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“We’re not, but we should be.”
That was French economy minister Éric Lombard’s response to a question on March 1 asking if France is now in a war economy.
In June 2022, French president Emmanuel Macron addressed the country’s defense industry, four months after the Russian invasion of Ukraine. “Everything has changed,” Macron said, arguing that a war economy would be necessary to ensure Europe’s collective defense against Russia.
“It will require states to invest more, and for us to demand more from our industry,” Macron promised.
A bevy of jingoistic plans in recent days, promising trillions of euros worth of spending to construct a new decade of common European defense, makes it clear that France is jockeying to be the leading power in the new European military order.
That’s despite the fact that, according to both Macron’s government and European Union authorities, France is facing a serious budgetary deficit that it needs to address immediately.
Even before Donald Trump was elected, and before he and his vice president, J. D. Vance, clashed spectacularly on live TV with the president of Ukraine, Volodymyr Zelensky, the idea of a collective defense plan in Europe had been making headway.
Macron is one of Europe’s strongest supporters of the idea, and since his first election in 2017 has argued for what is now called “strategic autonomy.” Zelensky’s humiliation only accelerates long-standing plans by Macron to move out of Washington’s shadow and have France become the leading military power in a revitalized, rearmed Europe.
Supporters of Macron’s vision are now taking a victory lap as the United Kingdom and Germany discuss an unprecedented military break with the United States, including switching from the American nuclear “umbrella” to protection under France’s missiles.
In addition to discussing plans for increased European funding of Ukraine, a full-scale remilitarization plan is now also on the table for the continent. Ukraine produces around 55 percent of the military material it needs. Before Trump cut off weapon shipments on Monday, March 3, it got around 20 percent from the US, and the final 25 percent currently comes from Europe.
In a speech that same day, European Commission president Ursula Von der Leyen declared that the EU was now “in an era of rearmament” and promised an opening tranche of €150 billion in loans to member states for military investment.
“We are living in the most momentous and dangerous of times. I do not need to describe the grave nature of the threats that we face, or the devastating consequences that we will have to endure if those threats would come to pass,” Von der Leyen announced matter-of-factly, before laying out a plan to “ReArm Europe” which could see an additional €800 billion marshaled by Europe for military spending.
The Wall Street Journal, citing “current and former Western officials,” reported that Ukraine would have enough material to keep defending the country’s territory until mid-2025.
The United States has also cut off intelligence assistance to Ukraine and reportedly barred Britain from sharing US intelligence with Kyiv.
While Europe can keep providing artillery ammunition to Ukraine, US intelligence and sophisticated weaponry would be the most difficult to immediately replace without substantial European military investment. High-tech systems like surface-to-surface ballistic missiles, long-range rocket artillery, advanced air-defense systems, and navigation systems would be the most expensive gaps to fill. Europe’s current promises to supercharge military spending would ostensibly address these limitations, though it’s doubtful that Ukraine would be able to keep fighting on in the meantime, without having to accept some deal imposed by Washington.
With plans for European “defense sovereignty” churning, the French and German defense industries are positioned for massive windfalls from the martial plans flying around.
Even before Zelensky’s falling out with Trump and Vance, French defense companies like Thales, Safran, and Dassault Aviation were skyrocketing on the stock market. Thales was up 31 percent from the beginning of the year, Safran up 13 percent, and Dassault Aviation up 19 percent — all on fears and hopes that Trump cutting Ukraine out of the picture would encourage European arms spending.
After the Zelensky blowup, Dassault jumped another 14 percent with Thales not far behind, up 11 percent. It’s a similar picture to Germany, where the expected lifting of the borrowing limits under Friedrich Merz’s incoming Christian Democrat–led coalition has also fueled double-digit stock rallies for German companies who supply weapons manufacturers like Thyssenkrupp, Rheinmetall, and Renk.
At the start of March, Macron announced that France will spend between 3 to 3.5 percent of its GDP on the military, and called for the EU to invest €200 billion in common defense. This marks a striking shift in rhetoric around public debt.
After Macron called snap elections last June, the European Commission had warned France that it would face budget discipline for continuing to run a budget deficit over 3 percent of GDP.
When the commission made that announcement, France’s budget deficit was at 5.5 percent and predicted to go down to 5.3 percent by the end of the year.
But ahead of grueling budget negotiations that started last year and stretched into the middle of February, France’s deficit was predicted to be 6.1 percent of GDP. The new budget under Prime Minister François Bayrou, which includes €50 billion in spending cuts, is now forecasting a 5.4 percent deficit.
