Italy’s Defense Tech Moment

This article appeared originally in the October 2026 version of Formiche, an Italian language monthly magazine.

On August 28, Italy’s Defense Minister Guido Crosetto announced that Mykhailo Fedorov, formerly Ukraine’s defense minister, would become his adviser on innovation. The role is unpaid, and Fedorov will continue to live and work in Kyiv, making the political significance of the appointment even clearer: Italy is importing a method—the one Ukraine has used over the past four years to build perhaps the only industrial base capable of innovating at a pace commensurate with 21st-century warfare.

The political backdrop to the decision is less straightforward. Of the €14.9 billion earmarked under the Security Action for Europe (SAFE) program, Rome has activated only €8.9 billion, in part because of strong public resistance to investing in security, which continues to be perceived by part of the public opinion as an alternative to healthcare and social policy rather than as an essential precondition for both.

Because the political ceiling on defense spending remains low, the relevant question for Italy, as for any middle power, is less how much it spends than how that spending is structured and what industrial effects it produces.

War has changed the cost structure. Ukraine’s experience shows that military advantage increasingly depends on having large quantities of low-cost systems, coordinated by artificial intelligence and easy to upgrade or replace. National champions remain indispensable for complex platforms, but no traditional defense contractor is organized to produce in this way. This shift benefits countries that do not have the budgets of great powers: It lowers barriers to entry and creates new arenas for competition. What is therefore needed alongside the traditional defense industrial base is a second one: a defense tech ecosystem made up of investors aligned with national security interests, startups, accelerators, and commercial companies entering the military domain.

The war’s second lesson is that, for a middle power, developing such an ecosystem is a source of political leverage. Countries unable to compete in traditional platforms and resources must compensate through specialization. Possessing a capability that others lack can be converted into access, partnerships, and negotiating weight—even with much larger allies.

Ukraine demonstrates this vividly. At the end of March 2026, Volodymyr Zelenskyy signed three ten-year defense cooperation agreements in Jeddah, Abu Dhabi, and Doha, focused on counter-drone systems, electronic warfare, and interception capabilities. Two hundred Ukrainian specialists were already on the ground in the three countries before the agreements were signed, assessing vulnerabilities in Gulf air-defense networks under Iranian attack.

For Ukraine, all this is a by-product of the struggle for survival. In 2025, the country produced roughly four million drones, with a target of seven million in 2026, while Ukrainian companies manufactured around 100,000 interceptor drones. An industrial capability built to avoid losing the war has now also become an instrument of diplomatic power projection.

For Italy, the challenge is to absorb this lesson and turn it into a deliberate policy direction. Its starting point is different: Fortunately, Italy is not at war; it has globally recognized national champions; and the ecosystem beneath them remains relatively thin. In the first half of 2026, Italian venture capital invested $652 million across all sectors, while defense and aerospace startups raised $22.6 billion globally over the same period. Funds dedicated to defense tech in Italy are few and relatively small.

The problem, therefore, is not so much the quality of Italian engineering or manufacturing, both of which are competitive, but the lack of pathways capable of taking a technology from the laboratory to a repeatable contract. Without those pathways, Italy arrives at the tables that matter for a middle power—in the Mediterranean, in Brussels, and in Washington—with little to offer.

Italy’s ability to close the gap will depend on four factors.

The first is procurement reform. Cutting bureaucracy, shortening decision-making timelines, and above all creating pathways toward recurring, multi-year revenues is a conditio sine qua non. Without the prospect of stable revenues, no innovative company can scale to the level of production capacity the state requires. The SAFE resources already activated could serve as a testing ground, with repeated purchases of low-cost systems replacing one-off contracts.

The second is focus. Italy’s domestic market is too small to cover the entire technological spectrum. The country should identify two or three areas of genuine comparative advantage and invest in them consistently. Undersea capabilities and maritime autonomy are the clearest candidates, drawing on Italy’s civilian and military shipbuilding, sensor expertise, and an already established national hub in La Spezia. In this area, specialization and geography converge, because protecting subsea infrastructure in the Mediterranean is a concern shared by all allies.

Earth observation and in-orbit services represent a second area, supported by a supply chain that ranges from large operators to small satellite and propulsion companies. The third is sensors for electronic warfare, where Italian research is strong and European demand has become structural after three years of jamming on the Ukrainian front.

The third factor is industrial conversion. The growth of defense technology can partly build on the conversion of existing industrial supply chains, starting with the automotive sector, which already has the production scale, component base, and expertise needed to manufacture drones, robots, and autonomous systems. This is a process already underway in Europe and one that also offers a possible response to the sector’s structural crisis.

The final condition is international partnerships, which Italy should pursue early and often. For Ukraine, foreign investment and production have accelerated the growth of its ecosystem. For Italy, European partners first and American partners thereafter can provide two things the domestic market cannot: risk capital and access to markets at scale.

A middle power’s relevance is increasingly measured by its ability to bring a unique contribution to its network of alliances. From this perspective, the division of labor generated by Europe’s defense awakening offers a generational opportunity to capitalize simultaneously on Italy’s strategic position and its industrial potential.

In addition to a flank to defend, the Mediterranean can become a platform from which to produce, and it will largely depend on the ecosystem Italy chooses to build over the coming years.

Dr. Daniel Kliman is Senior Vice President for Global Power Shifts at the German Marshall Fund of the United States (GMF). Beniamino Irdi is a Non-Resident Senior Fellow at GMF and CEO of HighGround.

The views expressed herein are those solely of the author(s). GMF as an institution does not take positions.

This article was translated from the Italian original into English using AI and then reviewed by the authors.