Status: 09.03.2022 7:49 p.m
The federal government wants to spend an additional 100 billion euros on defense. Defense stocks benefit enormously from this. The view of the Bundeswehr is also changing. Will investments in weapons soon be considered sustainable?
Russia’s invasion of Ukraine and the resulting images of war in Europe changed a lot. Federal Chancellor Olaf Scholz speaks of a turning point and thus justifies the creation of a special fund to strengthen the Bundeswehr in the amount of 100 billion euros. Even the majority of the German population thinks that’s right, as the latest ARD Germany trend shows. “The perception of a threat is now much more concrete than it used to be,” says Matthias Dembinski, an expert on European foreign and security policy at the Hessian Foundation for Peace and Conflict Research, or PRIF for short.
Fears increase acceptance of military spending
According to the security expert, it is now a question of reinsurance and the question of how NATO and thus also Germany could defend the Baltic States, Poland and Romania against Russia. The Bundeswehr is currently unable to meet the expectations of its NATO partners at all because of a whole series of structural deficits and decades of underfunding. “Under the impression of the war, an attack out of the blue, the fears of the population are great and thus the reflex to agree to the increased defense spending,” is the assessment of the PRIF expert.
Specific security policy culture in Germany
It is questionable how long the population will be in favor of upgrading the Bundeswehr to the planned level, according to Dembinski. So far there has been less acceptance of the military in Germany than in other western countries. There is a historical reason for this, after two lost world wars, the second of which also ended in moral bankruptcy.
Decades later, the motto “never again war” and a critical attitude towards the military prevailed within the German population. The researcher from the Hessian Foundation for Peace and Conflict Research says that the specific security policy culture in Germany differs from that in other countries tagesschau.de. A culture like that changes slowly.
Defense stocks in demand
The reaction on the stock exchanges was different. Investors react at lightning speed when politicians change the rules of the game. And so since the start of the Russian war of aggression in Ukraine, armaments companies have been among the big winners on the stock market. Papers from the armaments technology group Hensoldt or from Rheinmetall have increased by 80 percent at times since the beginning of the year.
Even if, in the opinion of capital market expert Robert Halver from Baader Bank, it was not “fashionable” and even cynical during the war to talk about armaments stocks on the stock exchange, there were still enough investors who bought them. “The investors are buying, the big ones and the small ones.” According to Halver, a military budget of 100 billion euros would first have to be implemented. The corporations need new employees, perhaps new production facilities and raw materials, which are currently in short supply.
Can guns be sustainable?
Russia’s war against Ukraine is turning certainties upside down, and with it the question of whether weapons can be sustainable or not, says Hendrik Pontzen, Head of Sustainability at Union Investment. “Our view is that weapons are necessary, but they are not sustainable. Necessary because we have to be able to defend our freedom. And that can’t be done with the means of democracy alone. That also needs weapons,” says the portfolio manager.
But only what is not associated with significant negative impacts can be sustainable, according to Pontzen. A dilemma – as also shown by the demands of the Ukrainian President Volodymyr Zelenskyj, who urgently calls on the NATO countries to supply arms for his country’s self-defense.
The state benefited from the peace dividend for a long time
According to the expert from the Hessian Foundation for Peace and Conflict Research, “a war in Central Europe was unimaginable” from a research point of view. Since the end of the Cold War, the national budget has benefited from the so-called peace dividend. “The Bundeswehr has saved money and has practically been transformed into an army for foreign missions,” said the EU foreign and security policy expert. Collective defense has receded into the background.
But that changed when Russia invaded Ukraine on February 24. Which in turn led to the Chancellor’s announcement, without much public debate, that Germany would meet NATO’s so-called two percent target. In other words: Germany intends to spend two percent of its gross domestic product on defense every year in the future. And would, according to Dembinski, at least nominally, have a higher defense budget than Russia.
Does rearmament ensure peace?
The peace and conflict researcher’s cautious prognosis with regard to the acceptance of the higher defense spending is: “If we remain in a situation of unregulated confrontations with Russia, if there are further conflicts and the tension with Russia remains high, then the acceptance face a heavy military budget and face the armed forces.”
As far as the financing of armaments companies is concerned, the European Commission could soon publish new guidelines. After the EU last classified nuclear power plants as sustainable in its so-called taxonomy under public protest, armaments companies are now being put to the test. The taxonomy is a classification system designed to make it easier for investors to assess which company or industry is green, social and ethical. This should help direct private capital to where it will be of the greatest benefit to people and nature. The social taxonomy is still in the draft phase.
However, an interim report published in July aroused fears among the armaments lobby that it would be declared to be socially harmful. The industry itself considers itself sustainable because it secures peace, freedom and democracy in Europe. A highly controversial point of view, which is likely to be discussed again in view of the Russian war of aggression in Ukraine.