The new forces include 5,000 new police and gendarmes, 1,000 customs officials, and 2,500 prison guards. “I assume it will lead to an increase in expenses,” he said.

The combined effect amounts to a fiscal stimulus and may ultimately cushion the economic damage of terrorist attacks for the tourist industry, but the “rearmament” drive spells the end of any attempt to meet deficit limit of 3pc of GDP enshrined in the Stability and Growth Pact. With France in open defiance, the reconstituted pact is now effectively dead.

The European Commission expects the French deficit to be 3.4pc of GDP next year and 3.3pc in 2017, but the real figure is likely to be much higher and will last through to the end of the decade. The concern is that this could push the country’s debt yet higher from 96.5pc of GDP to nearer 100pc, made worse by the effects of deflation on debt dynamics.

Mr Hollande said France will invoke article 42.7 of the Lisbon Treaty, the solidarity clause obliging other member states to come to his country’s help by “all means in their power”. It would be beyond parody for Brussels to continue insisting on budget rules in such a political context.

The French economy is slowly recovering as the triple effects of a weak euro, cheap oil, and quantitative easing by the European Central Bank combine to create a short-term blast of stimulus, but it still remains remarkably depressed a full six years into the post-Lehman cycle of global expansion.

Growth crept up to 0.3pc in the third quarter after stalling earlier in the year. Unemployment is still stuck at 10.7pc and has actually risen over recent months. “Momentum may fade in 2017 as tailwinds peter out,” said the Commission.

Professor Brigitte Granville from Queen Mary University of London said the country has been losing competitiveness within Europe’s monetary union for so long – not helped by a labour code still 3,648 pages - that it is now caught in a stagnation trap with the wrong intra-EMU exchange rate. She warned that the country is on a slow slide towards economic “catastrophe”.

A study by Nobel economist Gary Becker found that “the fear created by terrorism has huge and enduring effects on human behaviour,” often out all proportion to the actual risk. This makes it extremely hard to predict the economic effects.

Tourism to Israel fell by two-thirds during the eighteen months after the Al-Aqsa Intifada, and air travel in the US fell by 15pc in the year following the Twin Towers attack on 2001. The paper concluded that people are ultimately rational and learn to control their fear. Life goes on as normal.

David Fuller's view

France’s economy was already weak before Friday’s massacre and it will take a further hit as tourist revenue declines and some business meetings are temporarily postponed. 

This is only the latest European problem and poses a threat to the region’s modest economic recovery that we had been seeing.  France is the EU’s second largest economy, and while the additional military spending is likely to offset the slowdown in tourism, the budget deficit will definitely soar, as AE-P points out above.  This will ensure that monetary policy from the ECB remains very accommodative, representing a cushion beneath the region’s stock markets, including France.