European defense stocks fall

The defense sector in Europe has suffered a major downturn following reports that the German Finance Ministry will not approve additional requests for military aid to Ukraine due to budget constraints. According to the Frankfurter Allgemeine Sonntagszeitung (FAS), the Finance Ministry’s decision was made due to the country’s financial constraints.

The news sent shockwaves through the defense sector. Shares in arms maker Rheinmetall initially fell by as much as 5 percent before recovering. Other European defense companies, including BAE Systems, Saab AB, Thales and Leonardo, also saw their shares fall by between 1 and 4 percent.

New help requests are prohibited.

The FAS report cites a letter from the finance ministry dated August 5, stating that new measures this year and next are only allowed if funding is already secured. The letter was addressed to Defence Minister Boris Pistorius and Foreign Minister Annalena Baerbock.

The decision is expected to have serious consequences for Ukraine’s military efforts. In 2024, Ukraine is set to receive nearly €8 billion in aid from Germany, while its budget for 2025 is set to reach €4 billion. But sources close to the government revealed that these plans have not changed and that most of the money has already been allocated.

Germany wants to use frozen Russian assets

Instead of increasing its financial support, Germany has announced plans to use the proceeds from frozen Russian assets to finance more aid to Ukraine. In this way, the country wants to ease the pressure on taxpayers and ensure continued support for Ukraine’s military efforts.

The decision comes as other G7 members, such as Britain, have pledged to maintain their support packages for Ukraine at the same level. A Rheinmetall spokesman declined to comment on the German budget discussions, saying the company would continue its cooperation with Ukraine.

As negotiations between Germany’s three-party coalition continued, defense companies such as Hensoldt and Renk also suffered losses. Shares fell 4.2 percent and 3 percent, respectively. Hensoldt reassured investors that the company did not see any setbacks in the report for its business.

The leaders of the Social Democrats, Greens and Liberals agreed on a €481 billion budget bill and only reached an agreement last Friday to cut the budget deficit.

Key points

• European defense stocks fell after reports that new military aid to Ukraine has been frozen.
• The German Finance Ministry has announced plans to use frozen Russian assets to finance more aid to Ukraine.
• Defense companies such as Rheinmetall, Hensoldt and Renk suffered losses as a result of this news.

If you want access to all articles, take advantage of our special promotion and subscribe here!