Europe in the Space Race: Powerhouse or Passenger?
- Eloisa Versaci
- Apr 20
- 5 min read
At the beginning of 2026 Space X applied to the Federal Communication Commission to introduce orbital data centers in the next years. This plan is estimated to lead to the launch of roughly one million satellites in a year. On April 1st, the NASA successfully sent four astronauts out of the Earth’s orbit on a trajectory that takes the crew around the Moon’s far side and returns them to their starting point.
The question that arises spontaneously is: where does Europe stand in the space race? Do Europeans have strategic autonomy, or do they depend on other actors?
The Draghi report highlights a paradox at the heart of Europe’s position in the space race. On the one hand, the EU remains a major space power, with world-leading programs such as Galileo and Copernicus and strong industrial capabilities. On the other hand, it is losing ground in the most dynamic segments of the sector. In particular, Europe has fallen behind in launch capabilities and had to rely on SpaceX to deploy key infrastructure such as Galileo satellites. According to the report, autonomous access to space is a prerequisite for strategic autonomy, yet this is precisely where Europe is most vulnerable. In other words, Europe is strong technologically, but weak strategically. As private actors and large-scale public investment reshape the global space economy, the EU risks becoming increasingly dependent on external providers, especially the United States.
The reasons why Europe seems to be lagging behind are mainly two: underinvestment in the sector and a strong fragmentation.
First, in the United States a large portion of the public budget is devoted to the development of space technologies. According to a report published by Bruegel, the US assigns the space sector six times the resources that the European Union is able to collect.
The difference in resource allocation necessarily translates into a higher R&D capacity, better infrastructures and long-term plans.
Yet, underinvestment alone does not explain Europe’s position in the sector. The second, and arguably deeper, problem is institutional fragmentation. European public demand for space services remains largely organised at the national level, with each Member State pursuing its own programmes and procurement strategies. The result is that there is no single “European customer” capable of generating the volumes, scale economies, and cumulative learning effects that would allow European industry to compete on cost and speed.
At the centre of this challenge sit the principles behind the organization of the European Space Agency. Founded in 1975, the ESA operates on an intergovernmental model and applies the so-called “geographical return” principle: each member state receives industrial contracts roughly proportional to its financial contribution. The logic is politically sound as it ensures that smaller or less developed space nations benefit from participation. However, it is also economically costly. Distributing work according to national quotas rather than comparative advantage prevents the consolidation and vertical integration that have made players like SpaceX highly competitive. In short, geographical return is a solidarity mechanism that comes at the price of competitiveness.
This problem is further reinforced by the broader market structure. The EU single market still lacks a fully integrated regulatory framework for the space sector, with barriers between Member States limiting cross-border scale. Companies that manage to grow face a fragmented landscape of national licensing regimes, procurement rules, and liability frameworks that raise costs and slow expansion.
This regulatory patchwork is one reason European space start-ups so often look to US capital markets and headquarters to expand, where indeed there is a fertile environment for scaling up. As a matter of fact, American space start-ups benefit from a deep ecosystem of venture capital willing to fund scale-up rounds, whereas European investment remains heavily skewed toward early-stage deals: according to McKinsey data, nearly 70% of European space transactions fall below the ten-million-euro threshold. Start-ups that survive the early stage frequently find themselves stranded in a “Valley of Death”, unable to access the late-stage capital needed to compete globally.
These dynamics are not independent. Fragmented demand reduces expected returns, which in turn discourages large-scale private investment, reinforcing the problem of underinvestment. The result is a structural coordination failure that Europe has struggled to overcome.
This has direct consequences for human capital. European founders in the space sector are disproportionately likely to relocate their companies or list on foreign exchanges in search of deeper capital pools. The brain drain is not simply a loss of talent: it also weakens the “flywheel effect” by which successful entrepreneurs reinvest in and mentor the next generation of start-ups. The US has developed an ecosystem’s self-reinforcing dynamic: public seed money attracting private capital, which funds growth, which generates returns that fund the next wave. This is precisely what Europe has struggled to replicate at scale. In other words, the NASA-SpaceX partnership model, characterized by roughly one billion dollars of public investment between 2006 and 2012, remains the paradigm European policymakers should be trying to emulate.
However, awareness of these structural weaknesses has prompted a significant legislative response in the European Union. Launched in June 2025, the proposed European Space Act represents arguably the most ambitious renovation of EU space governance since Galileo. Its core ambition is to replace the current mosaic of national licensing regimes with a single, harmonised legal framework applicable to all operators providing services within the Union, regardless of where they are headquartered. The vision is a genuine “Single Market for Space”: a regulatory environment that reduces bureaucracy, provides legal certainty, and makes Europe attractive to private capital.
The Act introduces the concept of “Union Space Operators”, entities that must obtain registration from a Member State on the basis of harmonised technical requirements. This is designed to prevent regulatory arbitrage within the EU, ensuring that all actors, both European and non-European, adhere to the same standards of safety, cybersecurity and orbital sustainability. Analysts have noted, however, that compliance costs, particularly for environmental footprint assessments and cybersecurity mandates, risk falling disproportionately on small and medium enterprises if not accompanied by dedicated support schemes and procurement reform. The success of the Act will therefore depend not only on its ambition, but on the measures that will accompany it.
For readers, the space debate may seem distant from the economic and policy questions that dominate everyday issues. However, it should not be. The space sector is increasingly the infrastructure layer underpinning GPS navigation, financial transaction timing, weather forecasting, precision agriculture and broadband connectivity in underserved regions. A Europe that cannot guarantee autonomous access to orbit is a Europe whose digital and physical infrastructure depends on the goodwill of foreign providers. Yet, this is an uncomfortable dependency that the war in Ukraine and shifting US foreign policy have made impossible to ignore.
The good news is that Europe’s challenge is not one of technological inadequacy: Galileo and Copernicus demonstrate what the continent can achieve when it acts collectively. The challenge is one of governance design, capital mobilisation and political will. The European Space Act, if implemented effectively alongside serious investment reform, offers a credible path forward.
The next steps of Europe in the space sector will say much about its capacity to translate institutional ambition into strategic reality in one of the defining industries of the coming decades.
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