Justice has been served in Berlin. A German court this morning handed a life sentence to the man who drove a lorry into a crowded Christmas market last December, killing 12 and injuring scores more. The verdict was swift, the punishment final. For markets, the message is clear: European security cooperation works, and that has a price tag worth paying.
Let’s cut through the sentimentality. This was a terrorist attack that could have shaken consumer confidence and spooked foreign investment, particularly in the retail and hospitality sectors ahead of the festive season. Instead, German authorities, with support from UK intelligence, proved that the machinery of justice can function efficiently. The trial, completed in under six months, was a masterclass in judicial execution. No appeals will be tolerated. The attacker will spend the rest of his natural life behind bars.
The UK government was quick to praise the outcome. The Home Secretary issued a statement calling it “a victory for the rule of law,” while the Prime Minister noted that “our shared security infrastructure with Germany remains a cornerstone of European stability.” This is more than diplomatic fluff. It signals a deepening of post-Brexit security cooperation that investors should welcome. A stable Europe means lower risk premiums, and lower risk premiums mean cheaper capital for everyone.
But let’s not get carried away. The cost of this security collaboration is not zero. Germany has spent billions on counter-terrorism since 2015, and the UK is not far behind. These expenditures are inflationary: they add to sovereign debt without directly boosting productive capacity. The German 10-year bund yield, already under pressure from the ECB’s rate hiking cycle, may rise further if markets perceive that security spending is crowding out infrastructure investment. Gilt yields in London are also drifting higher, reflecting similar concerns.
Yet the alternative is worse. A failed security state would trigger capital flight. Investors would flee German assets, pushing up borrowing costs and tanking the euro. The UK, too, would suffer as global capital sought shelter in more predictable jurisdictions. The life sentence is therefore a form of insurance. It signals to global markets that Europe takes the protection of property and life seriously.
What does this mean for your portfolio? Short term, markets will shrug: the verdict was priced in. Long term, watch for any signs that this cooperation leads to higher taxes to fund expanded surveillance and policing. If the UK or Germany announces new security levies, expect a sell-off in consumer stocks. For now, though, the verdict is a buying signal for defensive assets: utilities, bonds with short duration, and the dollar.
In the City, we like certainty. Today’s judgment provides exactly that. The terrorist is gone for good. The system held. And when the system holds, capital flows freely. That is the bottom line.
