Germany Eyes Stake in Arms Industry to Bolster Defence Strategy

The German government may acquire stakes in arms manufacturers and defence projects to strengthen its arms industry, per a draft paper from the economy and defence ministries. This move is part of a strategy to bolster defences following Russia's 2022 invasion of Ukraine.

The German government may take stakes in arms manufacturers and defence projects in 'strategic cases,' according to a draft paper from the economy and defence ministries, reported Handelsblatt on Thursday. The proposal is part of a new strategy to bolster Germany's arms industry as Europe ramps up defences following Russia's 2022 invasion of Ukraine.

A spokesperson for the economy ministry confirmed that the paper is not yet final, while the defence ministry could not be reached for comment. If the strategy is approved, it could lead to more frequent government stakes in strategically important companies and projects. Currently, the government already owns a 25% stake in defence electronics maker Hensoldt, according to LSEG data.

In June, sources revealed to Reuters that state-lender KfW and private equity firm Carlyle were in talks to jointly acquire a majority stake in Thyssenkrupp's warship division, with a potential deal by September if consensus is met. Russia's invasion has resulted in increased defence spending across Europe, benefiting arms-makers like Rheinmetall and Hensoldt. The draft paper also includes recommendations on promoting key technologies, enhancing the industry's financial framework, and simplifying regulations.

(With inputs from agencies.)