Can the Bundeswehr fight?

The market implication is not a near-term revenue story so much as a multi-year balance-sheet and industrial policy repricing for European defense. The key second-order effect is that “readiness” rhetoric only matters if it is converted into multi-year procurement visibility, which lowers discount rates for defense primes and their supplier chains; the real beneficiaries are firms with NATO-standard electronics, munitions, air-defense, and logistics bottlenecks rather than the headline platform makers alone. Expect a broader re-rating across European industrials that can qualify as dual-use capacity, especially where spare manufacturing capacity can be redirected quickly.

The underappreciated loser is fiscal flexibility in Germany and, by extension, other EU states that were assuming defense spending could be deferred. If Berlin becomes structurally more permissive on procurement, the trade-off is less room for social spending and potentially tighter industrial policy on energy and labor, which can pressure domestic cyclicals with high wage sensitivity. The supply chain angle matters: European defense demand will likely expose shortages in propellants, microelectronics, optics, and maintenance capacity, pushing margin expansion more into subcontractors and less into integrators over the next 12-24 months.

The contrarian risk is that investor consensus may overestimate execution speed. European rearmament is constrained by permitting, procurement bureaucracy, and labor bottlenecks, so the first-order headlines can arrive months before actual backlog conversion; that creates a window where defense names can compress if order-flow evidence disappoints. A second risk is political turnover: any softening in transatlantic security guarantees or a negotiated Ukraine de-escalation could reduce urgency and delay budget releases, even if stated intent remains high.