Record Highs for Defense Industry Stocks in Europe amid Plans for Massive Rearmament
The actions of defense companies in Europe have skyrocketed following the announcement of an $800 billion rearmament plan for Ukraine. Thales, Dassault, Kongsberg, and Rheinmetall are experiencing remarkable increases.
Germany is abandoning its budgetary rigor and proposing a lasting exemption from European rules for military spending, with a €500 billion fund to modernize its infrastructure and support its army.
The EU is considering massive funding of €650 billion over four years to strengthen its defense industry, in response to the US withdrawal of support for Ukraine and uncertainty about American security guarantees.
A Surge in Defense Stocks
A new era is upon us. Europe is facing a clear and present danger of an unprecedented scale that none of us have experienced during our adult lives.
Ursula von der Leyen
President of the European Commission
As Europe embarks on a massive rearmament strategy, defense companies are experiencing a spectacular surge in the stock market. In response to the diplomatic crisis between Donald Trump and Volodymyr Zelensky, the European Union unveiled an $800 billion aid plan to strengthen Ukraine’s defense, a strategic turning point that has propelled the sector’s values.
Since the tense episode on February 28th, defense companies’ stocks have surged an average of 20%. In France, Thales and Dassault have seen a 20% increase in just five days. In Europe, the Norwegian company Kongsberg and the German company Rheinmetall are showing similar performances, evidence of investors’ widespread enthusiasm for the sector.
Europe Opens the Door to Unprecedented Rearmament
Long before the official announcement of the funding program, the markets were already anticipating a massive increase in military budgets. The “RearmEurope” plan aims to relax the budgetary constraints of the member states, allowing them to mobilize hundreds of billions of additional dollars for defense. In France, Prime Minister François Bayrou stated that France must play a central role in supporting Ukraine militarily, thus demonstrating Paris’ desire to establish itself as a key player in this new era of rearmament.
Germany Changes Course and Puts Pressure on the EU
The most striking turnaround comes from Germany. Friedrich Merz, the likely future chancellor, surprised by advocating for a lasting exemption from European budget rules for military spending. This radical change marks the end of Berlin’s traditional budgetary rigor and places defense at the heart of the country’s economic priorities.
Berlin plans to go well beyond the initial four-year exemption proposed by Ursula von der Leyen, President of the European Commission. The German government aims to reform debt and deficit rules to ensure a massive and sustainable increase in military investments. This historic decision puts considerable pressure on other member countries, urging them to adopt a similar approach to ensure European security.
Merz announced the creation of a €500 billion fund to modernize the country’s infrastructure and revitalize the economy, while preparing Germany for a major military effort. This plan, which will be submitted to the Bundestag for approval, could represent a major turning point in European budget policy.
A New Era for Europe: Rearmament and Budget Restructuring
The acceleration of European rearmament coincides with the withdrawal of US military support for Ukraine and the questioning of American security guarantees. Faced with this uncertainty, the EU is exploring new funding mechanisms, including the creation of an intergovernmental fund involving the United Kingdom.
Ursula von der Leyen has called on the 27 member states to mobilize €650 billion over four years, relaxing tax rules and utilizing EU resources to boost the defense industry. Among the measures being considered, the European Commission could raise €150 billion in the form of loans to European capitals to accelerate defense investments.
Europe is thus entering a new strategic era, where budget reallocation and increased military spending are top priorities. While some countries still struggle to reach the NATO-imposed 2% of GDP for military spending, others like Germany and France are already taking the lead in ensuring the security of the continent against future threats.
