In the midst of shifting geopolitical sands, the ongoing war in Ukraine and President Trump’s determination to alter the world order as we know it, Greece is preparing one of its most ambitious defense investments in decades, pledging to spend €25 billion over the next ten years to modernize its armed forces and strengthen its domestic defense industry.
According to the draft 2026 state budget, defense deliveries will reach €1.7 billion in 2025 and €2.3 billion in 2026, while total annual investment in military equipment is projected at €1.88 billion, or about 0.3% of GDP -one of the highest defense spending ratios in the European Union.
Greece is making use of an EU National Escape Clause (NEC) that allows elevated defense expenditures to be temporarily excluded from its deficit calculations. Behind the fiscal maneuver lies a strategic choice: to channel the increased defense spending into industrial renewal and technological capacity, not just armament upgrades.
Reviving a modest defense industry
Greece’s domestic defense sector remains relatively small. With an estimated €1.5 billion in annual turnover, around 400 companies and 15,000 employees, the focus falls mainly on maintenance, components, and support services. The government hopes that the modernization plan will draw foreign partnerships, technology transfers, and new investment.
Companies such as Hellenic Defense Systems (EAS) and the Hellenic Aerospace Industry (EAB) could play a key role if they secure collaboration agreements with international defense contractors. Greece’s participation in SAFE, the EU mechanism that co-finances defense projects, could also boost local involvement.
However, the plan’s success depends heavily on efficient management and transparency in order to ensure the effective use of EU funds. Officials warn that bureaucratic hurdles and slow procurement processes could derail timelines and inflate costs.
Fiscal pressures and structural challenges
The program will account for a significant portion of public spending, roughly €2 billion a year, or about 1% of total government spending, excluding operating costs and legacy payments. When those are included, total annual defense costs could rise to €3 billion.
The government argues that the investment will have a multiplier effect, generating jobs, tax revenue, and technological growth. Yet past experience shows that if domestic firms remain sidelined, much of the money will return to supplier countries, limiting Greece’s economic gain.
Analysts also point to fiscal risks if long-term payments coincide with economic slowdowns. Combined with administrative inefficiencies, such factors could undermine the plan’s aspirations.
Beyond reinforcing its military capabilities, Greece aims to position itself within Europe’s evolving defense architecture. The ultimate challenge, however, lies in turning military expenditure into productive, innovation-driven investment that strengthens the country’s industrial base.
Whether the €25 billion program becomes a cornerstone of economic modernization or just another costly procurement cycle will depend on how effectively Athens can align national defense with industrial strategy over the next decade.
