| Emmanuel Macron called for Europe to rearm this week, and not for the first time. The French president pushed the continent to get serious on hard power during Donald Trump’s first term, with little success. What’s changed since is Russia’s invasion of Ukraine, Trump’s return as a transatlantic wrecking-ball and Germany’s awakening under Friedrich Merz after years of strategic slumber. Throw in the complete sidelining of European allies in the Middle East and it’s likely defense spending is headed one way: Up. Yet France is also a good example of the big open questions left after NATO’s new commitment to lift military outlays to 5% of GDP over time, up from 2%. First, a bit of historical context: The last time French defense spending reached 5% was in 1962, year of the Cuban Missile Crisis. Even if you strip out the fuzziest part of the 5% target – namely the 1.5% dedicated to infrastructure and interoperability – a 3.5% goal would take one back to the 1970s. These are big numbers not seen since Georges Pompidou.  Leaders during a NATO plenary meeting on June 25. Photographer: Lina Selg/Bloomberg Now consider that those numbers look even bigger in a context where France already has the European Union’s highest budget deficit and third-highest debt pile relative to GDP, meaning less room to borrow and spend. France is also a world-beater in taxation, making it even harder to sell the idea of a massive tax-led defense push. The pressure on the country right now is to cut back, not expand, spending: On Thursday, just as European allies were celebrating reaffirmed commitments to NATO, Paris announced a need to find an extra 5 billion euros in spending cuts this year to meet its deficit plans. A note published last month by a governmental department found that spreading the burden across four areas might make a 3.5% target achievable by 2030: It proposed a combination of joint European funding, a broad freezing of spending, targeted taxation and the creation of half a million jobs in five years. But even that would require ambitious political breakthroughs with continental partners and anxious voters, many of whom are opposed to a retirement-age hike to 64 from 62. France may be luckier than some of its neighbors in soft-power Europe in that it does actually have a national identity wrapped up in defense, from its annual military parade to pride in having nuclear weapons. But given that the road to higher defense spending runs through the mire of bad-tempered pension debates, this remains a hard sell. Worldline’s Belgian arm is under investigation by Brussels prosecutors as the fallout continues following press reports over alleged fraud at the payment services company. Macron said the US attacks on Iran’s nuclear facilities had been effective. The French leader also emphasized that President Trump is pushing hard for a ceasefire in Gaza.
Inflation inched up in France and Spain but not enough to concern European Central Bank officials who are optimistic that their 2% target will be met sustainably this year. French Prime Minister Francois Bayrou said an agreement is within reach on some changes to the contentious pension reform. The premier said he is ready to include some “compromise provisions” in the Social Security budget in the fall.
Anne Beaufour, one of the French billionaire heirs controlling drug maker Ipsen SA changed her residency from the UK to Switzerland, as plans for a generational shift in ownership take shape. Monday: French budget balance as of May Tuesday: French monthly PFA car registrations for June Thursday: Three-day annual economic forum begins in Aix-en-Provence: Friday: French May industrial and manufacturing production | 
