Budget, Estonia, EU – Baltic States, Financial Services, Funds, Legislation, Markets and Companies

Also the requirement concerning the size of own funding will decrease significantly and the size of direct support will increase by more than one-third. In total, Estonia stands to get over 6.8 billion euros from the EU by the year 2027. 

The prime minister said that on the fifth day of their negotiations, EU heads of state and heads of government reached a historic agreement on the EU's long-term budget for 2021-2027 and a plan for restarting the economy. Together, these measures secure a total of 1.824 trillion euros to help reinvigorate the EU economy after the pandemic, strengthen the single market, raise competitiveness, create jobs, and also to address climate change and speed up the implementation of digital technology. 

Ratas described the economic difficulties that have arisen as a result of the global COVID-19 pandemic, along with the rise in unemployment, as an unforeseen challenge for EU residents, businesses and member states alike.

"Unfortunately, this crisis is far from over and uncertainty persists all over the world over how difficult our economic situation will become in the coming months and in the nearest future," Ratas said. "Therefore, the agreement reached by the Council is very good and vital for the feeling of security and wellbeing of both Europe and Estonia. It also demonstrates that we can count on Europe also in the most difficult situation," Ratas said.

The prime minister described the deal also as a sign of strong solidarity and caring, as less well-off countries that are experiencing a more complex situation stand to get more support both from the budget as well as the temporary restarting plan. Openness and successful functioning of the single market and economic recovery of all member states is in our common interests, Ratas said. The agreement is also a positive message for the global markets. 

Ratas said the thing that we can be most satisfied with is that Europe responds vigorously and managed to find a solution fast. For Estonia, the budget negotiations were successful and we can be satisfied with the agreement reached, the prime minister added.

"We can quickly start making large-scale investments and reforms necessary for restarting the economy. This means a feeling of security for our business operators, but also real investments that help to create jobs and enliven the economy," he said.

With support under EU cohesion policy funding, Estonia will start making investments and carrying out reforms, creating new jobs, making the society smarter, greener, more interconnected, more cohesive, and closer to the people.

"Euro money will help to implement the goals of the soon-to-be-completed national strategy  Estonia 2035. This means contributing in the coming years, for instance, to a smarter economy, research, energy transition and energy saving, reducing carbon emissions in energy, industry,  transport and agriculture. Also a contribution to the capability of the field of health, education, faster train and internet connections, and advancing local life," the prime minister said.

Cohesion policy, or structural funding available to Estonia under the new long-term budget totals three billion euros. An important achievement in the negotiations is also the reduction of the rate of national co-financing from 45 percent to 30 percent, which will speed up the implementation of projects and reduce the need for national funding by about one billion euros. 

According to Ratas, also farmers have reason to be happy as Estonia will make a big step forward in the new budgetary period in that the gap between the levels of support available to Estonian farmers and to farmers in countries entitled to higher support levels will narrow. According to the original proposal, support per hectare for Estonia would have increased from 66 percent to 76 percent of the EU average. In the negotiations, an even better result was achieved with Estonia to reach the level of 76 percent of the EU average in direct agricultural support not in 2027, but already in 2022.

Leveling off will continue also beyond 2022, and by 2027 direct support for Estonian farmers will grow to 80 percent of the EU average. 

"The total size of direct support for us will increase by more than one-third," Ratas said, adding that the agreement also contains the possibility to assign additional support from the rural development fund on top of the direct support already allocated, and it is the government's wish to definitely reach at least the level of Poland by the end of the next period. In a situation where the size of the budget is decreasing due to Brexit and also considering the situation of the economy, this is a very big and positive message for Estonia's rural areas, the prime minister said.

The level of direct farm support in Poland is 83 percent of the EU average.

For the next budgetary period 1.35 billion euros has been earmarked in direct support for Estonian farmers, 35 percent more than in the current period. In addition, 638 million euros will be added in support for rural life under the long-term budget and 64 million euros under the plan for restarting the economy. 

Estonia will be able to invest significantly more in achieving climate goals. "One-third of the restarting plan and of the whole EU budget is dedicated to movement towards the climate goals. It will help us make the Estonian economy greener, more environmentally sustainable and environment friendly. I am very glad that the budget of the European Union pays special attention also to oil shale," Ratas said.

The budget and the restarting plan set forth 3.3 billion euros for activities with a positive environmental and climate impact for Estonia. This includes money from the brand new Just Transition Fund, which will be of significant support foremost for the transition to a more climate friendly economy and jobs in East-Viru County. The contribution of the just transition facility towards investments is 340 million euros.

Ratas highlighted the endorsement of additional funding necessary for the construction of Rail Baltic and securing a favorable EU financing rate for it as a significant success in the negotiations.

"The dream of Estonia, Latvia and Lithuania of a fast and environment-friendly rail connection with Europe will become true. Additional funding for the whole project increased altogether by  1.56 billion euros in current prices in the course of the negotiations," Ratas said.

In addition, Estonia will be able to make significant investments in education, connectivity, renewable energy, research, business development, improvement of border control and internal security with various EU support items. 

No new taxes will be introduced with the new long-term budget and the restarting plan. A change will take place in the calculation of own resources, which in the future will take into account in addition to the country's gross national income also the amount of plastic waste not recycled. 

Estonia stands to get 6.8 billion euros under the EU's long-term budget for 2021-2027. It is also about to get over 1.5 billion euros in support from the plan for restarting the economy over the next three years, in addition to the main budget. Hence Estonia stands to get almost 2.17 billion euros more from the EU budget than in the outgoing period. Besides, the country has the possibility to borrow money. 

Estonia stands to get 2.8 euros, and 3.5 euros considering also the restarting plan, for each euro it will pay into the EU budget during the next seven years. 

The size of the EU's new long-term budget is 1.074 trillion euros and of the plan for restarting the economy 750 billion euros, of which 390 billion euros is grants and 360 billion euros loans. 

In order to stimulate the economy during the years of crisis, the EU will borrow money together to finance the restarting plan.

In addition to grants, it is possible to borrow money from the restarting facility. Estonia has yet to decide whether it will tap into the loan funding expected to be provided by the EU with a favorable interest rate.