, which has seen a rise of over 3 billion euros, remains one of the few sectors exempt from cuts in the 2025 budget. Projected to grow from 50.5 billion euros this year to around 67 billion by 2030, this increase is part of a military programming law amounting to 413 billion euros for 2024-2030, as stated by Minister of the Armed Forces Stéphane Lecornu.
With a projected annual defense budget nearing 100 billion euros, France aims to strengthen its military capabilities. However, government spokesperson Sophie Primas acknowledged that the mobilization of European funds—targeted at 800 billion euros—might fall short of addressing the nation’s defense requirements.
While the European Commission and both Berlin and Paris advocate for excluding defense spending from the excessive deficit calculations, finding budgetary flexibility remains a challenge. Macron has ruled out tax increases, and Lombard has dismissed cuts to social spending. Ecalle notes that achieving substantial savings without affecting social and local expenditures is a daunting task.
The Ministry of Economy is also looking to stimulate private investments in the defense sector by convening financial institutions. To attract these investments, it is crucial to establish a clear public order book to enhance production capabilities. As Julien Malizard, from the Institute of Advanced National Defense Studies (IHEDN), stated, spending on domestic military equipment can stimulate economic activity, though it may not entirely offset the incurred costs.
Despite the Minister of the Armed Forces’ intent to rally French citizens to voluntarily support these efforts, Bercy is currently not considering new financial products or the utilization of frozen Russian assets, as proposed by some political leaders. In the fragmented political climate following the dissolution of the National Assembly in June 2024, the most significant challenge may be rallying public support for fiscal sacrifices. Malizard emphasizes that beyond the economic aspects, achieving social acceptance for certain decisions is critical.
Prime Minister François Bayrou aims to preserve the social model, while the left opposes any new sacrifices, amidst discussions on welfare state reforms. As the government engages in consultations on pension reforms and strives to improve employment rates, Macron has called upon social partners to present viable solutions.