Estonia has signed a Security Action for Europe (SAFE) funding agreement with the European Commission, granting the country access to up to 2.34 billion euros in long-term loans for defense investments.
The SAFE mechanism is a component of the European Union's ReArm Europe package, which aims to mobilize up to 150 billion euros from capital markets to provide long-term loans to member states for defense purposes.
Defense priorities and procurement rules
The Estonian Ministry of Defense intends to use the SAFE loan for several purposes, including strengthening air defense, purchasing artillery shells, other ammunition, and military vehicles, as well as supporting Ukraine with unmanned aerial vehicles.
Access to the SAFE mechanism requires the organization of joint procurement. To encourage the development of the European defense industry's production capacity, at least 65% of the final components of procured products must originate from the European Union.
Kadri Peeters, the non-commissioned officer for defense capability at the Estonian Ministry of Defense, stated that the rapidly changing security situation in Europe requires more defense and faster action from the entire alliance.
Financing and debt management
Janno Luurmees, head of the Estonian State Treasury, said that when taking on debt obligations, it is useful to combine different instruments, sources, and maturities to get the most favorable terms. Luurmees noted the SAFE loan has a 45-year term, allowing repayments to be spread over a longer period.
Maximum amount available to Estonia under the SAFE agreement
This agreement follows previous financing from the European Commission, as Estonia previously borrowed 230 million euros from the TERA funding to finance government emergency expenses related to the Covid-19 epidemic in 2020.
