(News Bulletin 247) – According to the Frankfurter Allgemeine Zeitung, Germany would refuse to finance more military spending as part of Berlin’s support for kyiv, which has caused some military groups in Frankfurt to fall. The German executive nevertheless assured on Monday that it was “fully committed” to helping Ukraine.

Germany threatens to freeze federal funding for any new additional aid to Ukraine, a move that hits defense groups on the stock market Monday.

In the early afternoon, shares in Rheinmetall, a company that makes tanks, munitions and other military equipment, were down 1.8% on the Frankfurt Stock Exchange, after having fallen more than 5% at the start of the session. Hensoldt, which supplies optronics solutions, sensors and military electronics, fell 4.4%. Outside Germany, Norway’s Konsberg Gruppen and Britain’s BAE Systems fell around 1.8%. The movement was much more moderate for Italy’s Leonardo (-0.8%) as well as for France’s Thales (-0.6%) and Dassault Aviation (-0.7%).

The Frankfurter Allgemeine Zeitung reported on Saturday that the German government would not release additional funds for aid to Ukraine in its 2025 budget, with the German government sticking to the military aid already approved.

>> Access our exclusive graphic analyses, and enter the confidence of the Trading Portfolio

Germany remains “fully committed”

In the German budget proposal for 2025, 4 billion euros of funds are earmarked for military aid for Ukraine, compared to 8 billion in 2024.

According to a parliamentary source quoted by AFP on Saturday, Berlin intends to compensate for this halving of federal aid planned in the German budget by relying on the interest received on frozen Russian assets.

In June, the various G7 countries had reached a “political agreement” to finance a loan of 50 billion euros to Ukraine that would be guaranteed by the interests of the approximately 300 billion euros of Russian assets frozen in the world. But the terms of this agreement remain to be defined.

On Monday, German government spokesman Wolfgang Büchner said Berlin remained “fully committed” to supporting Ukraine.

“Support for Ukraine will continue for as long as necessary and no one, especially not the Russian president, has any reason to hope that we will relax (the effort, editor’s note),” he assured during a press conference, quoted by AFP.

“The reports suggesting that we are cutting aid are simply inaccurate,” he added, pointing to “nefarious” accusations.

A sector propelled on the stock market since 2022

These doubts about German military aid to Ukraine are therefore weighing on defense stocks this Monday. These groups have been propelled on the stock market by geopolitical tensions and the outbreak of conflict in kyiv and Moscow in recent years.

“Many countries had massively underinvested in defense for at least a decade. The outbreak of war in Ukraine was a rude awakening, reminding us that a conflict can very well arise on Europe’s doorstep, that it can be long and potentially spread to several zones. Germany, Poland, the Baltic countries and Finland have accelerated their military spending,” explained Yan Derocles, an analyst at Oddo BHF, to News Bulletin 247 in February.

Rheinmetall is certainly the best example, with a 90% increase over the whole of 2024 and a share price multiplied by five since February 24, 2022, the date of the start of the war in Ukraine. This opened the doors, last year, to the DAX 40, the flagship index of the Frankfurt Stock Exchange.

In April, Goldman Sachs nevertheless judged that the sector’s shares had certainly reached their full potential.