By Joshua Kirby

France will add an extra 1.7 billion euros ($1.85 billion) to defense expenditure via public-investment vehicles as European countries prepare for a shakeup of the continent's security order.

State-owned financial institutions such as the Caisse des Depots et Consignations will invest the funds in the country's defense companies, economy minister Eric Lombard said Thursday at a conference held at the country's finance ministry. Alongside private investment, this will lead to France adding some 5 billion euros extra to the defense sector, the minister said.

The eurozone's second-largest economy last year spent just shy of 60 billion euros on defense, according to NATO figures. France is home to major defense-sector firms such as Thales and plane maker Dassault Aviation, as well as plants operated by pan-European giant Airbus.

Companies in the sector are often in a more fragile financial situation than firms in other industries, Lombard said.

"We must reinforce the financial levers of the defense sector," Lombard said. "It is in our national interest that companies be financed in a proper way."

Investment in defense is a responsible course of action, he said. "All the more so since it is a kind of investment that protects our sovereignty and our principles: democracy, liberty, sustainable development," he said.

Individuals will also be able to invest in defense stocks via a new pool created by sovereign fund BPI France, Lombard separately told TV station TF1.

"It is vital that the French people feel part of this effort," Lombard said. The long-term participations will be "good investments," he added.

The drive to spend more on defense comes after the new administration in Washington is beginning to turn away from a decadeslong security order in which the U.S. had acted to guarantee European security, allowing European governments to spend relatively little on defense.

The German lower house this week voted in favour of a landmark change to fiscal rules which will allow Berlin to spend more on its military. Authorities at the European Union have set out plans for a joint fund of some 150 billion euros, backed by EU debt, for defense spending, and have also suggested the bloc's executive could loosen rules on borrowing to allow more defense investment at the national level.

French President Emmanuel Macron this week laid out plans to update the country's nuclear arsenal, as the U.S. nears a detente with Russia, which three years ago launched a full-scale invasion of neighbouring Ukraine.

"Our country and our continent will have to continue to defend, equip and prepare ourselves if we want to avoid war," Macron said.

Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby

(END) Dow Jones Newswires

March 20, 2025 08:08 ET (12:08 GMT)

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