Estonia is set to borrow up to 3.6 billion euros (approximately $4.1 billion) with the backing of the European Commission to enhance its defense capabilities through collaborative arms procurement with its allies. This significant loan aims to finance various military assets, including medium- and short-range air defense missiles, artillery shells, infantry fighting vehicles, and additional equipment, according to a recent statement from Tallinn’s Ministry of Finance.
The initiative forms part of a broader European Commission proposal that seeks to raise up to 150 billion euros ($174.2 billion) on behalf of EU member states, allowing for a collective approach to defense spending. By pooling resources, countries can secure more favorable interest rates compared to individual borrowing options.
State Treasury Department Director Janno Luurmees conveyed to Estonia’s state-owned broadcaster ERR that this initiative could involve a minimum borrowing of 2 billion euros ($2.3 billion), potentially extending over a term of up to 45 years. While specific amounts and terms remain under discussion, Luurmees noted that European Commission support could lower interest costs, resulting in savings of around 4 million euros ($4.6 million) per year for each 1 billion euros ($1.1 billion) borrowed.
“The Ministry of Defence has drawn up an initial loan interest request and submitted it to the European Commission, but the entire process is still in its relatively early stages,” Luurmees stated. He also highlighted that the final interest rate would be determined at the time of borrowing, with current estimates suggesting a difference of approximately 0.4 percent between Estonia’s ten-year bond rate and that of the European Commission.
In parallel, Kalle Kirss, who oversees the NATO and EU department at Estonia’s defense agency, indicated that the funds would also support the Baltic Defense Line, expand naval capabilities, and enhance ammunition stockpiles. Most of the acquisitions are expected to be carried out through joint procurement initiatives, similar to Estonia’s previous collaborative purchase of IRIS-T medium-range air defense systems with Germany and Latvia.
The Estonian government has until the end of November to present a detailed spending blueprint to the European Commission, laying out specific funding allocations and procurement strategies.
Further reinforcing its defense strategy, the announcement comes on the heels of a July decision by Defence Minister Hanno Pevkur, who approved a comprehensive four-year, 10-billion-euro ($11.6 billion) development plan covering fiscal years 2026 to 2029. This ambitious program emphasizes the enhancement of air defense capabilities, including establishing a new brigade, procuring additional IRIS-T and Piorun man-portable air-defense systems, and conducting preliminary research for ballistic missile defense.
To bolster national defense, funding for Estonia’s voluntary national defense organization, the Defence League, is set to increase from 240 million euros to over 314 million euros ($278.8 million to $364.7 million), with improvements in infrastructure and training. Notably, a quarter of the planned investments will be allocated specifically to increasing ammunition reserves.
With this new development plan, Minister Pevkur asserted that Estonia aims to strengthen its deterrence capabilities alongside its allies by 2029, establishing a modern defense force prepared to effectively engage threats before they breach Estonian territory.
