French and Italian firms seal mega military deal: Aerospace, defense shares jump

The CEOs of both Italy and France signed a defense industry cooperation agreement that “strengthens Franco-Italian partnership,” French president Emmanuel Macron announced in Rome on Friday.

A joint industrial project between Airbus and Finmeccanica –including AMEC to design a E-Fan aircraft – will provide France with 10 percent of its defense needs, and help close the EUR 250 billion ($264 billion) French-Italian defense industry gap, he said.

Under the agreement, unveiled by Macron in Italian Premier Giuseppe Conte’s office, French companies including Dassault Aviation, Atlas Copco, Thales, Lagardere, Atlantia-Safran and Bouygues will be able to provide technical advice, projects management and products to the Italian defense company and reach exports of over EUR 2 billion ($2.4 billion) in 10 years.

Italy will become one of France’s main partners in military technology, said Conte.

“It is an ambitious but attainable objective,” said Conte. He added that the Franco-Italian cooperation would help France to “interaction with the aerospace and defense world.”

The cooperation agreement follows France’s decision to modernize its armed forces, which accounts for 30 percent of its procurement budget. France will form its aircraft carrier fleet with four Airbus A330neo multi-role planes and nine TFE731-made, Toulouse-built Rafale planes.

The plan coincides with France’s three-year modernization program, unveiled on March 1, with defense minister Florence Parly saying that the defense budget will rise 3.7 percent annually from 2020 to 2023. For 2022, the budget has been set at EUR 15.9 billion.

At the conference, Conte laid out a plan for an economic revival in Italy, which by the time Macron took office in May 2017 had been in the doldrums since the financial crisis, and accelerated under last year’s Prime Minister Paolo Gentiloni, who became Italy’s third premier since 2015, or EUR 46 billion.

A primary aim of Conte’s fiscal plan is to pass a simplified STOID tax regime for companies, which will increase productivity and GDP, said Conte.

According to Conte, the new incentives will be an additional “increase of up to 30 percent in profit.”

Renato De Santis, a professor of economics at Geneva University, sees an opportunity for Italy to catch up with the emerging European market economies and overtake the stronger countries like Germany and France.

“It is right that we are trying to catch up with other countries on technological and geographic understanding. We also have to do it on access to foreign credit markets,” he said.

According to De Santis, there is still a lack of competition in European Union markets.

“Many countries pay higher prices because they pay taxes more than the others. This is an opportunity for Italy to become competitive and thus growing,” he said.

In a statement, Ambiorte said the agreement on defense industrial cooperation would help both countries deal with an aging defense industrial base and bring “political and industrial strength.”

Under the agreement, AMEC will lead the procurement on defense integration for a EUR 8.7 billion joint program; Leonardo will work on E-Fan enhancement for EUR 2.1 billion; Thales will lead on cyber, data analytics and cloud for EUR 2.7 billion; Astrium will work on unmanned aircraft for EUR 2.3 billion, and Dassault Aviation will develop and produce high-speed patrol boats for EUR 1.6 billion.

Giulio Donzi, a retired Italian naval officer, chairman of Italian industry consultants group General Dynamics, advised the Europeans to focus on innovative projects, stating that there are thousands of small industrial projects that have been cancelled in Europe.

“The biggest resources in Europe have been wasted on bureaucracy, for example with rules which favor some countries. There is a need to bring the money back and allow the larger companies to focus on growth,” he said.

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