After a very difficult start, the FCAS program managed, in 2023, to get out of the rut in which it found itself, thanks to a political agreement firmly imposed by the three French, German and Spanish Defense Ministers.
Since then, the program seems to be on a more secure trajectory, even if the current commitments only extend up to phase 1b of the demonstrator study, and it will be necessary, once again, to renegotiate industrial sharing beyond that, which will not fail to create new frictions.
Beyond the tensions surrounding questions of industrial sharing, or even specifications, which differ according to the air forces, a new subject of discord could soon emerge, at least in France.
Indeed, far from representing the optimized budgetary solution put forward by the French executive, to justify this European cooperation, it appears that the FCAS program will cost more, and even much more, to French public finances, as well as to its industrialists. , that if the program was developed identically, by the National Defense aeronautical industrial and technological base alone, with a cost difference, for French taxpayers, of up to €20 billion.
In this section:
European Cooperation, the only alternative to finance the development of the FCAS program, according to the French executive
Since the launch of the FCAS program, the speech of the French executive, to justify the joint development with Germany, then with Spain, has not deviated one millimeter: the costs of developing an aircraft of combat and its 6th generation system of systems, are so high that they can no longer be supported by a single European country, even France.
The subject has, on numerous occasions, been raised on the public stage, in particular by French deputies and senators, questioning the government to know if France was able to develop, alone, such a program, in particular when the program was on the verge of breaking.
The response given then, by the executive as by the DGA, argued that if France were to carry out such a program alone, it would necessarily be less efficient and less versatile, than FCAS plans to be today, for essentially budgetary reasons. In other words, for the French government, there was no salvation, apart from this Franco-German, then European, cooperation.
The FCAS cooperation programme will cost France €14 billion less than if it had to do it alone.
A study of the figures available today would, in fact, tend to support the government position. Thus, the total R&D budget for the entire FCAS program would reach €40 billion, allowing each participant to contribute only €13,3 billion, or, more or less, one billion euros. per country and per year, until 2036 and the start of production of the planes themselves.
Even taking into account the empirical rule which dictates that co-development generates an additional cost multiplier equivalent to the square root of the number of participants, i.e. 1,73 for 3 countries, France saves a good €10 billion on the development phase of the program.
This gap widens even further when including the acquisition costs of the devices themselves. To support this assertion, it is necessary to set certain starting values. Thus, the unit price of the aircraft, if it were produced only in France, will be considered at €140 million including tax, with an additional package of services and equipment of €40 million including tax per aircraft. We will also consider that R&D costs for France would be €30 billion, and that France will acquire 200 devices.
As for the European FCAS program, we will consider an additional cost per device and per service and equipment of 10%, linked to cooperation (which is very low), i.e. respectively €144 and €54 million, while we will divide the coefficient by two. empirical multiplier of international cooperation going from 1,73 (square root of 3) to 1,37, assuming exemplary cooperation between the three countries and their manufacturers, and very few deviations like those observed around the A400M or NH90 programs, for an R&D cost of €36 billion.
Finally, we will consider that Germany will order 175 aircraft, and Spain 125, for a total of 300 aircraft for these two countries, i.e. the incremental replacement of their Eurofighter fleets. Typhoon in 2040. All of these values are, essentially, conservative values, tending to reduce the effectiveness of the demonstration that follows.
On this basis, the 200 aircraft intended for the French air and naval forces will cost public finances €36 billion, for a total programme of €66 billion, including development, in the case of an exclusively national programme, compared to €40 billion for the aircraft, and €52 billion for the programme, in its current format.
In other words, in the case of the FCAS program, European cooperation should enable French public finances to save €14 billion, or almost 27% of the price of the program, compared to an exclusively national program. So, is the executive right to proclaim the merits of this model? This is far from obvious, for two reasons: budgetary return and exports.
The budgetary return neutralizes the benefits of cooperation on the state budget concerning the FCAS program
The budgetary return represents the revenues and savings applied to the State budget, through the execution of the program and its investments. It adds up the taxes generated directly and indirectly by investments, across the entire industrial chain, as well as the social savings that can be applied to the State budget, due to the compensation of social deficits.
