From Fragmentation to Scale: How EU Public Capital Is Reshaping Europe’s Defence Market
An analysis of how EU funding instruments are being used to overcome national fragmentation, enforce interoperability, and restructure European defence procurement and industrial coordination.
Despite its economic size, Europe’s defence market has long suffered from structural fragmentation, driven by nationally isolated procurement, divergent standards, and weak demand aggregation. This fragmentation has undermined interoperability, raised costs, limited economies of scale, and constrained the competitiveness of the European Defence Technological and Industrial Base. In response, the European Union has progressively shifted from a passive regulatory role to an active use of public capital as a coordination mechanism. By conditioning funding, loans, and industrial support on multinational cooperation, common standards, and joint procurement, EU institutions are deliberately reshaping how defence demand is generated and how industry organizes production. This approach treats defence fragmentation not as a technical inefficiency but as a systemic market failure, and uses financial leverage to align national incentives with collective capability development, industrial scale, and long-term strategic coherence.