For several weeks, the German media have been fighting Armin Papperger. Until recently, hardly anyone knew the name of Rheinmetall’s CEO. But the arms race in Europe has once again put this sector in the spotlight. The moment of glory for the Leopard tank manufacturer came in recent days when it entered the Frankfurt stock market along with Volkswagen, Siemens and Bayer.
Armin Papperger, as tradition dictates, rang the bell at 8 in the morning in the trading room for his entry into the Dax, the index that brings together the 30 largest companies in the country. Since February 24, 2022, the day of the Russian invasion of Ukraine, this usually low-key company has multiplied its share price by 2.5 times. They continue to rise until they exceed 270 euros at the end of March compared to 149 euros on January 1, 2023.
Putting the Bundeswehr back in business
Thanks to Rhemetall, Germany has entered the top 5 arms exporting countries behind the United States, Russia, France and China, according to the Stockholm International Peace Research Institute (Sipri). Olaf Scholz’s goal is to keep improving. During a recent visit to the Hensoldt group, a specialist in military electronics, the Chancellor showed his ambition to build an industry capable of “contributing to guaranteeing peace and freedom in Europe”.
It is also about putting the Bundeswehr back into operation by making it the first army in Europe. For decades, it was the poor relation of the country, suffering from a constant budget decline.
Recently, a report by the Bundestag Defense Committee noted that the German army lacked everything. This message targets the government of Olaf Scholz, which is slow to deliver on its promise to provide the promised €100 billion special fund to modernize the army. The contracts linked to this budget should be signed this year, Olaf Scholz promised the industrialists who do not hide their impatience.
Fiscal efforts will have to last
All the heavyweights of the German defense, the KMW group, also a manufacturer of the Leopard tank, Thyssenkrupp for submarines and warships, MBDA or Diehl in missiles, intend to take advantage of this lucky break. They even warn that this war economy cannot be built anytime soon.
The budgetary effort will have to last if Berlin wants to dedicate 2% of its GDP to defense, like the great powers of NATO. This quota was 5% in the 1960s and then fell below 2% since 1990 and the breakup of the USSR, with just 1.3% in 2021. The commitment to return to 2% “means going from ‘ some 50 billion euros of annual military spending to 70 or even 75 billion on a sustainable basis,’ observes Pieter Wezeman of the Sipri Institute.
In Germany, the arms industry accounted for around 55,000 jobs in Germany in 2020 with a further 80,000 among subcontractors. And as in France, recruitment is becoming the cornerstone of companies. Rheinmetall is hiring hard to cope with the increase in production and the creation of new factories in Germany, in Hungary perhaps one more in the Ukraine.
Source: BFM TV