In this demonstration, for greater efficiency, we will consider two values limiting the budgetary return coefficient. The first, a floor value, is set at 50%, including 20% VAT, and 30% taxes, duties and social security contributions. This value corresponds to the cost of French OECD levies, of 42%, with an average VAT of 12%, reduced to a fixed VAT of 20% applied to army equipment.
The second value applies a Keynesian multiplier coefficient to revenues, linked to the Supply Chain of the French defense industry, almost exclusively French, leading to a particularly low export loss for this activity. In 2010, this coefficient in France was 1,39 for public investment. We will only take, here, 1,3 for a budgetary return coefficient of 65%, which represents a ceiling value largely by default, considering the industrial dimension and the Defense dimension of the activity.
By applying these coefficients to the previous values, we obtain respectively a budgetary return of €33 billion (50%) and €42,9 billion (65%), for an exclusively French program, and of €22,5 billion (50%). ) and €29,3 billion (65%), for French public finances, in the case of the European program.
Note that in the latter case, we applied an industrial equipotential sharing between the three countries on the total volume of devices ordered, i.e. the equivalent of 166,6 (=500/3) devices produced in France.
The budget balance, the difference between expenditure and revenue, is then established as follows:
- Balance with a budgetary return of 50% (low hypothesis): – €33 billion for the Fr program, – €29,1 billion for the EU program
- Balance with a budgetary return of 65% (classic hypothesis): – €23,1 billion for the French program, – €22,4 billion for the EU program.
We can see that, once the budgetary return is applied, the cost difference between the two programs, depending on whether they are exclusively French or in European cooperation, with a constant investment scope, tends to considerably reduce, ranging from 3,9 (33-29,1 billion euros in the low hypothesis) to 0,7 billion euros (23,1-22,4 billion euros in the classic hypothesis), depending on the hypotheses.
French manufacturers could lose up to €55 billion in turnover on the export market due to industrial sharing
The export aspect has always represented a subject of concern, in France, around the FCAS program. Industrialists and analysts feared, in fact, seeing Berlin impose its veto on certain key export contracts, as is the case today with Turkey, concerning the Typhoon. If the concerns were on the right subject, it is likely that they were not on the right aspect.
In fact, the main drawback, concerning the FCAS program, regarding exports, is not linked to the perimeter or to the possible right of veto of Berlin, but to the distribution of industrial activity, in execution of these international orders.
Thus, in the case of a national programme, the activity generated will be entirely carried out in France, by the French BITD, whereas it will be equitably distributed between the three partners, in the case of the European programme.
Here, we will consider that the unit cost of a device sold for export is equivalent to its unit price excluding tax, to which are added two lots of equipment and services, compared to only one for the Fr/De/Es armies previously used. .
In the case of a national program, the turnover in France excluding tax, achieved for 100 aircraft exported equals €18,3 billion, 200 aircraft for €36,7 billion, 300 aircraft for €55 billion and 400 aircraft for €73,3 billion. This same turnover excluding tax for France, in the case of the European program, equals €6,7 billion for 100 aircraft, €13,4 billion for 200 aircraft, €20,2 billion for 300 and €26,9 billion for 400 aircraft exported.
In fact, the difference in turnover between the French and European programs, for the French BITD, ranges from €11,6 billion to €46,4 billion, in favor of the French program, or the equivalent of 140 to 000 full-time annual jobs. Over a 557-year production period (high hypothesis), the difference represents 000 to 40 full-time jobs.
The French State will lose up to €24 billion on the FCAS program, due to European cooperation
However, the interest of exports, for France, is not only to create industrial activity and jobs. These generate, in fact, additional revenue for the State budget, in the same way as previously, through a budgetary return coefficient.
Not being subject to VAT, this coefficient is however reduced by 20%, and the two benchmark values previously used are therefore transformed into 50%-20%=30%, floor value, and 65%-20%=45%. , ceiling value.
