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DE RUEHFR #6896/01 2921459
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P 191459Z OCT 06
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC PRIORITY 2334
INFO RUEHZG/NATO EU COLLECTIVE PRIORITY
RHMFISS/HQ USEUCOM VAIHINGEN GE PRIORITY
RUEKJCS/JOINT STAFF WASHINGTON DC PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY
RUEHNO/USDELMC BRUSSELS BE PRIORITY
RHMFISS/USNMR SHAPE BE PRIORITY

C O N F I D E N T I A L PARIS 006896 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 10/12/2016 
TAGS: MARR MCAP EFIN PINS KCFE FR
SUBJECT: FRENCH DEFENSE BUDGET STABLE AMID WIDESPREAD 
CUTBACKS 
 
 
Classified By: Political Minister-Counselor Josiah Rosenblatt, reasons 
1.4 (b) and (d). 
 
¶1. (C) Summary: The Ministry of Defense's 2007 budget would 
increase defense spending a modest 2.2 percent to 47.7 
billion euros, according to the draft budget presented by 
Finance Minister Thierry Breton on September 27. The draft 
budget dispels earlier rumors that defense spending could 
diminish as the Chirac government attempts to reduce the 
overall budget deficit in line with EU-mandated limits and 
impress upon the public his government's fiscal prudence in 
advance of next April's presidential elections.  Most 
additional funds would be earmarked for large equipment 
purchases--including the Rafale multi-role plane and a second 
aircraft carrier--and for international operations, such as 
those in Afghanistan and Lebanon.  The defense budget 
contained few surprises, and proposed increases corresponded 
with previous commitments established in 2002 for the second 
phase (2003-2008) of a multi-year military modernization 
plan, which established defense priorities through 2015.  The 
MoD pointed to the budget as proof that France remains 
committed to its status as a global military power, even at a 
time when other ministries suffered significant cuts and 
other EU member states are scaling back on defense spending. 
It remains to be seen what effect the 2007 Presidential 
elections will have on the defense budget.  End Summary. 
 
Defense Gains Small Victory in Belt-Tightening Environment( 
--------------------------------------------- -------------- 
 
¶2. (C) The Ministry of Defense budget should enjoy a 2.2 
percent increase from 2006 for a total of 47.7 billion euros, 
in contrast with a Central Government (GC) budget widely 
hailed as "virtuous" for strict cost-cutting measures that 
will trim 15,000 jobs from the public rolls and limit public 
spending to a pre-inflation increase of .8 percent.  Finance 
Minister Thierry Breton presented the draft budget on 
September 27 at a time when the GoF is under great pressure 
to demonstrate fiscal prudence: the European Union's 
Stability and Growth pact requires all member states to 
reduce debt as a percentage of GDP to 60 percent by 2010, but 
France's overall budget deficit still stands at 65.5 percent 
for the second quarter of 2006, one of the highest levels in 
Europe. 
 
¶3. (C) In this fiscally austere environment, many expected 
the defense budget to suffer.  However, as she did in 
previous years, Defense Minister Michele Alliot-Marie waged 
an aggressive and successful public campaign to preserve her 
funding, claiming it would be "irresponsible" to cut defense 
spending at a time when 14,500 French troops are deployed in 
theaters such as Lebanon, Afghanistan, Kosovo and the Ivory 
Coast.  She further called for economic patriotism in 
defense-related industries, urging large increases in 
research and technology spending to protect French industry 
against "the power of American industry."  Finally, in the 
lead-up to the spring 2007 presidential elections, she 
repeatedly invoked the position of Socialist Party (PS) First 
Secretary Francois Hollande, that defense spending might be 
 
SIPDIS 
better directed toward social projects, to imply that a 
Socialist presidency would lead to a weakened military. 
 
¶4. (U) According to the plan presented to the Council of 
Ministers, defense spending would total 36.3 billion euros 
(47.7 billion euros including pensions).  Defense funds would 
account for 2.6 percent of the French GDP for the second year 
in a row (as compared to 4.1 percent in the U.S. and 1.5 
percent in Germany).  Second only to the budget of the 
Ministry of Education, this figure represents 599 euros per 
French resident per year.  The budget closely follows the 
five-year plan for 2003-2008 outlined in the Law of Military 
Programming (LPM), which aims to achieve specified targets of 
military modernization by 2015. Alliot-Marie announced in her 
presentation of the budget that 2007 marks the first time in 
25 years that an LPM plan has been followed for all five 
consecutive years. 
 
