France's Shift Towards a War Economy
In a recent report by Le Monde, it has been highlighted that France is transitioning towards a war economy, driven by rising arms spending despite ongoing budget constraints. The French military industry is witnessing an acceleration in production rates, fueled by unprecedented orders. However, the report notes that the industry's ability to adapt remains hampered by slow capital flow and bureaucratic procedures.
The French Navy has seen a significant reduction in its aviation bases, with only four remaining after 14 closures since 1980, a consequence of years of budget cuts. Captain Jean-Michel Ominier, commander of the Lann Bihoue base, expressed optimism, stating that “the recession is over” and that all aircraft will be renewed within the next 15 years.
Military Investment and Global Context
Despite President Emmanuel Macron's call for a shift towards a war economy, skepticism persists among military leaders regarding the revival of defense investment. Macron emphasized the need for France to enhance its defense capabilities, stating, “We must go faster, stronger and cheaper.” The global strategic environment has become increasingly challenging for France, particularly in light of rising global defense spending.
The Military Programming Act 2024-2030 has earmarked a historic budget of 400 billion euros for defense, with nearly 20 billion euros allocated to replenish ammunition stocks by 2030. This budget aims to accelerate production, with significant increases expected in the production of Aster missiles and air-to-ground bombs by 2025.
Challenges in Financing and Production
The transition to a war economy has led to increased hiring and the establishment of new production capabilities within the defense sector. However, access to financing remains a critical issue, particularly for companies involved in lethal activities. The reluctance of banks to support defense-related ventures has been a significant barrier, as highlighted by the challenges faced by startups in the sector.
As production rates rise, the financial needs of the industry are becoming more pronounced, with cash flow tensions likely to escalate. The report concludes that these challenges could impact the future success of French military equipment exports, even as the government pushes for a robust defense industry.