Once applied to the French turnover figures generated according to the export hypothesis, we therefore obtain:
| Return export (30%) | Program Fr | Eu Program | Difference (€m) |
| 100 app. exported | 5 500 | 2 017 | 3 483 |
| 200 app. exported | 11 000 | 4 033 | 6 967 |
| 300 app. exported | 16 500 | 6 050 | 10 450 |
| 400 app. exported | 22 000 | 8 067 | 13 933 |
| Return export (45%) | Program Fr | Eu Program | Difference (€m) |
| 100 app. exported | 8 250 | 3 025 | 5 225 |
| 200 app. exported | 16 500 | 6 050 | 10 450 |
| 300 app. exported | 24 750 | 9 075 | 15 675 |
| 400 app. exported | 33 000 | 12 100 | 20 900 |
By integrating the budget balance studied in the previous section, for national acquisitions, we therefore obtain the following table:
| Budget balance 30% | Program Fr (in m€) | EU programme (in €m) | Difference (in €m) |
| 100 | -27 500 | -27 119 | - 381 |
| 200 | -22 000 | -25 102 | 3 102 |
| 300 | -16 500 | -23 086 | 6 586 |
| 400 | -11 000 | -21 069 | 10 069 |
| Budget balance 45% | |||
| 100 | -14 850 | -19 350 | 4 500 |
| 200 | -6 600 | -16 325 | 9 725 |
| 300 | 1 650 | -13 300 | 14 950 |
| 400 | 9 900 | -10 275 | 20 175 |
As we can see, the only case in which the European FCAS program would prove to be more efficient, budgetarily speaking, than an identical French FCAS program, is observed with a budgetary return in the low hypothesis of 50% / 30%, and with a total export of 100 aircraft, or less.
Conversely, in the case of a budgetary return of 65% / 45%, which is far from being an unlikely hypothesis concerning the defence industry, the FCAS programme would not only be up to €20 billion more efficient in the national version, but from 300 aircraft exported, it would even achieve a positive budgetary balance for public finances, meaning that it would bring in more revenue and budgetary savings than it will have cost the state.
However, 300 devices is precisely the number of Rafale exported today, while Dassault Aviation can, in the months and years to come, further increase this total sales considerably.. Let us also remember that 70% of Mirage 2000 user countries have turned to the Rafale to this day, and that Peru could well do the same soon, and that the number of Rafale exported now exceeds that of the Mirage 2000.
Conclusion
As we can see, the FCAS programme, in its current European organisation, is far from being justifiable by budgetary arguments, and even less by possible unfavourable technological arbitrages, if it had to be carried out alone. On the contrary, outside the initial R&D phase, all the other industrial phases are much more effective, budgetarily, socially, as in terms of jobs created, in the hypothesis of an exclusively national model.
Finally, let us note that while cooperation today facilitates the financing of the programme in its initial R&D phase, many people around this programme are concerned about the considerable budgetary step it will have to take from 2031, when the industrial phase begins, and when cost sharing will lose its effectiveness.
In fact, once all the budgetary aspects are put into perspective, but also the industrial difficulties encountered during the negotiations, the social aspect, and the risks directly linked to the cooperation programs, it appears that nothing, today, argues in favor of continuing FCAS in its current model, if not a political dogma supporting European cooperation, and the possible desire to hide future expenses, which will be difficult to finance, by expenses that are more easily sustainable today, during the development phase.
Moreover, the situation is strictly the same, but in favour of Germany this time, concerning the MGCS programme, Berlin effectively having all the skills, and the captive international market with the Leopard 2, to develop its new tank alone, and make it profitable, budgetarily, through export, which will be much more difficult to do, for Paris. However, Berlin knows that it can finance the development of the MGCS alone, if necessary, which is not the case for France, today, concerning the FCAS program, at least in the political and budgetary context of the moment.
The fact remains that between a €12 or €15 billion program for 300 new-generation tanks and a €70 billion program for 200 combat aircraft, it is impossible to compensate one for the other, and the operating losses and budgetary revenues linked to sharing within the FCAS program, by those which will be generated by the MGCS program, make this global Franco-German FCAS + MGCS agreement a powerful springboard for German industry, without any real compensation for the French side, quite the contrary.
Article from August 5 in full version until September 14, 2024
