History shows it was possible in cantons of Switzerland, Habsburgs couldn't conquer them, despite no federal authority. There are still examples of small countries in military alliances today - I don't see what is the problem with contributing.

Economics is not a problem in a modern world with a free trade. Small city-states, that embrace free trade, fare well. There is even an possibility, that trade liberalization leads to political disintegration: https://www.nber.org/papers/w6163