PARIS — French President Emmanuel Macron is pressing his government to quickly carve out extra funding for defense amid fears of an American pivot away from Europe under United States President Donald Trump.
On Thursday, Macron held a meeting with Prime Minister François Bayrou, a centrist ally, to discuss the scale of the increases in spending needed to beef up France’s armed forces to make up for the possible American retrenchment and counterthreats from Russia. The duo were expected to “set a sort of trajectory” for upcoming defense expenditures, said a person with knowledge of talks.
Bayrou said last week that finding solutions to finance the military could take up to two months.
“We need to change gears,” a government adviser, who, like other people in this story, was granted anonymity to candidly discuss sensitive negotiations, told POLITICO. “It’s absolutely essential to link the efforts needed to the international emergency.”
France currently spends 2.1 percent of its gross domestic product on its military annually, but Macron wants to get that figure to more than 3 percent. According to estimates by French Armed Forces Minister Sébastien Lecornu, France’s military would ideally need a yearly budget of just under €100 billion — which would amount to finding about €30 billion more each year compared to what was previously foreseen by the military planning law passed in 2023.
But with France’s state deficit already expected to reach over 5 percent of GDP in 2025, it’s unclear where to find the cash to boost defense spending without raising taxes — which Macron has ruled out — or making deep cuts to welfare spending.
Some of the options on the table have included increasing working hours; controversially rowing back on commitments to review Macron’s pensions reform; and tapping into private investment.
Public Investment Bank to the rescue
In parallel to efforts to increase the state defense budget, the economy ministry has been tasked with finding ways to help the defense industry easier access capital and loans.
This week, several closed-door preparatory meetings have taken place between the prime minister’s office, the armed forces and economy ministries as well as lawmakers to prepare for a highly anticipated gathering on March 20 involving government ministers and representatives from the French banking and defensive industries.
After next week’s meeting, Economy and Finance Minister Éric Lombard and Lecornu are expected to unveil plans that will incentivize banks and private investors to help grow France’s defense sector.
When it comes to unlocking capital, the economy ministry’s preferred option is to leverage the Public Investment Bank, or Bpifrance, and the state-funded Caisse des dépôts et consignations, three people with firsthand knowledge of the plans told POLITICO. French life insurance policies, a type of savings product, could also be used to channel funds into the defense industry, they said.
“There are several avenues being explored, including strengthening Bpifrance’s instruments, possibly in the form of a retail fund that could open up possibilities for the general public,” said one of the individuals.
On Thursday, Lombard ruled out setting up a new type savings account dedicated to defense.
The economy ministry has also refused to tap into funds from France’s most popular savings account, the Livret A — even as Macron said that people’s savings could be mobilized to finance the defense effort. One of the arguments is that French citizens wouldn’t have the possibility to opt out, because of the way the savings account is structured.
Lawmakers from both the National Assembly and the Senate have long pushed for parts of the Livret A to be used to help defense small and medium enterprises borrow money — and there is “some discontent” about the economy ministry’s refusal to move on the issue, said one of the three individuals with firsthand knowledge the ministry’s plans cited earlier in this story.
The Livret A is “the point that can move the most in the next 10 days,” another one of the people said.
Macron turns the screws on ministers to boost defense spending
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