In a world where wars are no longer just fought on land, sea, or in the air, Europe’s defence sector is beginning to see the final frontier – space – as the next strategic battleground. With the return of war to European soil, a rising tide of anti-satellite threats, and the increasing militarisation of space by global superpowers, traditional defence companies are now aggressively venturing into orbital territory.

This is not just a symbolic shift. What was once a domain dominated by civilian projects, communications satellites, Earth observation, GPS, has now become critical for strategic autonomy and national security. From Austria to France, from Sweden to Italy, defence players are launching space divisions, dusting off legacy aerospace ambitions, and aligning with broader geopolitical imperatives.

From Civilian to Defence Sector In Space

While the relationship between space and defence is not new, the lines between civilian and military applications were, until recently, clearly drawn. That distinction is now blurring. As the Vienna-based European Space Policy Institute (ESPI) notes, many of today’s leading European space companies are either offshoots of defence conglomerates or embedded within them. But after a lull in the early 2000s, the last three years have witnessed a sharp uptick in defence-led space activities.

According to Matija Rencelj, research manager at ESPI, this shift began accelerating post-2022, with the war in Ukraine serving as a wake-up call. Space, once considered a domain of peaceful exploration, is now being reassessed as a pillar of Europe’s strategic autonomy. And yet, the gap between ambition and action remains painfully wide.

Investment Lag and Capability Gap
The EU currently spends just 0.07% of its GDP, approximately €14 billion annually, on space activities. Contrast that with the United States, China, or even India, and the disparity becomes sharp. Only 15% of Europe’s public space budget is allocated toward defence applications, compared to the global average of about 50%.

To close this capability gap, Rencelj estimates that Europe needs to ramp up investment to at least 0.15–0.25% of its GDP by 2040. But money alone won’t solve the problem. Fragmented national strategies and a lack of cohesive governance at the EU level have long hampered progress.

Christophe Grudler, French MEP and co-chair of the European Parliament’s intergroup on Sky and Space, stresses the need for a unified European approach. “Too many member states are currently working on separate national plans,” he says. “We need programmes designed, funded, and governed at the EU level.” In other words, without integration, Europe risks being outpaced and outclassed in the militarisation of space.

ESA, The Sleeping Giant?
Enter the European Space Agency (ESA), a 23-member consortium with the technical might to compete on a global scale but not yet the financial muscle. ESA’s Director General Josef Aschbacher has been sounding the alarm: Europe can do it, but only if it chooses to. “We have some of the best space engineers and scientists,” Aschbacher said, “and excellent companies of world standard.”

Currently operating on an €8 billion annual budget, roughly one-third of NASA’s and barely rivalling the U.S. Space Force’s spending, ESA has still managed impressive feats. In 2024 alone, ESA launched a record 13 satellites, inaugurated the Ariane 6 rocket, returned VEGA-C to flight, and trained a new batch of astronauts. But these achievements only scratch the surface of what’s needed if Europe wants to stand shoulder to shoulder with the world’s space superpowers.

There’s hope that the upcoming ESA Ministerial Conference in Bremen in November 2025 will mark a turning point. Budgets are expected to rise from €16.9 billion in 2022 to potentially €21 billion. But as Aschbacher points out, money is not the only concern but also about political will, long-term strategy, and vision.

Beyond Rockets. The Economic Case for Space
Critics often see space investment as wasteful, a playground for billionaire adventurers like Musk, Bezos, or Branson. But Aschbacher is quick to dispel the myth. “One euro invested in space brings back five euros to the economy,” he argues. That return manifests in job creation, technology spin-offs, private sector engagement, and even medical innovation.

Take Earth observation and weather forecasting satellites, for example. ESA’s Arctic Weather Satellite, launched recently, is expected to generate economic value fifty times its initial cost. And then there’s Vigil, an ambitious mission aimed at monitoring solar flares that threaten both satellites and Earth-based electrical grids. With a launch targeted for 2031 and a price tag of a few hundred million euros, Vigil is looking to safeguarding Europe’s digital infrastructure.

Time for a Unified Industrial Strategy
Grudler believes the time for fragmented ambition is over. He envisions space being placed on equal footing with semiconductors, energy, and artificial intelligence in Europe’s industrial policy. “We don’t need to copy the United States line by line,” he said, “but we do need political vision, unity, and continuity.”

That includes developing a true European procurement system for space, pooling resources across member states, and embedding space into the EU’s long-term industrial and defence strategy. Otherwise, Europe risks becoming a junior player in a domain where dominance translates directly to geopolitical leverage.

The Last Bit, Space Is Not Optional

Space is no longer a luxury, it is a necessity. As Aschbacher puts it: “You cannot live without space in 20 years.” Just as the internet transformed every aspect of modern life, space technology, from satellite communications and Earth observation to missile tracking and cybersecurity, will underpin the next era of global competition.

And Europe must decide – will it lead, or will it follow?

As ESA and EU institutions prepare for a pivotal 2025, the clock is ticking. The message from industry, policymakers, and scientists- the stars are calling, and Europe’s defence sector must rise to meet the challenge. Because in today’s geopolitical climate, space is not the final frontier, it is the next frontline.