France is paying for rearmament inside rules it chose not to bend

France has decided to pay for its rearmament out of its own budget and inside the European fiscal rules, rather than by asking Brussels for room. The budget outline that Prime Minister Sébastien Lecornu presented on 17 September makes the cost of that choice visible. State spending outside defence and debt service is to be frozen at its 2026 level; the government wants about €54bn of savings; and the deficit target for 2027 comes in two versions, one with the new military money and one without. The military programming law survives intact on paper. The harder question is whether the rest of the budget can carry it through a presidential election year.

What the government announced this week

The sequence began on 14 September, when Mr Lecornu wrote to his ministers reopening the spending ceiling letters sent in July. According to franceinfo, which reported the letter on 15 September, state spending for 2027 is to stay “strictly at the same level” as in 2026, with defence excluded. Public Sénat reported that the earlier ceilings had allowed ministries 0.4 per cent growth, and that military spending and debt interest were outside the freeze. The prime minister justified the move by pointing to a degraded outlook: franceinfo reported a growth forecast cut to 0.5 per cent for 2026, and Public Sénat noted that France’s ten-year borrowing rate had risen above 4.5 per cent from about 4 per cent a month earlier.

Three days later, at a government seminar, Mr Lecornu put numbers on the whole package. Without new measures, he said, the 2027 deficit would approach 6.5 per cent of GDP, driven by a €22bn spontaneous rise in social security spending, €10bn more in interest and €7bn in local authority operating costs. The target is 5 per cent. Excluding the additional defence effort, the figure would be 4.8 per cent. The estimate for 2026 has been raised to 5.4 per cent, against the 5 per cent goal set when the 2026 budget was forced through in February. Measures reported by Économie Matin and Public Sénat include a freeze of the civil service pay index worth about €2bn, just under €6bn from pensioners, about €2bn from sick-leave rules, and a reduction in the temporary surtax on large companies from €7.5bn to €5bn. Mr Lecornu called it the most rigorous state budget ever presented before a presidential election, and said he would not use Article 49.3 to pass it without a vote unless parliament obstructed it.

What the military law commits France to

The update to the 2024–30 military programming law was adopted by parliament on 1 July and promulgated on 16 August 2026. It raises total credits for the defence mission to €436bn over the seven years, €36bn more than the 2023 law. Most of the increase is front-loaded. On the trajectory analysed by the IFRAP think tank when the bill was tabled in April, defence mission credits rise from €50.5bn in 2025 to €57.1bn in 2026, €63.3bn in 2027 and €76.3bn in 2030.

The government’s figure for the extra defence effort in 2027 is €6.4bn, as reported after the seminar, while the law’s trajectory implies €6.2bn. The gap is small and probably reflects scope, for instance pensions or extra-budgetary receipts, but it is a reminder that “defence spending” in French debates can mean the programming law’s credits, the national accounts measure or the NATO definition. The Commission, using Eurostat’s functional classification, puts general government defence spending at 1.9 per cent of GDP in 2025 and projects 2.1 per cent in 2026.

Why the escape clause matters

In March 2025 the Commission invited member states to activate the national escape clause of the Stability and Growth Pact, which lets extra defence spending exceed the agreed net expenditure path without being counted as a breach. France signalled early that it would not apply; a French official told MNI in March 2025 that Paris would instead be pragmatic about EU defence loans. The Commission’s June 2026 recommendation for France notes that a request can still be made at any time until 2028.

Staying out has a logic. France is under the excessive deficit procedure, and the Council’s corrective path caps net expenditure growth at 1.2 per cent a year in 2026, 2027 and 2028 and 1.1 per cent in 2029. On 3 June the Commission found enough effective action to hold the procedure in abeyance, after net expenditure grew 0.7 per cent in 2025. A French request for flexibility would have been read in markets as a loosening by a country whose debt the Commission expects to reach 120.2 per cent of GDP by end-2027, up from 115.6 per cent in 2025.

But the choice has a price, and the two-number deficit target shows it. The 0.2 percentage points between 4.8 and 5 per cent is, in effect, a domestic escape clause: the government is telling voters and lenders which part of the deficit it regards as a strategic choice. The EU rules do not recognise that distinction for France, because France has not asked them to. Under the corrective path, the defence increase must be offset euro for euro by restraint elsewhere, which is precisely what the freeze on other ministries and the pension measures are for. IFRAP estimated in April that holding to the EU path while funding the new military trajectory would require more than €22bn of cuts on other spending in 2027.

What the numbers do not settle

The EU assessment already shows slippage. On the Commission’s spring forecast, net expenditure growth in 2026 was projected at 1.4 per cent, above the recommended 1.2 per cent, a deviation of 0.1 per cent of GDP, although the cumulative path since 2024 remained within limits. That forecast, based on unchanged policies, had the deficit at 5.1 per cent in 2026 and 5.7 per cent in 2027, partly because temporary tax measures worth 0.3 per cent of GDP expire. The government’s own 2026 estimate of 5.4 per cent is now worse than the Commission’s May figure, which suggests that the Middle East energy shock and higher interest costs have eaten into the margin since the spring.

Several items also sit outside the government’s direct control. Local authorities, whose own budgets the state does not vote, are asked to hold operating spending growth to inflation. The 2023 pension reform has been suspended until January 2028, which the Commission says worsens the balance into the mid-2030s. And a parliament without a majority must pass all of it before a presidential campaign in which pensioners and local councils are organised constituencies.

What to watch

Parliamentary debate on the draft budget opens in October, alongside the draft budgetary plan that Paris must send to Brussels. Three things will show whether the arrangement holds. The first is whether the €63.3bn defence line survives amendments intact, or whether the parliamentary compromise Mr Lecornu says he wants to leave room for is paid for by deferring equipment orders and payments. The second is the Commission’s autumn opinion on net expenditure: another deviation would put pressure on the abeyance decision. The third is the bond market, where the spread over German debt will price how credible a 5 per cent target is with growth at 0.5 per cent.

The strategic point is straightforward. France has kept its military commitments and its EU commitments formally separate and both formally intact. That is defensible, and it spares Paris the reputational cost of invoking a flexibility clause while under an excessive deficit procedure. But it also means that the defence budget is funded by explicit sacrifices elsewhere, identified line by line, in an election year. If the compromise frays, the programming law will be the most visible line in the budget, and so the easiest to trim quietly through delayed payments rather than openly through a vote. Whether it is trimmed will depend on French politics, not on the EU rules.

Sources

• European Commission — Recommendation for a Council Recommendation on the economic, social, employment, structural and budgetary policies of France, COM(2026) 210, 3 June 2026
• franceinfo — Budget 2027: Sébastien Lecornu demande à ses ministres que les dépenses de l’État restent « strictement au même niveau » qu’en 2026
• Public Sénat — Budget 2027: Sébastien Lecornu demande un nouvel effort sur les dépenses de l’État
• Public Sénat — Sébastien Lecornu propose un effort de 54 milliards d’euros
• Économie Matin — Déficit: où Sébastien Lecornu veut-il trouver 54 milliards d’euros d’économies ?
• Sénat — Projet de loi actualisant la programmation militaire pour les années 2024 à 2030 (la loi en clair)
• IFRAP — Actualisation de la loi de programmation militaire: plus de 22 milliards de baisses sur les autres dépenses à prévoir en 2027
• MNI — France, other EU states to forego defence escape clause (14 March 2025)