2010-02-07 18:34:37 - Fast Market Research recommends "France Defence & Security Report Q1 2010" from Business Monitor International, now available

The implications of President Nicolas Sarkozy's sweeping White Paper on Defence and National Security, published last June, began to be felt in the last quarter when France rejoined NATO's military command. Sarkozy confirmed the move in March 2009, over 40 years after Charles de Gaulle walked out in protest at US domination. Following approval by the National Assembly, despite an angry debate, the reintegration was completed in early April at the NATO summit in Strasbourg commemorating the alliance's 60th anniversary. Critics of the move - including left and centre politicians, as well as Gaullists in Sarkozy's party - suggest that France will no longer be able to forge its own diplomatic alliances and will lose its perceived independence from Washington.

But Sarkozy defended it, saying that the move would give France more influence within NATO. For a country that has staunchly championed the independence of its defence policy, the move could still suggest a greater strategic alignment with the United States. But some analysts believe that the return to NATO is an attempt to bring the alliance more firmly under Europe's control. France's defence industry represents a significant part of the French economy. Figures show that in 2008 it was worth some EUR9.4bn in terms of domestic arms orders - with this expected to double in 2009 - and EUR6.4bn in terms of arms exports. Up to180,000 people are employed directly by the industry. President Sarkozy said when launching the Defence White Paper that the government would seek to spend EUR377bn (US$584bn) on defence between 2009 and 2020. Of this, EUR200bn will be spent on equipment. The annual military budget will begin to rise from 2012, from its current level of EUR37bn. France ranked as the world's fourth largest arms supplier from 2003 to 2007, accounting for an estimated 9% of global deliveries. The major recipients, accounting for 69% of all French arms transfers, were the UAE, Greece, Saudi Arabia and Singapore. France has also been a key supplier to developing countries. According to US Government sources, France accounted for 3.55% of all arms transfers agreements with developing nations in 2007, although was responsible for a much higher 20.75% in 2005, likely due to the conclusion of a major contract that year. A recent move by aircraft manufacturer Dassault Aviation to acquire a major stake in defence information systems company Thales could signal a new wave of consolidation in the French defence industry. The sector had previously undergone significant restructuring and consolidation. Dassault Aviation concluded negotiations for Alcatel-Lucent's 20% stake in Thales in December 2008. EU competition authorities approved the acquisition in March 2009. Exclusive talks relating to the deal, worth EUR1.57bn, were first revealed in November 2008. Dassault also hopes to buy the 5.1% share in Thales held by its majority owner Groupe Industriel Marcel Dassault, which would mean the aerospace company would then be the secondlargest stakeholder after the French state, which has a 27% share in Thales. Meanwhile problems continue to dog the A400 military transport plane program, with France announcing its continuing support in March 2009. Airbus Chief Executive Thomas Enders said that the firm would be unable to complete the EUR20bn program under "current conditions". The program is already three years behind schedule, and EUR2bn over budget. Some countries had threatened to cancel or reduce their orders, but Airbus' owner, the Franco-German aerospace group European Aeronautic Defence and Space (EADS), said that the original 2003 contract had set an unrealistic timetable. In March, the seven countries awaiting deliveries of planes agreed on a three-month moratorium on any decisions about orders, to give EADS time to devise a new schedule. But by the end of March, the company announced for the first time that they were able to take a limited cut in orders, in order to keep Europe's biggest defence contract afloat.

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