Declining budgets challenge France as it seeks fiscal control, defense autonomy

The top priority of France’s newly elected president, Francois Hollande, is to slash government debt. Although this is no surprise, such a primary goal requires sacrifices as well as new priorities in an environment such as the current very challenging one: The economy is weak, growth is minimal, and the aerospace and defense industry’s production costs are too high to efficiently sustain competition.

Initial steps to kick off a difficult recovery effort are being devised and defense budgets are not expected to be significantly reduced. France benefits from a long-lasting bipartisan agreement to protect defense spending from short-sighted cuts. Moreover, although they are expensive, platforms that are symbolic of national influence and pride will not be touched by the budget ax. Nuclear-powered submarines carrying ballistic missiles, and Dassault Mirage 2000Ns and Rafales will remain cornerstones of France’s defense policy. During the presidential campaign, defense was hardly mentioned and military procure¬ment spending was never an issue.

However, the Hollande administration acknowledges that changes will be made to better take into account the need to be very careful with money. An updated defense white paper is scheduled to be completed in the next few months. The previous white paper was introduced less than four years ago, but that was before the recession and worldwide financial crisis. In the last few weeks, Hollande and Prime Minister Jean-Marc Ayrault have not referred to military issues, while Defense Minister Jean-Yves Le Drian has been focusing on matters such as France’s accelerated withdrawal from Afghanistan.

The truth is that reconsidering defense spending is a delicate undertaking and policymakers are reluctant to elaborate on pending issues. Objectives of the 2008 white paper rapidly became unrealistic because the fiscal crisis hit public deficits, says Montreal University’s Martial Foucault. He recently scrutinized France’s defense budgets on behalf of Ifri, an influential Paris-based foreign policy think tank. Foucault believes that France’s military plans face unavoidable reductions, and he says the 2008 white paper’s objectives are unachievable, due to incredible constraints.

To achieve its objectives, France’s military spending should not be less than 2% of its gross domestic product, though it is now 1.7% and suffering from soaring program costs. French policymakers are familiar with former Lockheed Martin CEO Norman Augustine’s «law» that while defense budgets grow linearly, military aircraft unit costs grow exponentially. Moreover, the French administration may soon be involved in sensitive arbitration, welfare vs. warfare, Foucault says. In other words, the world’s fifth-biggest power will be attempting the impossible, trying to square the circle, with national pride as strong as ever and geopolitical obligations that cannot be compromised.

Europe’s biggest military powers, the U.K. and France, are endeavoring to cooperate more tightly than ever to achieve economies of scale while at the same time following divergent paths. For example, the U.K. is a major partner in the U.S. F-35 Joint Strike Fighter program and so has relinquished plans to develop a follow-on national fighter project or participate in a European initiative. France, on the other hand, funds the Rafale multirole fighter, is the prime contractor on the Neuron (the European drone technology demonstrator scheduled to fly soon) and believes it should protect its ability to develop a next-generation combat aircraft.

The time of strictly national programs is gone, French defense officials and industry executives say, but Europe nevertheless should be able in due time to launch a next-generation combat aircraft. They add that the Airbus A400M airlifter, being produced by eight partner nations, shows the way, despite the fact that it struggled mightily through its development phase.

However, to produce a next-generation combat aircraft, Europe must be able to speak with a single voice. Even in the best of times, that is a very ambitious objective.

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