¶5. (U) The additional funds primarily would provide for the 
procurement of new equipment and deployment of forces 
overseas.  The MoF allocated a second tranche of 700 million 
euros to begin construction of a second aircraft carrier, 475 
million euros to purchase 12 NH 90 helicopters that would 
replace the aging Super Frelons, 250 million euros for the 
purchase of more Rafale multi-role planes, and 220 million 
euros for further development of the Barracuda nuclear attack 
submarine. The MoD would also purchase 117 armed combat 
 
vehicles for the infantry (VBCI), 50 naval cruise missiles 
and 5,000 "integrated infantry systems" (FELIN) that consist 
of a uniform, arms and communications equipment that enable 
an infantryman to operate efficiently in a wide range of 
circumstances. Further, the MoD would increase spending on 
"external operations" (OpEx) to 360 million euros from 175 
million euros. 
 
(But The MoD Downplays Subtle But Important Shortfalls 
--------------------------------------------- --------- 
 
¶6. (C) Despite Alliot-Marie's claim that the budget 
constitutes "dazzling proof of five year's worth of ceaseless 
political determination to modernize our defense," the modest 
increase in the defense budget conceals notable cutbacks and 
unfulfilled promises. The Army would purchase only 12 NH90 
helicopters, instead of the 30 helicopters it intended to 
acquire as recently as September.  While Alliot-Marie boasted 
that the gendarmerie will create 1,410 new jobs, she failed 
to mention that the MoD would cut 4,410 positions, for a net 
loss of 3,000 jobs.  (NOTE: the MOD and the Interior Ministry 
share responsibility for the gendarmerie, but it relies on 
the MOD for its budget.) 
 
¶7. (C) Alliot-Marie particularly highlighted the doubling of 
earmarks for external operations, saying that the additional 
funds demonstrated France's ongoing commitment to preserving 
peace and fighting terrorism around the world. However, 
according to Captain Eric Chaplet, head of the MoD's office 
that handles budget matters for NATO and the EU, the increase 
marks a newfound fiscal prudence rather than an intention to 
increase France's international military engagement. Until 
2005, OpEx did not constitute a line-item in the defense 
budget, so when crises arose, the MoD was forced to delay or 
cancel other existing programs or equipment purchases, thus 
weakening the French military in the long-term, Chaplet 
explained. Even now, the 360 million euro allocation for OpEx 
is far from enough: the MoD went 600 million euros over 
budget in 2005 on OpEx, and may do so again in 2006.  For 
instance, Chaplet expects that France's UNIFIL contribution 
alone will cost 100 million euros. 
 
Will Presidential elections affect the Defense Budget? 
--------------------------------------------- --------- 
 
¶8. (C) In the lead-up to the September 27 presentation of the 
draft budget, the press and many MoD officials speculated 
that the defense budget could be artificially high for 
reasons of presidential politics.  The prevailing argument 
suggested that the GoF would present an optimistic defense 
budget in order to project an image of strength, leaving it 
to the next government to make "rational" decisions and 
reduce funding, as necessary.  Separately, some political 
observers noted that a positive defense budget could benefit 
the center-right Union for the Popular Movement (UMP) 
presidential nominee, Minister of the Interior Nicholas 
Sarkozy, or (much less likely) Alliot-Marie herself. 
Alliot-Marie has implied that a Socialist Party presidency 
would lead to budget cuts that would preclude France from 
completing essential military modernization. 
 
¶9. (C) But MoD budget officials remain unconcerned about the 
fate of long-term programs following the presidential 
elections, according to Chaplet.  In his view, both the 
center-left and center-right agree on the importance of 
maintaing a strong defense and will likely share many of the 
same basic priorities.  "France wants to play a significant 
role in the world and ever since Charles de Gaulle our 
defense budget has been a barometer of that role.  Therefore, 
I am confident the budget will not be cut," he concluded. 
Elysee advisors and MOD Cabinet officials have made the same 
argument. 
 
¶10. (C) Comment: While we can can expect Defense Minister 
Alliot-Marie to fight major cuts in the 2006-2007 defense 
budget, the reality is that to meet current expenditures, she 
will likely have to make some cuts in programs in 2007.  In 
2005, these program cuts were in the range of 600 million 
euros.  Unsurprisingly, DATT and Office of Defense (ODC) 
contacts have noted that MOD staffs are studying budget cut 
options, although perhaps only as a contingency measure. 
Alliot-Marie will seek to ensure, however, that any potential 
program cuts are minimized, as long as she retains the 
defense portfolio.  End Comment. 
 
Please visit Paris' Classified Website at: 
http://www.state.sgov.gov/p/eur/paris/index.c fm 
STAPLETON