European defense stocks surged on Monday as leaders vowed to take on “the heavy lifting” of defending Ukraine from Russia. The three-year-old war appears set to enter a new stage, with President Volodymyr Zelensky of Ukraine facing a rift with US President Donald Trump.
Shares in top European defense companies, including BAE Systems and Rheinmetall, hit record highs as investors bet on increased military spending. However, concerns about Europe’s ability to afford such spending remain.
The UK proposed a four-point plan to support Ukraine, including an Anglo-French coalition and a 2.26 billion-pound loan to bolster the country’s military forces. Credit agencies have warned that increasing NATO defense spending could lead to unpopular spending cuts in social safety nets.
Analysts are divided on whether commitments to help Ukraine could impact the European Central Bank’s plans to cut interest rates. The stakes are high, with failure to support Ukraine potentially leading to a deal that favors Russia and testing EU cohesion.
“This is not just about Ukraine or Russia,” said Holger Schmieding, an economist at Berenberg. “It’s also about Europe’s position in the world, and whether we want to be seen as a divided continent or a united one.”
Source: https://www.nytimes.com/2025/03/03/business/dealbook/europe-ukraine-defense-stock-market.html