TAMPA, Fla. - European government space spending jumped 12% to 13.5 billion euros ($15.4 billion) in 2025, according to a July 13 European Space Agency report, bucking a 3% global decline on the back of rising national defense budgets.

While lower U.S. defense spending and flat NASA funding dragged global government space spending down to 119 billion euros, ESA said budgets are “projected to increase sharply from 2026 onward by over 20% in one year,” driven by defense programs such as the Golden Dome missile defense initiative.

The United States still represented 58% of global government space budgets in 2025. China ranked second at 15%, followed by Europe at 11%.

Germany has made Europe’s most significant near-term commitment with plans to invest 35 billion euros in space security and defense by 2030, while France is preparing an additional 4.2 billion euros for military space activities between 2026 and 2040.

More broadly, ESA noted that 2025 marked the 11th consecutive annual rise in global military spending, which reached $2.9 trillion, with Europe the main contributor to the increase.

However, the report also cited OECD and International Monetary Fund research warning that greater defense spending does not necessarily lead to lasting economic growth.

According to the OECD, long-term gains will depend on procurement strategies that can foster innovation while containing costs, as well as cross-border coordination and harmonized standards to unlock economies of scale.

Meanwhile, Europe continues to grapple with a structural disadvantage in turning domestic demand into a larger, more cost-efficient industrial base seen in the United States and China.

“An important factor, which is quite specific to Europe, is that a significant share of its accessible market is also accessible to all space industries in the world,” the report said.

“While European customers (public and private) accounted for 67% of the total accessible market value in 2025 … this European demand was not captive to European suppliers, as Europe does not apply any preference to its domestic industry.”

In contrast, European primes are locked out of more than 80% of the 75 billion euro global launch and satellite manufacturing market, ESA estimates, because of government procurement preferences elsewhere and vertically integrated constellations such as SpaceX’s Starlink.

The report did not address the proposed EU Space Act, which U.S. officials have criticized as a potential non-tariff barrier for foreign operators.

“Considering the past five years, European primes have benefited from a government demand that was five times lower than in China, and four times lower than in the United States,” the report added.

“These factors result in the European space industry being the most exposed to the global market demand variations, with the urge to constantly remain competitive to maintain its level of industrial activity.”

The report also highlighted a widening gap for private space investment. While European space ventures raised around 1.4 billion euros in 2025, down 8%, global investment surged 60% to a record 11.7 billion euros.