The problem is that open-source projects funded by the taxpayer bring nothing long term to create companies that can compete or generate economic growth or develop future industries. They would be much better off creating a more business friendly environment and supporting private businesses through grants, procurements, etc the way the US are good at.
This comment misses the point and argues against something unrelated. It's fundamentally a data sovereignty and security move, not a commercial one. It's neither pro or anti business. This or "creating a more business friendly environment" policies is a false dichotomy. That could be done too via other means. It is unrelated. Speaking about this "business friendly" only is either misdirection or myopic.
If the aim is indeed sovereignty, data and software (and this is software not data), and in general, then they need an effective and comprehensive plan. I think taxpayer-funded state-developed open-source software brings very little at a high cost and can even be counter-productive. Frankly I think it is apolitical move internal to the French state to keep the gavy train coming to government agencies.
Rather I think the US, and also China that does it even more, are much more effective at this by throwing money at the marketplace to develop a whole ecosystem competitively that can also compete globally. An important thing to note here is that EU rules prevent a lot of state action (for instance they would not be allowed to buy only French cars or do things seen as direct subsidies, etc)
France will continue to fall further behind unless it really gets it act together, which is unlikely TBH.