According to EU budget regulations, member states aren’t meant to maintain more than a 3 percent budget deficit, though France has always skirted the rules. The EU’s debt limit isn’t based on anything scientific and was invented by advisors to the former French president François Mitterrand as a way to avoid fulfilling spending promises he made to his French Communist Party allies when he was elected in 1981. In practice, the rule is most often used as a political lever to prevent EU member states from funding social spending or investing in non-market-led development.
A drumbeat of gloomy economic forecasts for France, including a negative outlook from the bond rating agency S&P, has set off another round of promises by France’s political class to continue driving the deficit down. That includes plans to put in place new parliamentary commissions to monitor spending and to balance any new war credits with a reduction in credits already allocated by the budget to other areas.
If the deficit stays high and France doesn’t manage to meet its anemic growth projections of at least 1 percent this year, the possibility of introducing a new amended budget for the year has also been raised. Either way, plans for the 2026 budget already include more cuts.
As the economy minister Lombard put it, France wants “room to maneuver” so that it can “regain expanded strategic autonomy.”
That means both increasing military spending and paying down the deficit. But how?
After Vance’s Munich Conference speech shocked liberal Atlanticists in mid-February, Von der Leyen called for relaxing Europe’s budgetary rules by excusing military spending from the calculation of national budget deficits.
Von der Leyen proposed using an EU budgetary tool first deployed during the COVID-19 pandemic to allow fiscal flexibility, which would mean new French military spending won’t count toward the 3 percent budget deficit limit. Much of France’s current deficit comes from increased COVID-era spending that was never offset because of a raft of regressive tax cuts under Macron.
Macron and his government are onboard with Von der Leyen’s plans, calling for a shared European deficit on defense.
“In circumstances as dangerous as these, we need to exclude military spending from the European deficit rules,” Bayrou told Le Figaro at the end of February. “By building a defense industry, our country has made efforts that other countries haven’t. It’s a considerable asset.”
Outside of deficit math, the government is also discussing introducing new savings accounts that French people can invest in to finance the war effort. Last February, the Socialist Party senator Rachid Temal introduced a law creating a “defense and sovereignty” savings account. At a Senate round table on February 20, the governor of the Bank of France proposed another savings account that would finance military spending.
Speaking in front of the French Senate on Wednesday, March 5, Bayrou gave a bellicose speech calling for a European military alliance, something that he said has “always been the message of France since General de Gaulle.”
“We have a population of 450 million people, and if you add the United Kingdom, we have 520 million people,” Bayrou told French senators:
The Russian population is 145 million. If you compare the GDP of the two, you see that the EU has €17,000 billion, and Russia has some €2,000 billion. If you compare arsenals, you discover that the European armies have 2.6 million soldiers, which is more than double those who might align with the Russian Federation. We have 15,000 aircraft, while Russia has 5,000. If we compare artillery, we have 15,000 and Russia has less than 10,000.
In the Senate, French Communist Party senator Cécile Cukierman pushed back, warning that increasing military spending would lead to a “social bomb.”
La France Insoumise MP David Guiraud told Jacobin in January that France’s manufactured deficit crisis was part of a premeditated plan to cut social spending.
“French capitalists have never tolerated social security,” Guiraud said then. “When it was created . . . it was hundreds of billions of euros which escaped the logic of the private sector, hundreds of billions of euros which they couldn’t make a profit off of. They know that they’re breaking social security. They know it. I think they do it deliberately for the most part.”
Boosting military spending while trying to maintain “fiscal discipline” will result in the same thing. A column by Janan Ganesh in the Financial Times on March 5 titled “Europe must trim its welfare state to build a warfare state” gave away the game even more directly.
“[T]he welfare state as we have known it must retreat somewhat: not enough that we will no longer call it by that name, but enough to hurt,” Ganesh wrote.
The threat of war is a useful motive.
“Chronic discomfort isn’t enough,” Ganesh elaborated. “An element of real fear has to come in, as perhaps it has now.”
And as the French weekly Le Canard enchaîné pointed out in an article noting the stock market rally for military suppliers, the last time France took out big loans for defense was in 1939.
Defense spending, then, not only serves as fuel for Macron’s geopolitical ambitions, but as a pretext to further pare back France’s social model.
Great Job Marlon Ettinger & the Team @ Jacobin Source link for sharing this story.
