For all the renewed debate over European rearmament, the central question is not only how much money Brussels and national capitals are prepared to spend, but who will be allowed to shape the next phase of the continent’s defence economy.
That is where small and medium-sized enterprises come in. Across the EU, SMEs account for 99% of all businesses and are among the main sources of innovation in fields now crucial to defence, including artificial intelligence, cybersecurity, ...
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drones and other dual-use technologies. Yet, despite their importance, many remain shut out of the European defence market by limited access to finance, complicated procurement rules and an industrial structure still dominated by a handful of large contractors.
The result is a contradiction at the heart of Europe’s ambitions. While the EU says it wants greater strategic autonomy, much of the innovation generated inside the bloc struggles to reach defence programmes, or is pushed to look elsewhere for growth. A study published by the European Parliament has argued that building a stronger European defence industry requires not just funding, but an ecosystem in which SMEs, start-ups, universities and research centres can participate in projects from the outset.
That view is increasingly reflected in Brussels. In June, the European Innovation Council announced new support for defence and dual-use technologies, opening grants and equity backing for start-ups and SMEs working in areas such as AI, quantum, advanced materials and robotics. The move marked a significant shift in EU policy, including a dedicated €100 million scale-up call aimed at defence firms. Applications remain open until 28 October 2026, with results expected in early 2027.
A European Commission report published in December 2025 also underlined the importance of AI-driven dual-use technologies, pointing to strengths in autonomy, sensing, logistics and decision-support systems. But it warned that too many promising companies still face the same obstacles: weak access to test environments, cumbersome procurement procedures and a funding gap between research and deployment.
That gap matters because defence is no longer defined only by heavy hardware. The war in Ukraine and the broader security tensions around Europe have sharpened awareness that resilience now depends as much on software, electronics, secure communications and unmanned systems as on tanks or frigates. Industry commentators have argued that Europe’s defence readiness increasingly rests on technologies that can move between civilian and military use, from cyber protection and advanced encryption to crisis-management tools and trustworthy AI.
There is also a financial dimension. An EU publication on defence SMEs found that around 40% of companies in the sector said access to finance was difficult or very difficult, even as private investors show growing interest in the market. That disconnect helps explain why many innovative firms remain trapped at the margins of a sector they could help transform.
For Greece, the issue is particularly relevant. The country has a growing base of SMEs active in aerospace, cybersecurity, electronics, drones and AI, but their ability to enter European defence programmes will depend on national strategy as much as on EU policy. If Athens can align its industrial policy with the bloc’s new funding tools, it could strengthen both the domestic economy and Greece’s place in Europe’s defence and technology base.
Europe’s defence debate, in other words, is no longer only about budgets. It is about participation.
Source: Noah Wire Services
