According to the Zhitong Finance APP, Joerg Kukies, who was appointed as Germany's Minister of Finance by Olaf Scholz last November, stated that the country's legislators may push for a significant increase in Germany's defense spending before the new parliament is sworn in next month. This news is a major boon for defense stocks, which have surged in price this year and have even driven the European stock market benchmark, the Stoxx 600 index, to new highs. The path to European defense autonomy after the U.S. withdrawal is undoubtedly a significant upward driving factor for the stock prices and fundamentals of European defense companies such as Rheinmetall, Leonardo, and Thales.
During an interview with the media on Wednesday while attending the G20 meeting in Cape Town, Kukies emphasized, &#34;Strengthening European defense investment in the coming years is extremely important, as we urgently need to consolidate NATO's European defense pillar. The parliament still has the authority to decide on the specifics of potential agreements during its remaining term.&#34;
He also warned that the yet-to-be-finalized German federal budget still has a significant shortfall of &#34;billions of euros,&#34; and filling this gap will be a key topic of negotiation between the conservative coalition led by the next German Chancellor Friedrich Merz and the Social Democratic Party, which is still led by Olaf Scholz.
&#34;The Minister of Finance must always maintain a clear awareness of budget constraints, and the constraints Germany faces this year are particularly severe,&#34; Kukies stated in a recent interview.
According to informed sources, Merz, who won the German chancellorship, has discussed raising up to €200 billion (approximately $210 billion) in defense budget spending through traditional debt financing methods with the Social Democratic Party after his victory on Sunday.
It is understood that when asked about the defense budget plan on Tuesday, Merz confirmed that discussions indeed exist but stated that he &#34;neither confirms nor denies&#34; whether it involves such a large-scale additional investment.
As Merz will become the new German Chancellor following a collective vote by the German public, Kukies' role as Minister of Finance is viewed by some analysts as a &#34;temporary acting Minister of Finance.&#34;
Some politicians have questioned the democratic legitimacy of using the old parliament to approve controversial legislation after German voters have elected a new federal parliament. This proposal has been particularly condemned by the Alternative for Germany party, which saw its vote share double to nearly 21% in the election, making it the largest opposition force in the new German parliament.
Saskia Esken, co-chair of the Social Democratic Party, expressed concerns during an interview with RTL/n-tv on Wednesday: &#34;It is difficult to explain clearly to voters. We should ensure that we seek a majority consensus for the overall interests of our country.&#34;
Recently, Merz stated that he hopes to complete coalition negotiations with the Social Democratic Party before Easter, which means both sides need to reach a so-called &#34;grand coalition&#34; agreement in less than two months.
Kukies has served as Germany's finance minister since last November, after Scholz dismissed long-time fiscal hawk Christian Lindner from the Free Democratic Party due to a government borrowing dispute. This move caused the ruling coalition to lose its majority in the Bundestag, forcing Scholz to initiate national elections seven months early. According to the constitution, Scholz and his cabinet (including Finance Minister Kukies) will continue to function as a temporary government until the new cabinet is in place
Will European defense stocks continue to surge?
Statistics show that Rheinmetall, one of the leaders behind the recent surge in European stocks, has seen its share price double in just three months. After the European market opened on Wednesday, the STOXX Europe 600 index rose nearly 1%, reaching a record high.
Since Trump took office, the STOXX 600 index has increased by over 6%, while the S&amp;P 500 index has risen by less than 1% during the same period. The ongoing bull market of the STOXX 600 index, known as the &#34;long-term bull market&#34; outlook, is on track for its strongest first-quarter performance relative to the S&amp;P 500 index in a decade.
After the U.S. government expressed its intention to &#34;withdraw from NATO,&#34; the &#34;urgent need&#34; for European defense autonomy has forced European officials to formulate new military strategies to strengthen defense systems.
In response to geopolitical changes, the European Commission's &#34;European Defense Industrial Strategy,&#34; released last year, indicates that European defense autonomy has transformed from a political slogan into a concrete action program. Data shows that the localization rate of EU defense orders for the 2022-2023 fiscal year was only 22%, while the new strategy aims for a 50% self-supply target by 2030, meaning that a 23 percentage point acceleration in military development must be achieved over the next six years.
In the short term, increased defense spending may focus on urgent defense needs such as ammunition and long-range missiles, but the EU also needs to gradually coordinate different governments' development and procurement plans for aircraft, ships, and tanks, and promote integration and cooperation among companies. Therefore, the significant expansion of defense spending in Europe is undoubtedly positive news for the stock prices and performance of European defense leaders like Rheinmetall, Leonardo, and Thales.
Rheinmetall AG is an international technology group headquartered in Düsseldorf, Germany, founded in 1889. The company primarily focuses on security technology and mobility technology, covering the defense and automotive industries. In the defense sector, Rheinmetall is one of Germany's largest defense companies, providing a variety of military equipment and systems, including well-known military products such as the L44 and L55 main guns of the Leopard 2 main battle tank, and the L52 main gun of the PzH2000 self-propelled howitzer

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German Finance Minister Jörg Kukies stated that lawmakers may push for a significant increase in defense spending before the new parliament is sworn in. This news is a major positive for European defense stocks, which have surged this year, especially as Europe's autonomous defense development will become an upward driving factor for companies like Rheinmetall, Leonardo, and Thales after the U.S. withdrawal. Kukies emphasized that strengthening European defense investment in the coming years is crucial, but there remains a significant gap in the German federal budget, requiring debt financing to raise up to €200 billion for the defense budget

This year's soaring European defense stocks welcome a major catalyst! The German Finance Minister expects defense spending to surge