On March 18, 2025, a two-thirds majority in Germany's parliament approved a historic infrastructure investment and lifted the cap on defense spending to enhance military readiness. The funding aims to strengthen the Bundeswehr amid ongoing geopolitical tensions. Defense Minister Boris Pistorius insists on the need for readiness following Russia's 2022 invasion of Ukraine. The increased spending benefits the defense sector, with shares of Rheinmetall soaring. However, some economists believe the economic stimulus from military spending will be moderate despite lawmakers' optimism regarding its potential effects on German industry and economic growth.
German lawmakers approved an infrastructure investment package worth billions and lifted the cap on national defense spending to prepare the Bundeswehr for potential conflicts.
The German defense industry is benefiting significantly from increased spending, with Rheinmetall shares rising dramatically from $59 in 2020 to around $1,800 by June 2025.
Oliver Dorre, CEO of Hensoldt, remarked that defense spending represents a gigantic economic stimulus program, signaling growth opportunities for the sector and broader economy.
While lawmakers are optimistic about the investment package boosting economic growth, economists caution that the stimulus from increased military spending will be moderate.
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