The German government’s announcement that it would massively increase military spending after years of reluctance caused shares in German armaments companies to skyrocket on Monday. Germany will put 100 billion euros into a special fund to modernize the Bundeswehr, Chancellor Olaf Scholz said on Sunday. From 2024, Germany will also spend at least two percent of its gross domestic product on defense each year. In this way, NATO obligations would be met that previous federal governments have repeatedly failed to meet.
The move gave a strong boost to the defense sector on Monday. Rheinmetall shares soared by 50 percent to 160 euros. The shares of the defense electronics manufacturer Hensoldt went up by almost 85 to 27.35 euros. Thyssenkrupp papers were also in demand with a plus of a good nine percent. BAE Systems rose by almost 14 percent on the London Stock Exchange. In Paris, Thales rose in price by 13 percent.
In view of the planned additional expenditure, Germany could invest an estimated 33.5 billion euros per year in equipping the Bundeswehr, four times as much as before, according to the analysts from the investment house Stifel. Since Rheinmetall is the largest supplier of the Bundeswehr’s main weapon systems, the Düsseldorf-based company should be able to secure a significant share of the sum.
Germany has for years rebuffed calls for increased defense spending, which has left armed forces across the board struggling to maintain key competencies. Significant pieces of defense equipment, including fighter jets, tanks and submarines, are unserviceable due to repairs and problems obtaining spare parts.
The armaments companies could also benefit from a possible change in German export regulations. On Saturday, Germany, along with other countries, agreed to supply arms to Ukraine, breaking the traditional rule of not supplying German arms to conflict zones. It is important to him, said Chancellor Olaf Scholz, “that we build the next generation of combat aircraft and tanks together with European partners – and especially France – here in Europe.” These projects should therefore have top priority. The contracts for the so-called Eurodrone project, a cooperation between Germany, France, Italy and Spain, had already been signed last week, said the German chancellor.