Piraeus Bank has taken a leading role in promoting and financing defense investments in Greece, as the first bank in Greece to participate in the European Investment Bank’s special program and the only one in Southeast Europe to support the Defense and Resilience Bank (DSRB) initiative.
This was emphasized by Theodoros Tzouros, Senior General Manager and Chief Corporate & Investment Banking Officer at Piraeus Bank, at the Athens Defense Conference during a panel discussion titled “Financing the EU’s Defense Funding Renaissance.” Mr. Tzouros analyzed the obstacles currently hindering the attraction of both private and institutional investment in the defense sector at the European level and, as he put it: “Europe’s rearmament requires more than just political commitment. It requires banks ready to take action.”
Piraeus Bank is indeed taking action and has been participating since January in the EIB’s security and defense program —the first bank in Greece and the third in Europe to do so—securing €100 million in funding, which will be channeled to small and medium-sized enterprises in the sector.
Its support for the Defense and Resilience Bank, which is currently being established and aims to address chronic underinvestment in defense, security, and resilience, is also significant.
Mr. Tzouros proposed that the proven, scalable model of the Recovery and Resilience Facility—which was implemented with great success by Greece—be immediately applied to defense financing.
Specifically,
- RRC Loan Program Structure: 50% RRC/SAFE financing, 30% co-financing by a commercial bank, 20% equity from the project’s financiers.
- Track record of performance: In 3 years, the Greek TAA loan facility has facilitated total capital investments of over €20 billion—demonstrating speed, transparency, and private-sector leverage.
- Immediate applicability: The same IT platform, network of certified auditors, and onboarding process can be reactivated for SAFE-funded defense investments in the Greek private sector.
- Role of banks: Banks act as a mechanism for launching, evaluating, and monitoring projects—ensuring the quality and commercial viability of projects receiving public funds.
The head of Corporate & Investment Banking at Piraeus Bank highlighted a number of issues that are hindering the attraction of significant private investment in the defense sector in Europe.
First and foremost, the ESG framework and investment classification system represent the greatest structural obstacle, as over the past 10 years, the majority of European institutional investors have implemented policies excluding exposure to the defense sector. There has been some improvement, but it is slow and sporadic, and the reputational risk for fund managers remains.
Second, the problem of classifying defense spending as “dual-use,” as there is no harmonized definition at the EU level, creating a regulatory maze that particularly deters institutional investors with inherently conservative legal teams.
Third, there is a structural financing problem arising from the mismatch in the procurement cycle, since government contracts are large, slow to process, and non-negotiable in terms of payment schedules, resulting in significant working capital needs for companies in the sector.
“Many promising defense technology companies stumble in the ‘valley of death’ between initial government funding for research and development and commercial-scale contracts,” Mr. Tzouros noted.
Another area creating obstacles is the regulatory fragmentation observed in Europe, with such differences from country to country that they significantly increase the legal and regulatory costs of compliance, a situation that does not exist in the U.S. and disproportionately affects smaller investors and emerging companies that lack specialized regulatory compliance teams.
Finally, the fact that defense is an industry where much of the most important commercial information is classified or commercially sensitive makes it difficult for investors to value companies. Investors in public markets struggle to accurately value defense companies without access to data on order backlogs or export licenses.
“Traditional financial models underestimate the value of a signed government contract relative to balance sheet metrics. This creates a ‘winner-takes-all’ dynamic, where a small number of specialized investors capture the lion’s share of the opportunity,” emphasized Piraeus Bank’s Chief Corporate & Investment Banking Officer.