European Commission President Ursula von der Leyen announced today a new plan, named “Rearmament of Europe,” which she will present to European Union leaders this week. Her comments come amid growing efforts by the EU to negotiate peace between Ukraine and Russia. The announcement has already caused a surge in stock prices for European arms manufacturers.
Von der Leyen stated, “Tomorrow, I will inform member states via a letter about the ‘Rearmament of Europe’ plan. There is no doubt that we need a massive increase in defense. We want lasting peace, but lasting peace can only be built through strength, starting with strengthening ourselves.”
EU leaders will hold urgent talks on Thursday to secure military support for Kyiv and prepare a potential peacekeeping force for deployment in Ukraine.
The news of increased defense spending has led to a spike in the shares of European defense companies. The European currency, the euro, strengthened against the U.S. dollar, and investors flocked to the European stock market, with the aerospace and defense sector index reaching record levels.
Europe has faced increasing pressure to spend more on its security following Russia’s large-scale attack on Ukraine three years ago. The need for action has become urgent, especially as Europeans, including Ukrainians, have been sidelined in talks between Washington and Moscow.
Reuters reported that those negotiating the formation of Germany’s new government are considering creating a defense fund.
Shares in major defense companies surged, with BAE Systems rising around 15%, German company Hensoldt increasing by 22%, Rheinmetall gaining 12%, Leonardo rising 11%, and Thales growing by approximately 13%.
JPMorgan analysts noted that recent events have “strengthened” their thesis for a new European rearmament cycle.
The EU estimates that €500 billion in investments are necessary over the next decade, but increasing defense spending to 3% of GDP would require nearly €200 billion more annually.
