Estonia secures up to 2.34 billion euros for defence investments

Estonia has signed a funding agreement with the European Commission allowing it to borrow up to 2.34 billion euros in long-term loans for defence investments, ERR reported. The funding will accelerate capability development projects planned by the Ministry of Defence.

Estonia plans to spend more than 5 percent of its gross domestic product on national defence each year in the coming years, enabling it to carry out planned defence investments more quickly and on a larger scale.

“Using the SAFE loan is a sensible way to finance the strengthening of defence capabilities. As a major issuer, the European Union can borrow on better terms than Estonia, helping to reduce interest costs,” said Janno Luurmees, head of the Treasury Department at the Ministry of Finance.

The loan has a 45-year maturity, allowing repayments to be spread over a longer period. Luurmees said combining different borrowing instruments, sources and maturities would help secure the most favourable terms, while reducing the burden on Estonia’s state budgets in the coming years.

SAFE, or Security Action for Europe, is part of the European Union’s ReArm Europe package, which aims to accelerate the strengthening of defence capabilities. Through the mechanism, the EU will raise up to 150 billion euros on capital markets and provide the funds to member states as long-term loans for defence investments.

“The rapidly changing security situation in Europe requires the entire alliance to provide more defence and act more quickly,” said Kadri Peeters, deputy secretary general for defence capabilities at the Ministry of Defence.

Peeters said Estonia’s decision to allocate more than 5 percent of GDP to national defence each year, combined with the EU’s SAFE loan mechanism, would allow critical investments outlined in NATO defence plans and Estonia’s development plans to be made significantly faster and on a larger scale. She said large-scale procurements with a direct impact on the security of Estonia and the wider region would take place in the coming years.

One condition of the SAFE mechanism is that countries conduct joint procurements. To encourage the development of production capacity in the European defence industry, at least 65 percent of the final components of procured products must originate in the European Union.

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

Estonia submitted its final SAFE loan application, known as the defence industry investment plan, to the European Commission in November 2025. The procurements and deliveries covered by the plan must be completed by 2030 at the latest.

Estonia previously borrowed 230 million euros in retroactive funding from the European Commission’s TERA programme to finance extraordinary government spending in 2020 aimed at mitigating the impact of the Covid-19 epidemic.