European defense stocks surged after regional leaders committed to taking a leading role in defending Ukraine from Russia. Shares of companies like BAE Systems, Rheinmetall, and Leonardo reached record highs, boosting the Stoxx Europe 600 index. However, concerns remain about Europe’s ability to finance increased military spending amid high debt, low growth, and potential U.S. tariffs. British Prime Minister Keir Starmer proposed a coalition to support Ukraine, including military aid and financial loans. Credit agencies warn that raising defense spending to 3% of GDP could strain European finances and social programs. Options like loosening fiscal rules or reallocating recovery funds are being considered, but borrowing costs are rising. Analysts debate whether these commitments could affect the European Central Bank’s plans to cut interest rates. Failure to support Ukraine might lead to a deal favoring Russia, testing European unity. — news from The New York Times
