France has announced the creation of a €450 million state-backed investment fund under Bpifrance to support defense projects, as the government looks to secure €5 billion in funding from both public and private sources.
However, François Villeroy de Galhau, governor of the Bank of France, has warned that defense spending must be measured and financially sustainable, cautioning against an “at-all-costs” approach.
Bpifrance is a state-owned investment bank that plays a key role in financing French industries, including defense. It provides loans, guarantees, equity investments, and innovation funding to businesses. As part of the new defense initiative, Bpifrance will manage the €450 million fund to support arms manufacturing and related projects.
Speaking on BFMTV, Villeroy de Galhau acknowledged the necessity of a stronger defense effort in response to rising security concerns in Europe, particularly amid uncertainties about U.S. support for Ukraine. However, he emphasized the challenge of balancing increased military investment with efforts to reduce France’s public deficit.
“There is a legitimate effort, but it must be measured and financed responsibly,” he stated, as investors and industry leaders gathered at the Ministry of the Economy to discuss defense funding. France is striving to cut its public deficit, targeting a reduction from approximately 6 percent of GDP last year to 5.4 percent this year, with the aim of bringing it below 3 percent by 2029.
In light of the investment announcement, “the more difficult question that will come next, is: ‘Who will pay in the end?'” asked François Villeroy de Galhau. “And here the answer is, unfortunately, clear, it is necessarily public spending: it is only the State that can buy military equipment, or pay the salaries of the military. This raises even more acutely the question of regaining control of our public finances and our deficits,” he added.
Economy Minister Éric Lombard estimated that the defense sector requires €5 billion in funding, with the costs to be shared between the government and private investors. To facilitate this, France is encouraging private investment and preparing an investment product that will allow individual citizens to contribute to defense financing.
As part of the strategy, French citizens will have the opportunity to invest in the fund for the long term, with a minimum one-time investment of €500. The initiative aims to engage the public in strengthening national defense while diversifying funding sources beyond traditional government spending.
President Emmanuel Macron has set an ambitious goal of increasing defense spending from the current 2 percent of GDP to between 3 percent and 3.5 percent.
He has recently called for a radical overhaul of the European Union’s defense strategy, specifically calling for a European-led approach to security in Ukraine in light of the U.S.’s wavering support.
“Europe’s future should not be decided in Washington or Moscow, and yes, the threat from the east is returning. And the innocence of these 30 years since the fall of the Berlin Wall is over,” he said in an address to the nation earlier this month.
The French president has even contemplated greater collaboration with the European Union over its nuclear deterrent.
