German defence stocks fell on August 19, after the German newspaper Frankfurter Allgemeine Sonntagszeitung (FAS) reported that the finance ministry would not approve additional applications for Ukraine military aid due to budget constraints.
Shares of German defence companies fell sharply this morning, with Rheinmetall dropping three per cent, making it the biggest loser on the DAX index.
Hensoldt, which produces radars for the IRIS-T air defence system, saw a six per cent decline, while tank gearbox maker Renk fell four per cent.
This downturn follows a report by FAS indicating that Chancellor Olaf Scholz will not approve any new financial aid for Ukraine, as outlined in an August 5 finance ministry letter.
The German chancellery and the finance ministry did not immediately reply to requests for comments.
Germany’s economy is facing challenges that threaten the viability of its growth model, a report has claimed. https://t.co/KzbKXudWPh
— Brussels Signal (@brusselssignal) August 6, 2024
Around €8bn are already earmarked for Ukraine‘s military in 2024, and the budgeted €4bn for 2025 is already overbooked.
“The pot is empty,” FAS quoted a government source as saying.
The 2024 and 2025 budget plans have not changed, German government sources told Reuters.
The planned financial aid for Ukraine would be halved to around €4bn euros in 2025 because additional funds from the G7’s $50bn loan plan should be available from November, the sources said.
The German government has said that instead of spending taxpayers’ money, it wants to use proceeds from frozen Russian assets for further Ukraine aid, in coordination with its Group of Seven (G7) partners.
Budget negotiations between Germany’s three-party coalition were difficult and protracted as large spending requirements for climate, social measures and infrastructure clashed with constitutionally enshrined limits for new debt.
Last month, the leaders of the Social Democrats, the Greens and the Liberals agreed on a €481bn draft budget and only on Friday reached a deal to narrow its deficit target.
