Estonia to strengthen air defence, military arsenal with EU SAFE loan

Estonia will receive up to €2.34 billion in long-term loans for defence investments under a funding agreement signed with the European Commission through the SAFE (Security Action for Europe) program. The loan will help speed up capability upgrades planned by the Ministry of Defence, ERR reports.

Europe's security situation requires member states to rapidly strengthen their defences while the continent's defence industry expands production capacity. Estonia has decided to allocate more than five percent of GDP annually to national defence in the coming years, allowing planned investments to move forward faster and at a larger scale.

"Using the SAFE loan is a sensible way to finance the strengthening of defence capability. As a major issuer, the European Union can borrow on more favorable terms than Estonia, which helps save on interest costs," said Janno Luurmees, head of the state treasury department at the Ministry of Finance.

He said the loan's 45‑year term allows repayments to be spread over a longer period. "When taking on debt obligations, it's useful to combine different instruments, sources and maturities to secure the best possible terms. This way we can make the necessary defence investments and reduce pressure on state budgets in the coming years," he said.

SAFE is part of the European Union's ReArm Europe package, aimed at accelerating defence capability development. Through the mechanism, the EU will raise up to €150 billion from capital markets and provide the funds to member states as long-term loans for defence investments.

Kadri Peeters, deputy secretary general for defence capability at the Ministry of Defence, said Europe's rapidly changing security environment demands more defence and faster action from the entire alliance.

"Estonia's historic decision to allocate more than five percent of GDP annually to defence, combined with the EU's SAFE loan mechanism, allows us to carry out critical investments outlined in NATO defence plans and our development programs at a significantly faster pace and larger scale," Peeters said, adding that major procurements in the coming years will directly affect security in Estonia and the region.

One condition of the SAFE mechanism is joint procurement. To support the development of Europe's defence industry, at least 65 percent of the final components of purchased products must come from the European Union.

The Ministry of Defence will use the SAFE loan to strengthen air defence, acquire military vehicles, artillery shells and other ammunition, and support Ukraine with unmanned aerial vehicles.

Estonia submitted its final SAFE loan application — the defence industry investment plan — to the European Commission in November 2025. Procurements and deliveries under the plan must be completed by 2030.

Estonia previously borrowed €230 million from the European Commission's TERA funding to retroactively cover the government's extraordinary expenses in 2020 to mitigate the impact of the Covid‑19 epidemic.

By Vafa Guliyeva