France Is Struggling to Pay for Ukraine Aid as Budget Stretched

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(Bloomberg) -- Massive spending cuts have left the French government struggling to put together funding for a package of as much as €3 billion ($3.2 billion) in military aid to Ukraine.

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The defense, foreign affairs and finance ministries will be asked to redirect funds and find savings in order to pay for equipment ranging from missiles to artillery, people familiar with the matter said, without giving details as discussions are ongoing.

The government’s headroom is limited after it lowered its 2024 GDP forecast on Sunday and said it needs to save €10 billion to meet commitments to narrow its budget deficit. And it has promised costly measures to help farmers, who have been protesting over rising costs, cheap imports and red tape.

France has also been criticized for a lack of transparency over its assistance to Ukraine, leading to accusations it isn’t doing as much as European and NATO partners. The Ukrainian military is facing a critical shortage of ammunition as Russia’s full-scale invasion reaches its two-year mark this week.

“All this already represents a great deal, but we’re determined to do even more,” President Emmanuel Macron said as he announced the new package in Paris on Friday, standing alongside Ukrainian leader Volodymyr Zelenskiy. This was the first time France has given figures for its aid.

The financing of the latest support will have to be found without making formal changes to this year’s budget, said the people, who asked not to be identified discussing confidential planning. One of the people added that €400 million earmarked to fund the armed forces through 2027 doesn’t include capacity for additional aid, complicating the task. A French Defense Ministry spokesperson didn’t immediately respond to a request for comment.

Christoph Trebesch, an economist at Germany’s Kiel Institute, which tracks aid to Kyiv, told Bloomberg that France needs to be more transparent with its weapons deliveries, though he praised recent steps to provide more information.

Figures released Friday showed France has spent €3.8 billion on support, including SAMP-T ground-to-air missile systems, Caesar self-propelled howitzers, AMX 10 armored vehicles and SCALP missiles.

European countries are exploring new ways to boost the continent’s defense industry and get weapons to Ukraine, including joint borrowing, an idea that’s been backed by Macron and Estonian Prime Minister Kaja Kallas.

Though it’s likely to meet resistance from more fiscally hawkish nations such as the Netherlands and Germany, the deadlock in the US over providing Ukraine with more than $60 billion in military aid and the perspective of a Donald Trump victory in November’s election have given fresh momentum to the idea.

Macron signed a bilateral security agreement with Ukraine on Friday. This followed a similar accord struck earlier in the day with Germany and one last month with the UK to provide long-term support to Kyiv.

German Chancellor Olaf Scholz announced an additional package of air-defense and artillery systems worth about €1.1 billion. The French and German leaders said they would not back down in supporting Ukraine.

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