The German government has cleared more than €50 million (A$88.5 million) in defence contracts over the next few years, as Russia’s war on Ukraine puts pressure on the nation to boost military spending.
The proposed expenditure, which is expected to be passed, will include €22 billion for personal protective equipment for military personnel and about €10 billion in upgrades to infantry fighter vehicles, air defence and missile systems, according to German media.
The new military budget is likely to be approved due to European stocks rallying on Wednesday as investors awaited the outcome of the meeting.
The Stoxx Europe Aerospace Defence index was up 1.2% on Wednesday by 11:22 am London time and was led by defence giants Renk, which rose 2.8%, Hensoldt, with an increase of 2.4% and Rheinmetall, which gained 1.8%.
This follows the sector shedding 1.8% on Tuesday amid rising hopes of a peace deal to end the war in Ukraine.
Following countries ramping up military spending, with some regional defence players even doubling in value amid commitments from regional governments and the NATO military alliance to ramp up defence spending, the Stoxx Europe Aerospace and Defence Index rose more than 50% since the start of the year.
German companies have particularly benefited from the regional defence boom, following the country's government reforming historic legislation, paving the way for increased security spending.
For example, arms manufacturer Rheinmetall has seen its stock surge 150% this year.
“Germany’s roughly 50 billion [euro] defense procurement package, widely regarded as the largest single approval for defense equipment in the country’s post-war history, is set to benefit listed European defense primes such as Rheinmetall and Hensoldt, alongside a broader group of European suppliers to a lesser extent,” Dmitrii Ponomarev, a product Manager at VanEck, which manages a defense ETF, told CNBC.
They added that the move reflects a “long-overdue effort to rebuild military capabilities after decades of underinvestment”.
