Last Sunday, the Portuguese Government formally submitted its application to the SAFE program, the new European loan instrument for Defense, opening the door to 5.8 billion euros in investment in the Armed Forces. It is a truly impressive number. Especially when we compare it with the Military Programming Law for 12 years, until 2034, whose budget is 5.5 billion euros.
This is, as Minister Nuno Melo highlighted, the “largest investment at once” in the Portuguese Armed Forces.
According to the European Commission, SAFE provides long-term loans, with competitive interest rates and a 10-year grace period, with terms of up to 45 years and including pre-financing and VAT exemption in supported contracts.
It is, in theory, “cheap” money to quickly modernize capabilities on land, sea, air and space – from armored vehicles to ships, from drones to satellites.
But behind the headline of 5.8 billion there are questions that still have no clear answer: How will acquisitions be made? Who controls these contracts? What concrete benefits will the national industry have? And on what national strategic concept is this effort based?
From a financial point of view, the package is designed to be attractive. It is understandable that governments with tight public finances see SAFE as a rare opportunity. But the combination of easy money, haste and technical complexity is always delicate.
We know that the implementation of this plan still depends on Brussels’ response to the model presented by Portugal. But since we, the taxpayers – and probably our children – are going to be paying this bill, there could be more transparency.
A detailed public table with the list of equipment to be purchased, individualized costs, delivery schedule and reimbursement charges over the coming decades is still unknown. It’s like a blank check, which we will only understand in detail when the bill has to be paid.
There is another sensitive piece: the hiring method. The SAFE regulation provides for “targeted derogations” from Directive 2009/81/EC, precisely to simplify and speed up defense acquisition processes.
In practice, it is like saying that, for contracts financed by SAFE, the existence of a crisis situation is presumed, which allows States to generally resort to the “negotiated procedure without prior publication” – the European equivalent of a direct adjustment due to urgency.
It is not illegal, it is provided for in the directive itself. But it is an exceptional shortcut, designed for extraordinary cases, which will now become the rule in a 150 billion euro package on a European scale.
As for Portugal, with our history of controversies in public procurement, it was important, if not essential, to know that additional filters will be created to prevent corruption, favoritism and guarantees that the national interest is the preponderant criterion.
It would be unfair, however, to ignore the effort that the current Minister of Defense has sought to make. In July, Nuno Melo created a SAFE working group, with the mission of preparing Portuguese participation in the program, identifying priority needs in the three branches and articulating with the national industry, with the declared objective of guaranteeing concrete benefits for the national Defense Technological and Industrial Base.
This movement deserves the benefit of the doubt in relation to the concerns mentioned. It is positive that the minister has brought military leaders and industry around the table, assuming Portugal’s ambition to lead some joint acquisition projects and align choices with NATO goals in terms of capabilities.
If the working group worked with clear criteria – once again, doubt, as nothing was public – transparency and scrutiny, it could mitigate part of the risks associated with the volume and speed of investments.
The official discourse repeats that SAFE is a “historic opportunity” to integrate Portuguese companies into European value chains, especially in ammunition, land systems, naval capabilities, cyber defense and strategic domains such as space.
But we need more than rhetoric. The experience of other European programs shows that, without binding clauses on industrial counterparts, technology transfer and effective participation of national SMEs, the largest share of contracts tends to be in the hands of large traditional players.
SAFE is, by nature, a loan instrument for the acquisition of existing products, not a fund for the development of new capabilities in Portugal.
If the Portuguese State is not demanding in negotiations – ensuring, for example, that each large contract ensures development in national territory – the risk is that we will have more debt, more imported equipment and little structural change in the industrial base.
There is also a structural point that is only talked about among Defense specialists, but which has an impact on all of us. It’s just that Portugal is making long-term Defense decisions based on a 2013 National Defense Strategic Concept (CEDN). That’s right. It’s not a jackdaw.
The CEDN defines the State’s defense priorities, which gives rise to the Military Strategic Concept, the National Forces System and, finally, the Military Programming Law.
In practice, we are deciding 5.8 billion in capabilities for 2030 with a CEDN designed before the annexation of Crimea, before 2014, before the large-scale invasion of Ukraine and before the new wave of hybrid and cyber threats. The political debate in Parliament itself has already recognized the need to review the CEDN. This review remains, however, to be done.
If SAFE is, as the saying goes, a historic opportunity, then it must be treated with the seriousness and transparency of a historic decision. Citizens’ trust cannot be bought with slogans about “the biggest investment ever”. It is built with information, debate and scrutiny.