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Macron backs creation of European satellite manufacturing

champion

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Europe struggles to compete with US, China in space

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Defence spending may boost European space budgets

By Tim Hepher, Giulia Segreti, Makini Brice

PARIS, June 20 (Reuters) - President Emmanuel Macron

threw France's backing behind plans for a European satellite

manufacturing champion and called for accelerated deployment of

Starlink-type satellites as he declared space the new theatre

for world power competition.

Speaking at the Paris Airshow on Friday, after France moved to

take control of Starlink competitor Eutelsat, Macron

called for an energetic push spanning launchers to manufacturing

and services as he set out a strategy to counter the sprawling

rocket-to-telecoms interests of U.S. billionaire Elon Musk.

Staged amid the conflict between Israel and Iran, the

world's largest aerospace event has mostly been dominated by

geopolitical and trade tensions and fragile supply chains,

rather than the usual glittering jetliner order announcements.

On Friday, attention turned from defence displays to space.

"At the intersection of all these public and private

questions, as well as civil, military, scientific and industrial

ones, space has in some way become a gauge of international

power," Macron said in a speech to delegates.

Europe has taken a lead in Earth observation but has

struggled for years to keep up with the United States and China

in a domain now considered as strategic as the planet's oceans.

It lost independent access to orbit for more than a year in

2023 following technical problems, delays and a breakdown of

ties with Russia over Ukraine that halted use of Soyuz rockets.

Despite Europe being the world's largest exporter of

satellites, its two main manufacturers - Airbus and a

tie-up between Thales and Italy's Leonardo -

have struggled to make money and want to pool those activities.

"They have our full support and confidence. I want us to

build this new champion as soon as possible," Macron said.

"This is what will allow us, as Europeans, to have the scale

to improve competitiveness and volume. It's a sector

consolidation."

Under pressure from Musk's cheaper low Earth-orbit Starlink

satellites and a shift away from bespoke satellites in higher

orbit, Airbus, Thales and Leonardo have said they are discussing

plans code-named Project Bromo to forge a combined venture.

Previous efforts to pool satellite-making have been thwarted

by competition concerns.

DEFENCE SPENDING

In a third battleground, the importance of satellite

services and connectivity has been highlighted by Ukraine.

On Thursday, France agreed to inject $1.55 billion into

debt-laden Eutelsat, sending its shares soaring.

U.S. and Chinese spending on space dwarfs European budgets

and insiders say industrial squabbling has curbed co-operation.

The European Space Agency says the U.S. accounted for nearly

two-thirds of the global space budget in 2023; Europe just 11%.

Space budgets may get a lift from defence funds flowing into

the sector. But fiscal room for Macron's new agenda is tight.

"Partnership between public and private capital will be

needed and this requires a considerable effort", said

Jean-Pierre Darnis, associate fellow at the Foundation for

Strategic Research.

France is struggling to get public finances under control after

spending spiralled higher last year.

Europe is already hiking defence spending after U.S.

President Donald Trump's team made clear that the United States

was no longer willing to be the main guarantor of Europe's

security.

"The big story of this show is sovereignty in the wake of

some of the statements by (Trump) questioning U.S. commitment to

Europe and to NATO," said Vago Muradian, founder of the Defense

& Aerospace Report.

Macron flew into Le Bourget days before a NATO summit on a

French Air Force A400M transport plane - itself a symbol of

Europe's shifting priorities after years of battles over costs.

The future of Europe's troop plane had been under threat

after some of its European NATO sponsor nations including France

and Spain slowed the pace of deliveries or cut their orders.

Exports have also fallen short of expectations.

But Airbus signed an agreement with procurement agency OCCAR

at the show to stabilise production until 2029.

Weapons makers and buyers are increasingly touting the label

"ITAR-free" to avoid getting caught up in U.S. export controls

for certain components, a senior European industry official

said. ITAR stands for International Traffic in Arms Regulations.

Some U.S. suppliers are scoping out ways of offering

ITAR-free product lines to avoid being left out by the European

spending wave, analysts said.

The commercial side of the show fell silent on Friday after

being overshadowed by last week's crash of an Air India Boeing

787 jet in India. Boeing ( BA ) sat out any announcements as Airbus and

Embraer ( ERJ ) rolled out deals earlier in the week.

Some airlines are shunning such shows to announce purchases

in Washington or other capitals as aircraft become a currency of

choice in a new style of transactional politics, delegates said.

Organisers said the show nonetheless had record attendance.