French Economy Minister Eric Lombard announced on March 20, 2025, that state investors are set to allocate €1.7 billion to bolster the capital of defense companies in France. This initiative, he explained during a conference focused on financing the defense sector, is projected to leverage private investments and could raise up to an additional €5 billion in support for the defense industry.
The push for increased funding comes amid escalating calls for enhanced military production, particularly in light of shifting U.S. policy regarding Ukraine and perceived threats from Russia. Lombard characterized these investments as "responsible," urging private investors to consider backing the defense sector. He asserted, "Some believe that financing our defense sector does not align with the ambitious environmental and social policies of the government. That belief is mistaken. Investments in the defense sector are responsible investments. It’s all the more responsible because these investments protect our sovereignty and the principles we stand for: democracy, freedom, and sustainable development."
Lombard further clarified that the term "controversial weapons" does not apply to any arms being funded, citing the existence of laws and international treaties that govern military arms.
The French defense technological and industrial sector consists of prominent groups, including Thales and Safran, supported by about 4,500 small and medium-sized enterprises (SMEs), with around 800 of those identified as strategically or critically important.
Meanwhile, the French Ministry of Armed Forces has requested an additional €40 billion to increase its annual defense budget from €50 billion to between €90 and €100 billion, equivalent to 2% of GDP currently, rising to 3.5% by 2030. Sébastien Lecornu, the Minister of the Armed Forces, has been vocal in advocating for this substantial budget increase, arguing it is necessary to bolster France's military capabilities in the face of growing security challenges.
However, this request faces significant obstacles. France's sovereign debt has surpassed 110% of GDP, contributing to a state budget deficit exceeding 5%. The government is caught in a paradox where rising defense costs collide with a backdrop of economic constraints. Government officials have voiced skepticism regarding the feasibility of such increases without incurring more taxes or cutting back on other crucial public services.
On a European level, Brussels introduced some transitional measures aimed at easing states’ budgets to accommodate chronic deficits, providing a temporary fund to finance certain initiatives. Despite this, the trajectory for France’s defense budget raises doubts—could it truly meet the demands set by the Ministry of Armed Forces?
In a related effort, the French government is engaging with its citizens through an innovative initiative called the "defense loan." Announced by Minister Lombard during a televised event, the defense loan aims to allow individuals to invest between €500 and several thousand euros to finance the defense sector. Details, such as the specific interest rates, are still under discussion, but Lombard forecasts that such schemes could yield around €450 million, significantly contributing to the €5 billion target that defense companies require.
The idea is to generate public engagement in the defense investment, but economists stress that the loan's appeal hinges critically on an attractive interest rate—ideally around 3%—to compete effectively with existing savings options available to the public. With the forecasted doubling of the defense budget to over €100 billion by 2030, the French government is adamant that it will not raise taxes during this period, stating that citizens’ savings will remain intact and that it is up to them to decide whether to invest.
However, the implementation of these ambitious programs faces skepticism from financial pundits, especially given the reported record net loss of €7.7 billion by the Bank of France in 2024 due to the dual impacts of the COVID-19 pandemic and the ongoing war in Ukraine. François Villeroy de Galhau, the governor of the Bank of France, described the situation as a rare sequence of "two extremely unusual episodes."
The persistent calls for increased military investment illustrate a significant shift in France's defense policy trajectory. As European countries respond to global tensions and security expectations grow, it is clear that the French government finds itself at a critical juncture. Balancing fiscal responsibility while attempting to fulfill these defense demands poses unprecedented challenges for the French administration. Will they find the necessary financial means to secure the future of France's military capabilities?
