How to finance French rearmament and other priorities by 2030?

Since 2014, Europe has begun to rearm, a process accelerated by the war in Ukraine. Some countries have already substantially increased their military budget, often financed through deficit spending. France, although historically active and equipped with nuclear weapons, has seen its spending stagnate around 2% of GDP over the last twenty-five years. After an initial increase, the 2023 Military Programming Law (LPM) set the course for a sharp rise in spending through 2030, but exceeding this trajectory would demand an unprecedented effort.

This note aims to shed light on the financing challenges of such an effort. It looks ahead to 2030, attempting to take into account the additional constraints and priorities that will weigh on our public finances over the next five years.

There are four main levers for financing rearmament. First, controlling public spending, which would require unprecedented cuts in other areas, including social benefits or civil service. Second, a major increase in taxes and social security contributions, which would have a negative impact on business activity. Third, an increase in the employment rate –an ambitious and difficult goal in the short term. Finally, the use of European financing, in particular through joint indebtedness, which would raise political and legal challenges but would allow part of the effort to be shared with our partners.

Relying on a single lever seems unrealistic given the scale of the effort required. It would therefore be necessary to mobilise several instruments to finance large-scale rearmament. The right balance between these different levers will have to be the subject of democratic debate.

Beyond budgetary constraints, this rearmament may also face several obstacles: difficulties in recruitment, strained production chains, particularly in terms of manpower or critical materials, requiring massive mobilisation to achieve such an ambition.

Finally, the effectiveness of rearmament will also depend on European cooperation. To organize this, a joint strategic review and a European military programming document could be established, with spending partially financed by joint debt, and a collective target, part of which would be dedicated to the purchase of equipment produced in Europe (’European 1%’), in order to strengthen the continent’s strategic autonomy.