Germany will continue to support Ukraine in its defence against Russia’s invasion for as long as necessary, according to a spokesman for the finance ministry in Berlin.
The spokesman, Fabian Leber, was responding to a weekend report in the Frankfurter Allgemeine Zeitung newspaper that said spending constraints mean that financing for additional aid for Ukraine — on top of what has already been earmarked — won’t be available from the federal budget.
Leber said Chancellor Olaf Scholz’s ruling coalition and its international partners will be relying on part of the support for the government in Kyiv being funded from profits generated by immobilised Russian central-bank assets.
“We are still standing shoulder to shoulder with Ukraine and that applies especially” to Finance Minister Christian Lindner, Leber told reporters Monday at a regular news conference. “He says that of course we will support Ukraine for as long as necessary.”
The European Union, the US and other G7 allies have been working to finalise plans to provide Ukraine with US$50 billion ($65.54 billion) in loans by the end of the year, following an agreement reached at a G7 leaders’ summit in June.
Both Leber and Wolfgang Buechner, a deputy government spokesman, said Monday that Germany expects agreement on the plan by the end of this year so that Ukraine can start to receive the funds from 2025.
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“The chancellor’s pledge still applies that support for Ukraine will continue for as long as it’s needed,” Buechner said. “Nobody, above all the Russian president, can hope that we will ease off.”
Prior to the statement, European defence stocks slid on Monday, paring some big year-to-date gains, after the report alleged that Germany will no longer grant new requests for aid to Ukraine in an effort to rein in spending.
Germany’s Rheinmetall fell as much as 5.1% in Frankfurt, while Hensoldt slumped 7.6% and Norway’s Kongsberg Gruppen dipped 4%. A basket of defence-exposed European shares tracked by Goldman Sachs Group dropped as much as 3.4%, though is still up 45% this year after investors piled into the sector amid global geopolitical unrest.
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The Frankfurter Allgemeine Zeitung reported that while existing German aid programs to Ukraine should generally continue, additional applications for military support will not be approved. It cited government documents, emails and unidentified officials.
Stocks such as Rheinmetall are coming back from technically overbought positions. The shares fell abruptly in April after Goldman analysts warned of high valuations.
Although existing programs will generally continue, additional applications for military support won’t be approved, the Frankfurter Allgemeine Zeitung newspaper reported on Saturday citing government documents and emails as well as unidentified officials.
Germany’s ruling coalition has been mired in bickering for months after a court ruling overturned billions of euros in funding, forcing budget cuts across the government. The three parties on Friday sealed a final agreement on next year’s spending plan, only after weeks of squabbling over limited funds.
Lindner, head of the fiscally hawkish Free Democrats, has insisted on restoring the constitutional borrowing limit — known as the debt brake — which was suspended to help deal with the pandemic and the energy crises. With German economic growth sputtering, that’s meant less money to spend.
In his letter to the defence ministry, Lindner downplayed the impact of the move, suggesting that funds could be made available to Kyiv from frozen Russian central bank assets. Still, it’s unclear how those resources could be tapped amid ongoing legal issues, the FAZ reported.
Under current plans, Germany’s military support for Ukraine — second only to the US, according to the Kiel Institute for the World Economy — is set to be almost halved next year and then reduced to less than a tenth of the current amount in 2027, the newspaper reported.
Chart: Bloomberg
