German defense stocks experienced significant declines on 19 August as the government coalition debated future financial aid for Ukraine, according to Spiegel. The major arms manufacturer Rheinmetall’s shares dropped by up to 5% before recovering slightly to a 3% loss by midday. Bavarian arms producers, Renk and Hensoldt, also suffered losses of around 4% each in the afternoon after initially also falling sharply.
The market downturn follows a period of substantial growth for these stocks, with Rheinmetall shares having risen by up to 28% over the previous two weeks, approaching record highs. The sudden reversal is attributed to uncertainty surrounding Germany’s continued military support for Ukraine.
At the center of the debate is a letter from Federal Finance Minister Christian Lindner to Defense Minister Boris Pistorius and Foreign Minister Annalena Baerbock.
In the letter, Lindner stressed that “new measures” could only be taken if funding is secured in the budget plans for the current and coming years. He further urged, “Please ensure that the ceilings are adhered to.”
The German government is reportedly exploring using interest generated from frozen Russian state assets as aid for Ukraine. The G7 countries agreed in principle to this strategy in June 2024. However, many questions remain unanswered regarding the implementation of the planned financial instrument.
Related:
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- Ukraine dismisses reports of Germany halting military aid as manipulative
- FAS: Germany halts new military aid to Ukraine amid budget cuts
- Ukraine to receive 30 Leopard 1A5 tanks in 2024, says German general