German defence stocks down after report of freeze on new Ukraine military aid
BERLIN, Aug 19 (Reuters) -German defence stocks fell on Monday, after the Frankfurter Allgemeine Sonntagszeitung (FAS) newspaper on Saturday said the finance ministry would not approve additional applications for Ukraine military aid due to budget constraints.
Shares in weapons maker Rheinmetall RHMG.DE were down 3% at 0923 GMT, the biggest losers in the German blue chip index Dax .GDAXI. Hensoldt HAGG.DE, a maker of radars for IRIS-T air defence system and tank gearbox maker Renk R3NK.DE were down 6% and 4%, respectively.
No new requests for money for Ukraine will be approved at the request of Chancellor Olaf Scholz, FAS reported on Saturday, citing a finance ministry letter from Aug. 5. The German chancellery and the finance ministry did not immediate reply to requests for comments.
Around 8 billion euros ($8.8 billion) is already earmarked for Ukraine's military in 2024, and the budgeted 4 billion euros for 2025 is already overbooked, according to the weekly. "The pot is empty," FAS quoted a government source as saying.
The 2024 and 2025 budget plans have not changed, German government sources told Reuters. The planned financial aid for Ukraine would be halved to around 4 billion euros in 2025 because additional funds from the G7's $50 billion loan plan should be available from November, the sources said.
A spokesperson for Hensoldt said the FAS report was "blown out of proportion" and that the firm did not see any backlash from it for its business.
The German government has said that instead of spending taxpayers' money, it wants to use proceeds from frozen Russian assets for further Ukraine aid, in coordination with its Group of Seven (G7) partners.
Budget negotiations between Germany's three-party coalition were difficult and protracted as large spending requirements for climate, social measures and infrastructure clashed with constitutionally enshrined limits for new debt.
Last month, the leaders of the Social Democrats, the Greens and the Liberals agreed on a 481 billion euros draft budget and only on Friday reached a deal to narrow its deficit target.
($1 = 0.9061 euros)
Reporting by Andrey Sychev, additional reporting by Paolo Laudani, Editing by Miranda Murray, Kirsti Knolle and Conor Humphries
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