EC backs France's decision to boost security spending; Stocks extend rally

The European Commission has just backed France’s decision to increase security spending at the expense of deficit reduction.

Commissioner Pierre Moscovici has told reporters in Brussels that the Commission will show "full understanding" of the situation in France, after Paris said it will not get its deficit below the target of 3% of GDP by 2017.

Moscovici - a former French finance minister - says there is flexibility within the rules to give states some freedom of action, when it is necessary.

He notes:

"One thing that is clear in the current circumstances is that in this terrible moment the protection of citizens, the security of citizens in France and Europe is the priority."

The Paris CAC 40 index has extended its rally. It’s now up by 2.18%, up 104.64 points at 4,908.95.

London’s FTSE 100, and the German DAX, have both gained around 1.8%.

Defense companies are leading the London stock market on expectations that they will benefit from France’s new security spending plans.