Amid rising security fears, France to establish €450m defence-focused fund

PARIS: Finance Minister Eric Lombard announced Thursday that France's state investment bank Bpifrance will establish a 450 million euro ($490 million) defence-focused fund.

This he said ahead of a speech wherein he will explain how to pay for the military expenditure.

The fund will contribute to the nation's efforts to increase military spending in response to fears of a Russian strike and concerns about the future of US protection.

"French citizens will be able, by tranches of 500 euros, to invest their money in the long term," Lombard told TF1.

France has been leading European rearmament initiatives following signs of a potential Washington-Moscow rapprochement, which has heightened fears that Russia could expand its influence westward.

However, with French budgets already stretched, the government faces significant challenges in funding these defence ambitions.

European Central Bank (ECB) member Francois Villeroy de Galhau said on Thursday that while increased defence spending was needed in France, it cannot be unlimited given the country's high public deficit and debt.

"We cannot have a policy of spending whatever it takes regarding defence spending," Villeroy, who also heads the Bank of France, told BFM TV. He emphasised that the defence buildup cannot be approached in the same manner as Covid-19 emergency spending, when France deployed massive financial resources to support the economy.

French companies in the defence sector will need more than five billion euros in additional equity capital over the next few years, according to both the finance and the defence ministries.

President Emmanuel Macron, who has initiated a doubling of the French defence budget over the course of his two mandates, has recently set an even higher target, saying the country should increase defence spending to 3-3.5% of economic output from the current 2%.

($1 = 0.9184 euros)