(BFM Stock Exchange) – Germany has decided to loosen the budget vice to strengthen its defense and infrastructure. This announcement fuels the appetite for the risk as a whole but particularly supports certain values.

Germany is inspired by Mario Draghi. Devassed for several years and faced with the imperative to strengthen its security in a world where the United States no longer wants to defend Europe, the country has acted a beginning of a Copernican revolution.

The CDU-CSU (Conservatives) and the SPD (Socialist), the parties in charge of forming the future government coalition following the legislative elections, announced a massive plan to strengthen German defense, infrastructure and therefore the economy.

Hundreds of billions of euros will be invested in these two areas. The two parties predict, in the case of the defense, to reform the German mechanism known as the “debt brake” which limits the federal budget deficit to 0.35% of German GDP and 0% at the level of the regions (“Länder”).

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“The return of strength”

The CDU/CSU thread chief, Friedrich Merz, spoke of an “with It Takes” (“whatever it costs”) as a watchword for defense, because of the “dangers that threaten our freedom and peace on our continent”. The expression is an explicit reference to the “Whatever It Takes” pronounced in 2012 by Mario Draghi, then president of the European Central Bank, to ensure his commitment to defend the sustainability of the Euro.

The German press mentioned investment projects in defense ranging from 200 billion to 400 billion euros.

The leaders also announced a “agreement” on a gigantic public subsidy plan to improve the country’s infrastructure and competitiveness. A special fund of 500 billion euros must be voted with this in mind.

Deutsche Bank evokes “a moment ‘Whatever It Takes’ Historique”. “The Réveil de la Force”, a title on its Barclays, in reference to the seventh episode of the “Star Wars” saga.

These announcements launched this Wednesday an enthusiasm pronounced on European scholarships. If the Dax 40, the flagship index of the German stock market, takes 3.3%, the CAC 40 also benefits from this historic turn, and earns 1.9% to 8.204.14 points.

Construction and steelmakers jump

This German plan benefits many actions, including cyclicals. Some are distinguished more particularly.

Concerned in the foreground by the increase in military budgets, the defense groups are progressing clearly. The Germans Rheinmetall and Hensoldt advance 4.5% and 8.7% respectively. In Paris, Thales climbs 6.8% and Dassault Aviation by 4.5%.

“I am delighted to see that Germany may change course” but “I’m waiting, ‘I observe”, said Éric Trappier, CEO of Dassault Aviation, to journalists at a press conference this Wednesday. “If there are opportunities we will take them,” he concluded.

Construction groups are also particularly concerned with the desire to invest in infrastructure. Wienerberger, specializing in building materials, takes 11.8% in Frankfurt while Heidelberg Materials, a cement company, advances 14.3%.

In Paris, Saint-Gobain, French producer of building materials, signs the second highest increase in CAC 40 and advances 7.8%. The construction group Eiffage, the specialist in civil and mechanical engineering SPIE and the cement maker Vicat gained 8.3%, 9%and 7.4%respectively.

The same logic prevails for the steelmakers. Thyssenkrupp jumped 12.2% in Frankfurt, Salzgitter took 9.9% and the Austrian Vestalpine wins 8.6%. ArcelorMittal, for its part, signs the highest increase in CAC 40 and takes 8%.

“Germany weighs 10% of the group’s turnover and represents 20% of the group’s capacity in Europe, also around 10% of the group capacity (worldwide, editor’s note)”, explains Maxime Kogge, analyst at Oddo BHF.

ArcelorMittal “achieves around 30% of its activity in Europe in construction and public works, so it would obviously benefit from the recovery plan, no doubt a little less, however, than actors more turned towards Germany like Salzgitter, Thyssenkrupp and Vestalpine”, he adds.

The railway is progressing

The renewal of infrastructure should go through spending in the railway, the German network being known for its obsolescence. The Swiss group Stadler specializing in rail equipment takes 8.7%, Knorr-Bremse, a German group focused on brake systems for trucks and trains, wins 7%and Siemens, whose subsidiary Siemens Mobility specializes in rail takes 7.9%. Vossloh, an Austrian group specializing in rail infrastructure jumped 15.6%.

In Paris, Alstom climbs by 14%. A specialist in value believes that “German announcements should benefit in the Middle Long term rather than in the short term to the designer of the TGV”.

Alstom has a large industrial footprint in Germany, especially since the acquisition of Bombardier Transport (in 2021, editor’s note). The group is almost in a duopoly situation with Siemens because Stadler encounters difficulties and in the long term rail expenditure should increase because the Deutsche Bahn (the German SNCF) has suffered for years of under-investment, “he said.

The increase in German expenses can also suggest a better German situation. Which supports banks. In Frankfurt, Deutsche Bank and Commerzbank both take almost 10%. French establishments are also well oriented: Société Générale is 6.3%, BNP Paribas 5%and Crédit Agricole SA 3.4%.