German Defence Stocks Plummet Amid Budget Constraints on Ukraine Aid

German defence stocks, including Rheinmetall, Hensoldt, and Renk, fell on Monday after a report that the finance ministry would not approve more applications for Ukraine military aid due to budget constraints. Around 8 billion euros are earmarked for 2024 while the planned aid for 2025 is set to be halved.

German defence stocks faced a significant downturn on Monday following a report from Frankfurter Allgemeine Sonntagszeitung (FAS) that said the finance ministry would stop approving new applications for Ukraine military aid due to budget limitations. Shares in major defence firms, including Rheinmetall, experienced notable declines.

FAS revealed that Chancellor Olaf Scholz had requested a halt in new requests for military funding for Ukraine, citing a finance ministry letter from Aug. 5. Despite an 8 billion euros allocation for 2024, the proposed budget for 2025 is already overstretched, with the aid set to be reduced to 4 billion euros. The German chancellery and finance ministry provided no immediate commentary.

A spokesperson for Hensoldt dismissed the report as exaggerated, while the German government suggested using proceeds from frozen Russian assets for future Ukraine aid. Budget negotiations among Germany's coalition parties remain complex, balancing various substantial spending needs against debt limits.

(With inputs from agencies.)