For decades, European space policy was a quiet success story. It was a domain for engineers and technocrats, focused on building world-class scientific missions and institutional infrastructure like the Galileo navigation system and the Copernicus Earth observation program . Europe was a reliable spacefaring power, if not a flashy one.
That era is over.
Today, space is no longer just about science or prestige. It is the backbone of modern warfare, digital infrastructure, and climate security. As the geostrategic landscape darkens following Russia’s invasion of Ukraine and questions mount over the reliability of transatlantic alliances, Europe finds itself in a paradoxical position: it is spending more money on space than ever before, yet it risks falling further behind the United States and China .
The continent has reached an inflection point. To secure its future, Europe needs more than just a bigger budget—it needs a fundamentally new perspective on how that money is invested, procured, and deployed.
The Diagnosis: More Money, Same Gaps
At first glance, the numbers are encouraging. In November 2025, member states of the European Space Agency (ESA) agreed to a historic budget increase of roughly 30%, committing €22.1 billion for the next three years . Germany has pledged €35 billion specifically for military space defense . The European Investment Bank (EIB) has launched “Space TechEU,” its first dedicated financing program for the sector, aiming to mobilize €1.4 billion in new investment .
Yet despite this influx of cash, the structural weaknesses plaguing the European space ecosystem remain unaddressed. The European Economic and Social Committee (EESC) warns that the EU currently allocates only 0.07% of its GDP to space activities, compared to 0.25% in the US . This “structural imbalance,” as the EESC calls it, undermines Europe’s ability to foster autonomous innovation.
Furthermore, the private capital that does flow into the continent is skewed. According to Seraphim Space, while two-thirds of spacetech venture capital deals in North America and Asia target upstream manufacturing (rockets, satellites), less than half of European deals do, with investment flowing instead to less capital-intensive downstream data analytics . Europe is effectively ceding the hardware war to focus on apps.
“We have a gap when it comes to what I call active space defence,” Michael Schöllhorn, CEO of Airbus Defence and Space, told Euronews. “Being able to act, protect, and counteract in space against adversaries that want to do something to our infrastructures” .
The New Perspective: From Planning to Action
The core problem, industry leaders argue, is not a lack of ambition in European strategy papers, but a paralysis in execution. The continent has a habit of launching “grand schemes” that take too long to materialize.
The poster child for this critique is IRIS², the EU’s planned multi-orbital constellation of 290 satellites intended to provide secure communication and rival Starlink. While the need for such a system is urgent, the project is not expected to be operational until 2029.
“Well, Starlink is on its third iteration,” Schöllhorn said. “We, excuse me for saying it so clearly, thought politically so arrogantly that we can surpass them in one go in a few years. That’s not a good definition of a programme” .
Adopting a new perspective on space investment means shifting from this “one giant leap” mentality to an iterative, incremental approach. Instead of waiting a decade for the perfect sovereign system, Europe must embrace a dual-track procurement strategy . This involves buying proven capabilities off the shelf from non-European providers in the short term to meet immediate security needs, while simultaneously accelerating reforms to ensure long-term industrial sovereignty is built at home.
The Speed vs. Sovereignty Dilemma
This brings us to the central tension facing European defense ministers: the conflict between sovereignty and speed.
If Europe wants to deploy space-based intelligence, surveillance, and reconnaissance capabilities to deter Russian aggression by the late 2020s, it may be forced to buy American . European industrial capacity is currently insufficient to meet a sudden surge in institutional demand. Bottlenecks in physical infrastructure, workforce recruitment, and supply chains mean that even with unlimited funds, scaling up production takes years.
Daiva Rakauskaitė, manager at Aneli Capital, notes that Europe must do a better job of bridging the “valley of death” between early-stage innovation and commercial scale. Currently, close to 70% of investments in European space companies are below €10 million, focusing on early-stage projects rather than the later-stage growth funding needed to build industrial champions .
To fix this, Europe needs to unlock massive pools of domestic capital. Rakauskaitė points out that European pension funds, which control around €3 trillion in assets, are largely absent from the venture capital ecosystem—unlike in the US, where such participation is common .
Breaking the “Juste Retour” Habit
Perhaps the most sacred cow that needs slaughtering is the principle of “juste retour” (fair return). This long-standing governance mechanism of ESA ensures that member states get a geographic share of industrial contracts proportional to their financial contribution.
While politically useful for securing national funding, this approach fragments the industrial base. It creates an ecosystem where there are too many players building too few rockets, preventing the consolidation needed to compete with the scale of a SpaceX or a Lockheed Martin. Even if Airbus, Leonardo, and Thales merge their space activities, the resulting entity would still only be the fourth largest in the world .
A new perspective would replace “juste retour” with a focus on competitiveness. This means moving towards a “space as a service” model, as pioneered by NASA. Instead of dictating technical specifications to contractors, European institutions should purchase services (like data relay or astronaut transport), giving companies the freedom to innovate and consolidate .
The Path Forward: An Orbital Single Market
Ultimately, the new perspective required is one of market creation. The European Liberal Forum argues that the upcoming EU Space Act should act as the backbone of an “orbital single market” . This means creating a harmonized regulatory framework where a company can get one license valid across all 27 member states, rather than navigating 13 different national approaches as is currently the case .
A single market would lower costs for start-ups, attract global capital, and allow successful companies to scale rapidly. It would transform Europe from a collection of national space programs into a genuine space power.
Conclusion
Europe has the technological know-how and the financial resources to be a leader in the new space race. But it is currently losing because it is playing by old rules. Increasing the budget is necessary, but insufficient.