While investors and defense companies meet on Thursday March 20 in Bercy to reflect on the best ways to finance the latter, the Minister of the Economy said that some 5 billion euros were necessary in the sector to go up in the framework of the national defense effort.
“Companies will need around 5 billion equity, new capital, money from public and private investors to increase production channels and develop,” said TF1 Eric Lombard on Thursday morning. “It will be public money from (the public investment bank, editor’s note) Bpifrance, the Caisse des Dépôts, the State, but we need private money,” also detailed the minister.
He announced that Bpifrance would launch a new fund of 450 million euros: the French will thus be able to “for 500 euros become indirectly shareholders of companies in the defense sector” and by these “500 euros tickets” minimum “place their money in the long term”, via a capital “blocked for at least 5 years”.
“It is very important to associate all French people and French with this effort, they will be good investments. The major banking and insurance networks will make available other purely private funds for those who want it, on a volunteering basis,” can participate, summed up the Minister.
The often reluctant financial sector
The new situation, engendered by the evolution of the American position vis-à-vis Ukraine and the Russian threat, “requires an acceleration of our armament,” said Matignon upstream of this meeting. The “industrial and technological defense base” (BitD) French has nine large groups, such as Dassault Aviation, Safran, Thales or Airbus, but also 4,000 SMEs and intermediate companies (ETI), 1,000 of which are strategic. On Thursday, some financial players are expected to take a position in favor of support for these companies, “and the idea is to train others in their wake,” said the government. Consolidation of the sector could also be mentioned on Thursday, that is to say the reconciliation of activities of certain groups.
Listing on France Inter Les subjects de la Réunion on Saturday – “Do defense companies need loans, equity, ability to produce more?….” -, the Minister of Public Accounts Amélie de Montchalin added: “Do they need capacity to work more as a European group, rather than small businesses?”.
But the financial sector is often reluctant to invest in defense. Banks, investment funds or insurers are particularly sensitive to “ESG risks” (environmental, social and governance) in their investments. Developments of doctrine could be announced on Thursday.
On Wednesday, France Insurers, the federation of French insurers, assured that they were “ready to take all their part in the rearmament effort of the country”. Likewise, the six major banks grouped in the FBF (French banking federation) said on Tuesday “fully mobilized to finance the expected needs of the sector”, in addition to the 37 billion euros they already invest there.
Watch out for “whatever it costs”
The governor of the Banque de France François Villeroy de Galhau said on Thursday morning on BFMTV/RMC that he could not “be again whatever it costs” to finance the defense industry in the economic and budgetary context in which France is located. “There is a legitimate effort, but it must be measured, it must be funded,” he insisted.
“I believe that it takes a defense effort. It is not for me to decide on its size, but it is legitimate for Europe to return to control of its military but also economic destiny,” he said. For him, the meeting of the day in Bercy answers “a first question: ‘who will lend at the beginning to the defense industries?'”. “But the more difficult question that will then come, which is more difficult is: ‘Who will pay at the end?'”. “And there the answer is unfortunately clear, it is necessarily of public spending: there is only the State which can buy the military equipment, or to pay the balance of the military, etc.”, underlined François Villeroy de Galhau, for whom this equation “poses in a even more acute way the question of the recovery of our public finances and our deficits”.
The whole EU has been mobilized on the defense since the beginning of the month: Wednesday, it kicked off a large plan aimed at rearming the continent by 2030, with 800 billion euros.