Stock prices of defense companies have risen after German Prime Minister Olaf Scholz announced that he would raise military spending and strengthen his army and capabilities in response to Russia’s invasion of Ukraine.
Scholz said Germany’s 2022 federal budget will secure a one-time budget of € 100 billion for the armed forces. Policy statement He added that the country would invest “more than 2 percent” of GDP in defense “every year.” Berlin spent about 1.53 percent of its GDP on defense last year, according to NATO data. Germany aims to meet the goals set by NATO in 2006 by raising military spending.
According to some analysts, Russian President Vladimir Putin has ordered an invasion of Ukraine due to growing concerns about NATO expansion at the Russian border. Germany’s solution for manufacturing weapons could encourage other European allies to follow proceedings leading to a new arms race on the continent.
Defense stocks in various markets traded much higher on Monday than they closed on Friday. The stock price of German car and weapons maker Rheinmetall peaked at 160 euros ($ 178), up 49.5% from Friday’s closing price of 107 euros ($ 119). Hensoldt, Germany’s leading military sensor maker, surged more than 88%, peaking at € 14.80 ($ 16.50) to € 27.95 ($ 31).
Thales, a French multinational company engaged in the defense and aerospace industry, rose its share price from € 91.50 ($ 102) at the closing price on Friday to a peak of € 105.55 ($ 117.71) in trading on Monday. ..
The stock price of Italian defense company Leonardo rose from € 6.93 to € 8.20 ($ 7.73 to $ 9.14). BAE, the UK’s largest defense company, has seen its share price rise from 650.40GBX to 749.40GBX ($ 8.71 to $ 10.04).
Northrop Grumman shares increased from $ 409.66 to $ 442.14 in the United States. Raytheon’s share price hit a high of $ 98.12 to $ 102.70. Lockheed Martin, the manufacturer of the F-35 fighter, saw stock prices rise 5.94 percent to a peak of $ 433.82 on Monday.
“More resources for defense between European US allies combined with challenges from Russia could contribute to the development of a larger and more competent … European defense industry base … US You can increase your competitiveness with it. “JP Morgan, I have written With a memo.
“But in the short term, we see the German announcement as an opportunity for contractors in the US defense industry.”
After the Cold War, some European countries reduced their military power because of the belief that economic interdependence made war meaningless. The German “Wandel durch Handel” doctrine suggested that commercial relations with Russia continue to curb the Kremlin’s expansionism.
Germany has reduced its army from about 500,000 in 1989 to now only 180,000. During this time, the number of main battle tanks decreased from 5,000 to 300.
However, Russia’s invasion of Ukraine forced Scholz to declare a historic shift in national defense policy.
In a policy statement, Scholz accused Putin of wanting to build a “Russian Empire” and, if necessary, use military force to redefine the status quo of Europe “in line with his own vision.” So Germany intends to invest “much” in security to protect “our freedom and democracy,” the Prime Minister added.