The emergency bite of European leaders this week was a major goal: providing unity and supporting Ukrainian President Folodimir Zellinski, “one of them”, which was adopted in a European fold after the war erupted in 2022, which was insulting at the White House during the weekend and then lost defense aid. The conference host, British Prime Minister Kiir Starmer, talked about “a moment once in the generation.” Other leaders said that “Europe has finally woke up” and that the unit of ranks indicates that “any European will surrender to the Russian aggression.”
In the image of the group that closed the conference, the organizers tried to show that they understood that this era of power, and that military power has now become the only currency in the market. In the middle of the photo, in the first row, the leaders of the two European countries were the only two nuclear, Britain and France weapons. There was Zelinski, who was standing next to them, who also showed a combat spirit even in the oval office.
On the wings, Prime Minister of Poland (the country that aims to build the largest army in Europe) and the President of Finland, who called for not to be afraid of a military confrontation with Russia. The German counselor, issued by Olaf Schools, fell to the third row. Military power is the game's name now.
Markets interact
Despite the unit of ranks, there is still a great contrast in the scope of defense spending of European countries, and in the general approach to the possibility of armed conflict with another country. Before the conference was held, and before leaving to meet with US President Trump, the British Prime Minister announced that this was a period when the military force was the most important thing, and that he was cutting the budget for international aid in the United Kingdom, in order to strengthen its army. The goal is to reach defensive spending by 2.5 % of GDP by 2027, with a goal of 3 % after that.
Polish Prime Minister Donald Tusk is leading a similar line: The threatened country announced that it intends to build the largest army in Europe by the end of the decade in response to the insight of the Russian threat. Its defensive spending has doubled 4 % of GDP and launched plans to double its military power to 300,000.
The Baltic countries – Estonia, Lithuania and Latvia – are close to 5 % of the GDP of annual investment in defense, and they call Europe to join them. Czech Prime Minister in London announced that his country's defensive spending will increase to 3 % of GDP.
The reaction in the market indicates that they believe that the shark has decreased in Europe. The shares of the European Defense Company were rising and rising for weeks, but with the opening of the trading on Monday, they continued to rise. Rheinmetall Germany increased by 14 %. It completed a 160 % increase last year, and those who put their money on the weapons manufacturer after the war in Ukraine had seen eight times a return.
Bae's Bae increased by 14 %, Italian Leonardo 15 %, and the French company Thales by 13 %. The strong statements of European leaders and Chairman of the European Union Committee, Ursula von der Layen, which must take Europe to increase defensive spending immediately, seriously, not like lip service in order to maintain the via Atlantic partnership.
Germany comes from the fence
What motivated the rise in defense stocks is the signs that Germany, the largest economy in Europe, was starting from the fence and also joining the arms race. So far, Germany has barely reached 2 % of GDP defensive spending.
Now, the media has reported the possibility of establishing a budget fund for weapons that amount to 200 and 800 billion euros for the coming years, which will increase German spending much more.
At the same time, Germany appears to be abandoning its long opposition to the joint European debts to finance arms. Therefore, there are two potential roads that can be established to increase military spending in the coming weeks: national ads independent of the growing defense budgets, as well as the announcement of a European public fund (with British participation) of 300-500 billion euros, according to current reports, or more.
Polish Prime Minister Tusk tried to express the need for the Military Union. “500 million Europeans ask 300 million Americans to protect them from 140 million Russians. If there is anything that Europe lacks today, this is not a demographic or economic power, but the belief that we are really a global power.”
Israeli corner
The arrows in the defensive stocks also reached the Israeli regimes, which jumped more than 5 % on the Tel Aviv Stock Exchange. Since Europe greatly increases defensive spending, local defense companies may be among the largest beneficiaries.
Europe is one of its main markets. ELPIT SYSTEMs has a branch in the UK, Rafael holds 20 % of European Eurospike, which markets Spike missiles. This is just a small part of the list.
Brigadier General (RES.) Pini Yungman, President and CEO of the Defense Company TSG, explains that markets are priced in Trump's comments and movements. “It is expected that the influence on close relations between European countries and their industries will be seen, while relying on American companies is declining. In his first term, Trump said that the NATO country that has not been invested 2 % of the GDP in defense will not get US aid, and this had an impact on the strongest countries in Europe.”
In his opinion, after developments on the continent, we can expect to see a wave of cooperation between European and Israeli companies, and Israeli companies that create branches to deal directly with customers in the relevant countries.
One of the most prominent examples of Israeli -European cooperation is the deal to sell the AROW 3 air defense system to Germany for $ 3.5 billion. In this deal, Israel Reuters (IAI) took over the European MBDA MBDA as a contractor to coordinate with the Germans on local infrastructure.
IAI is currently joining Rafael in the Rafael deal in the Israeli G2G deal (from government to government) in which air defense systems reach two billion euros to Greece. In the sale of David's ropes system to Finland, local companies are partnership partners.
The defense sector in Israel is optimistic. Israeli missile systems are advanced and cheap compared to alternatives. In light of their success rate in the war, it is also possible that the Israeli air defense systems will be in demand.
Yunegman says another factor in favor of the Israeli defense industry against the United States in the way it works. While American companies provide a final product, Israeli companies are able to transfer development and production to other countries.
The CEO of Orbit Communication Systems, which provides air communications solutions and the navy, says that when he talks to customers in Europe, he finds that they prefer to work with a European company instead of an American company. Therefore, the orbit works on the acquisition in Germany. “The geopolitical changes lead to higher requirements and rearmament,” he says.
Eshcar adds that after the United States turned to Europe, European countries began to return to Israeli companies. “In Europe, they look at their work with Israeli companies, and they realize that during the war most of the delivery operations occurred on time, and companies showed flexibility. In contrast to the United States, they are vulnerable to finding themselves in a position in which, in a fatal blow, the equipment clip.”
It was published by Globes, Israel Business News – En.globes.co.il – on March 4, 2025.
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