France pushes shift to ‘wartime economy’ as US turns its back on Ukraine

When President Emmanuel Macron first announced that France had shifted to a “wartime economy”, just months into Russia’s full-scale invasion of Ukraine, his martial rhetoric elicited widespread scepticism. 

Back then, in June 2022, the European Union’s only nuclear power was still spending less than 2 percent of its GDP on defence – shy of a target set by NATO a decade earlier. 

France was also facing uncomfortable questions about its small share of arms deliveries to Ukraine compared to other Western nations, which in turn exposed shortages in its own military stocks. 

Almost two years on, talk of a “wartime economy” is once again making headlines now that US President Donald Trump has turned his back on Ukraine, raising doubts about Washington’s commitment to NATO and the defence of Europe. 

“We’re not there yet, but we need to be heading towards (a wartime economy),” French Finance Minister Eric Lombard told Le Parisien at the weekend, promising to unveil new budgetary measures to boost defence spending in the coming weeks. 

“We must go faster and harder,” Lombard added in a separate interview with Franceinfo on Tuesday. “We will have to make greater efforts to protect ourselves, to build an economy in that protects peace, and to strengthen our defence within a European framework.”  

Peace dividend 

Like other European democracies, France slashed its defence budget and downsized its army in the decades following the end of the Cold War, reaping a “peace dividend” as it redirected resources to tackle structural problems including high unemployment and sluggish growth. 

While French defence spending finally passed the 2 percent mark last year, it remains a far cry from the 5.4 percent spent in 1960 and the 2.8 percent it was still spending in 1991, the year the Soviet Union collapsed. 

And while French military firms are among the world’s leading exporters, the sector employs just over 200,000 people across the country. 

“A wartime economy implies the mobilisation of the state apparatus and the majority of a country’s industries in support of a war effort, which is clearly not the case of France and other European countries,” said Alain De Neve, a researcher at the Royal Higher Institute for Defence in Brussels. 

“In fact, we are still a long way from a war economy – which is not to say that nothing has been done to bolster Europe’s defences,” he added. 

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US critics have long accused their NATO allies in Europe of “free-riding” while Washington extends its nuclear umbrella and deploys tens of thousands of troops to protect the continent. 

Speaking to US media last week, US Secretary of State Marco Rubio singled out France and Germany among the “big, powerful economies” that rely on the US for their security so they “can instead spend their money" on an “enormous social safety net”. 

The comments prompted a response from the French Foreign Ministry, which played up the “operational capabilities” of France’s armed forces and their ability to “conceive and conduct large-scale operations abroad”.  

The ministry also noted that France is now in line with NATO spending targets and on course to double its defence budget by 2030 – though even that target has been made inadequate by Washington’s abrupt U-turn on Ukraine. 

As De Neve observed, “The dramatic events of recent weeks mean France’s current defence spending plans are based on forecasts that are effectively obsolete.” 

Targets revisited 

As he returned from an emergency Ukraine summit in London on Sunday, France’s Macron acknowledged that his government would have to “review and increase” its current seven-year military spending plan in light of Washington’s changing priorities. 

The French president called on Europeans to dramatically increase their defence spending to over 3 percent of GDP – a figure previously advocated only by Baltic nations long alarmed by the threat from Russia.   

“For the past three years, the Russians have been spending 10 percent of their GDP on defence. We need to prepare what comes next, with an objective of 3 to 3.5 percent of GDP,” Macron said in an interview with French daily Le Figaro. 

That will mean proposing a new defence budget in the French parliament despite lacking a majority to pass it, and at a time when France is already under pressure to reduce its ballooning deficit. 

The government can expect little support from opposition parties on the far right and hard left, including nationalists, pacifists and critics of NATO who feel France should never have aligned with the US in the first place. 

Marine Le Pen, whose far-right National Rally party has long harboured Russian sympathies, supports France's rearmament but to serve French interests only. Her camp voiced outrage after Macron suggested extending France’s nuclear umbrella to protect its European allies. 

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French government debates extending France's 'nuclear umbrella' to all Europe © France 24

The moderate Socialist opposition, a staunch supporter of Ukraine, has been more open to boosting military spending in coordination with EU partners – provided France’s cherished safety nets are spared.  

“There can be no question of sacrificing our social model,” former president François Hollande warned in an interview with Le Monde on Friday, cautioning that such a move would be a gift to the “populists” and “appeasers” who would rather abandon Ukraine. 

Seeking to allay such fears, Finance Minister Lombard said Tuesday that maintaining France’s social protections was “absolutely essential”. He called on the private sector to step in, urging “banks and French investors to play their part in developing our defence’s industrial and technological base”. 

Rearming Europe 

Mobilising private capital is also at the heart of a plan to bolster Europe’s defence industry and increase its military capability that EU chief Ursula von der Leyen unveiled on Tuesday, just hours after Trump froze US aid to Ukraine, confirming Washington’s pivot away from Kyiv and Europe.  

Presenting the “ReArm Europe” package in Brussels, von der Leyen said the plan could raise nearly €800 billion for European defence while also providing “immediate” military support for Ukraine. 

“Europe faces a clear and present danger on a scale that none of us has seen in our adult lifetime,” the European Commission president said in a letter to EU leaders. “We are ready to step up.” 

French President Emmanuel Macron visits a repair warehouse for Puma military helicopters in Bourges, south of Paris, on October 27, 2022. © Lewis Joly, AP

Key to the proposals, which will be discussed at an EU summit on Thursday, are steps to spur defence investments by the bloc’s 27 member states by easing its strict budget rules, as well as a new €150 billion loan facility. 

In a sign of the changing times, the proposal was warmly greeted by Germany, traditionally the guardian of EU budgetary orthodoxy, with Foreign Minister Annalena Baerbock hailing “an important first step” towards the “quantum leap to strengthen our EU defence”. 

Guntram Wolff of Brussels-based think tank Bruegel said the measures went in the “right direction” but were “not a game changer”, telling AFP that he hoped for a more ambitious debate on joint borrowing once Germany's new government is in place. 

Describing von der Leyen’s plan as a “substantial step” in support Europe’s defence industry, De Neve cautioned against focusing exclusively on budgetary measures – to the detriment of coordination between national defence industries. 

“Europe’s problems are not merely a matter of budgets and numbers, but also of coordination,” he explained. “It is imperative that each country’s military planning fits into a wider and more coherent vision for Europe.” 

Pledges into orders 

Coordinating European procurement would not necessarily contradict France’s historic aim to preserve a sovereign production capability, De Neve added, noting that the priority should be to reduce each national defence industry’s reliance on the US. 

“If we can encourage European countries to buy European materiel, and thereby reduce our dependence on American components, that would already be a huge step forward,” he said. 

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Focus © France 24

With several major armaments manufacturers such as Thales and MBDA and a host of smaller defence firms, France is poised to play a prominent role in Europe’s rearmament. 

On Tuesday, the industry’s major players said they were ready and willing to fill the gap left by Trump’s Ukraine aid freeze. But they cautioned that getting there would take time and depend on how fast political pledges turn into contracts. 

Defence manufacturers have long complained that targets do not translate into orders, or that contracts end up going to US rivals. 

“Does Europe have the necessary technology to produce the full spectrum of defence equipment that it needs? The answer is yes,” Thales CEO Patrice Caine told reporters as the French firm’s share hit a record high. 

"It is more a question for buyers, governments and armies,” he added. “When the contracts come, we will be ready, but there is no point in being ready too far in advance.”