The Australian government has agreed to pay €550m (A$830m) in a settlement with Naval Group over the former Morrison government’s controversial decision to scrap the French attack class submarine project.
The prime minister, Anthony Albanese, announced on Saturday the confidential settlement would draw a line under the cancelled $90bn project. Labor gave bipartisan support to the Aukus partnership that replaced the project – under which the US and the UK have offered to help Australia to acquire at least eight nuclear-propelled submarines and cooperate on other advanced technologies.
However, Albanese said on Saturday the way it was handled by the former Morrison government “has caused enormous tension in the relationship between Australia and France”.
“This is a fair and an equitable settlement which has been reached. It follows, as well, discussions that I’ve had with President [Emmanuel] Macron and I thank him for those discussions and the cordial way in which we are re-establishing a better relationship between Australia and France,” he said.
The French defence minister welcomed the settlement deal on Saturday afternoon.
“It permits us to turn a page in our bilateral relations with Australia and look to the future,” Sebastien Lecornu said.
Speaking on the sidelines of the Shangri-La Dialogue security summit in Singapore, Lecornu said France valued its “friendship” with Australia.
“Just because a government in the past did not keep its word, it does not mean we have to forget our strategic relationship,” he said.
“Australia has a new team in power, we are happy to be able to work with them.”
The agreement was forged by the new Labor government just three weeks after the federal election. Albanese confirmed it was not reached before the election by the former government and kept confidential.
The total cost of the failed submarine project for Australian taxpayers is $3.4bn, which is down from the $5.5bn touted as the government’s total approved budget for the project. As Guardian Australia has previously reported, officials had considered this to be a maximum “envelope”.
Albanese said despite the lower cost, it was still “an extraordinary waste from a government that was always big on announcement but not good on delivery, and from a government that will be remembered as the most wasteful government in Australia’s history since federation”.
The prime minister said it would allow Australia to move forward in its relationship with France. Macron accused Morrison of lying to him about the deal, and Morrison later said he was “not going to cop sledging of Australia”.
Part of a text message exchange between the two leaders was released to several Australian media outlets in an apparent attempt to blunt the idea France had been completely blindsided by the cancellation.
French officials denounced the leaking as “an unprecedented new low”.
By contrast, Macron had warmly welcomed Albanese’s election to office last month, extending an invitation for Albanese to visit Paris, which the prime minister said he had accepted.
“Details are being worked through. We have a critical relationship. France, of course, plays a critical role in the European Union. And President Macron, of course, has recently been re-elected, I am newly elected and it is important that we have engaged – I appreciated his message of congratulations and the fact that both of us want to reset the relationship between our two countries,” he said.
“I see a personal meeting between myself and President Macron in France as being absolutely vital to resetting that relationship, which is an important one for Australia’s national interests.”
On Thursday, the opposition leader, Peter Dutton, said he had devised a plan as defence minister before the election to buy two Virginia-class submarines by 2030 to fill the gap before the nuclear submarines are delivered, claiming he had “formed a judgment the Americans would have facilitated exactly that”.
Albanese said on Saturday that Dutton had presided over an “all-announcement, no-delivery” regime.
“You don’t defend your country and our national security with a media release – you defend it with operational capability,” he said. “My government intends to concentrate on delivering rather than the statements that Peter Dutton has made that contradict all of the statements that he made while he was defence minister.”
As to whether Australia was negotiating for the submarines Dutton mentioned, Albanese said he would not be making “on the run comments” about national security and defence.
The Aukus announcement also forced the UK and the US into damage control with France. The French defence minister last year cancelled talks with her UK counterpart after the deal was announced, while the US president, Joe Biden, had a 30-minute call with Macron to mend relations after France recalled its ambassador from Washington.