Luis Soutullo, Financial corporate director of Cecabank.
Recent conflicts in Middle East and the war in Ukraine have demonstrated the fragility of the international stability. La Paz has been a precarious exception in the history. During decades, The West lived a phase of relative calm, in which the geopolitical one was perceived as a marginal factor. Today, that stage has changed: the geopolitical one comes back to the centre of the economic life and social, shocking in the supply chains, the price of energy, the financial markets, the active shelter, decisions of the central banks and many companies' feasibility. The economies are debated between the impact in the prices and the possible recession derived from the uncertainty.
The Russian invasion of Ukraine altered deeply the energy supply and of minerals, affected to the transportation and it put in half-the above-mentioned the European industrial sovereignty. The sanctions and blockades compelled to the companies to reconfigurar its strategies. Europe did not live a geopolitical and economic instability so deep from major shocks of the twentieth century. Today, the corporate decisions must integrate geopolitical factors that shock so much or more than the inflation or the monetary policy.
This new paradigm is unavoidable for the financial world. The corporate investors have already internalised the geopolitical one as a structural factor. Ignore this change supposes a strategic risk.
According to the Overall report «Family Office Survey 2025» of BlackRock, more than 85% of the family offices considers the geopolitical risk as a variable more in its strategic allocation. We have confirmed it this year with two events that they have generated episodes of very intense volatility, but short-duration, that they can suppose opportunities of stance in the markets.
On 4 March, Germany announced a sharp increase of its defence expenditure and infrastructures, financed with 500,000 million euros in new debt in 5 years, between 2025 and 2029, which is equivalent at 11.6% of its GDP of 2024. This announcement caused the great fall in a single day of the German debt from the fall of the Berlin wall. Days later, the European Commission proposed a plan of rearmament unprecedented, with 800,000 million euros in four years and a national escape clause that will allow an additional debt of up to 1.5% of the GDP. Spain owe increase its defence expenditure, that in 2024 was 19,723 millions (1.29% of the GDP). Given the current GDP of our country, every increase of 1% of expenditure will suppose about 16,500 additional millions.
The second significant event went the tariff announcements of the new administration of the USA, that they caused sharp drops in the stock exchanges after 2 April, known as «Liberation Day». The deposit of generalised levies untied commercial war dreads and a massive sale in the markets, reflecting the increasing sensitivity of the investors to the geopolitical and commercial risk.
The rise of the defence expenditure in Europe and the USA is reconfigurando budgetary priorities, moving resources of the transition green and digital towards the security. This shocks directly in the markets of debt, originating a new one asset class linked to the military financing. An example is the first European bond of defense, issued in August for BPCE, with a demand seven times higher than the offer, which it took to expand the volume until the 750 million euros. This fact, together with the market rally of the sector in 2025 - Rheinmetall (+211%), Hensoldt (210%), Saab (+126%) and Indra (+134%) - at the close of 10 October, reflects the increasing investing interest for the defense.
Spain part of a favourable position in this rearmament context to benefit from the trust fund in infrastructures and defense. This, thanks to a relatively reduced military structure and to a solid and competitive home industry.
In this environment, companies as an Indra, Navantia or St Bárbara emphasise for its technological skills. According to Munich Re, only 22.3% of the military equipment Spanish comes from the exterior, which allows that the investment reverts in the national economy. The multiplier effect estimated is 1.28, higher than that one of Germany (1.23) and well above of that one of Italy.
All in all, the geopolitical risk has stopped being an exogenous variable to become a structural factor that conditions decisions of governments, companies and investors. For the States, no longer is enough with attract investment or promote innovation: it is essential to develop the strategic autonomy in key sectors as an energy, semiconductors or defense, including the cybersecurity.
This new context compels to the financial sector to assume an essential role, not only as a source of financing in a stage of major debt increase, but instead as an architect of solutions that they channel resources towards strategic projects.
The challenge will be channel those resources towards a possible re-industrialisation and a process of desglobalización already up and running.
