Prime Minister Ratas: Estonia did unexpectedly well at the EU budget negotiations

Jul 21
Created: 21 July 2020

According to Prime Minister Jüri Ratas, the heads of state and government of the European Union reached a historic agreement on the next long-term budget for 2021–2027 and the economic recovery plan on the fifth day of negotiations. The budget and recovery measures will help to revive the European economy after the pandemic, strengthen the common internal market, increase competitiveness, create jobs, respond to climate change, and speed up the implementation of digital technology in a total amount of 1.824 trillion euros.

According to Prime Minister Jüri Ratas, the economic decline caused by the COVID-19 pandemic along with increased unemployment are an unexpected challenge for the people, companies, as well as Member States of the EU. 

“Unfortunately, the crisis is far from over and the whole world is unsure of how complicated our economic situation will turn out to be in the coming months and the near future,” said Ratas. “Therefore, the agreement reached in the Council is an excellent and necessary one for security and well-being in Estonia and Europe as a whole. It also shows that we can rely on Europe when times are tough,” Ratas emphasised. “This decision is also a clear sign of solidarity and caring, as countries who are in a more difficult financial situation or less wealthy will receive more support from the budget as well as the temporary recovery plan. The openness and successful functioning of the internal market and the economic recovery of all Member States is in all of our best interests,” said the prime minister, adding that after reaching an agreement on the numbers, it is now time to actually implement the created plans.  The agreement is also a strong positive message for the global markets.

“I am most satisfied about the fact that Europe reacts forcefully and has managed to find a quick solution. For Estonia, the budget discussions were a success and we can be satisfied with the agreement we reached,” Ratas emphasised. “We can quickly make the required large investments and carry out the reforms needed to restart the economy. This means creating a sense of security for our companies, but also actual contributions to creating jobs and boosting the economy,” the prime minister said.

With support from the EU’s Cohesion Policy, Estonia will make investments and carry out reforms, create new jobs, and make the society smarter, greener, better connected, more cohesive, and closer to the people. “The funds from the EU will help to implement the goals of the national strategy Estonia 2035. This means that in coming years, we will invest in smarter economy, research, energy transition and conservation, and reducing carbon emissions in the energy, industry, transportation, and agriculture sectors. We will also contribute to the capabilities of the healthcare sector, education, faster trains and Internet connections, and the development of local life,” the prime minister said regarding the most important reforms and investment plans.

Estonia will be able to use three billion euros from the Cohesion Policy funds, i.e. structural funds, from the new long-term budget. Another important accomplishment of the negotiations for Estonia is the decrease of co-financing from the initial 45% to 30%, which will speed up the implementation of projects and reduce the requirement for national financing by approximately a billion euros.

According to Ratas, there is also cause for joy for farmers, as Estonia will be taking a big step forward in the next budget period – direct supports will increase significantly and the gap between the support received by Estonian farmers and farmers of other Member States will decrease. According to the initial proposal, the supports per hectare would have increased from 66% to 76% of the EU average. During the negotiations, an even better result was achieved. Now, we will reach 76% of the EU average support per hectare by 2022 instead of 2027. Harmonisation will continue after that, however, and by 2027, the direct supports will be 80% of the EU average. “The amount of direct supports will increase by more than a third. The agreement also has enough flexibility to allow adding funds from the European Rural Development Fund to the designated direct supports, and the government wishes to reach the level of Poland, at least, by the end of the next budget period. “In a situation where the union’s budget has decreased due to Brexit, and considering the current economic situation, this a very important and positive message for Estonian rural areas,” said the prime minister. The level of direct supports in Poland is 83% of the EU average.

In the next budget period, Estonia will receive 1.35 billion euros for direct agricultural supports, marking a 35% increase compared to the current period. In addition, 638 million euros will be added from the long-term budget and 64 million euros from the recovery plan to support rural life.

Estonia will be able to invest in achieving climate goals much more than before. “A third of the recovery plan and the entire budget of the EU is dedicated to achieving climate goals. It will also help us to make Estonian economy greener, more environmentally friendly, and more sustainable. I am very pleased that the EU budget places special attention also on oil shale,” said Prime Minister Ratas. From the budget and the recovery plan, Estonia can contribute 3.3 billion euros to activities with a positive effect on the environment and climate. This amount also includes the funds from the new Fair Transfer Fund, which will primarily support Ida-Viru County in transitioning to a more climate-friendly economy and labour. The EU’s contribution to the fair transfer investments is 340 million euros.

Ratas highlighted the additional funding required for the construction of Rail Baltica and ensuring a favourable financing rate for it from the EU as an important achievement of the negotiations. “The shared dream of Estonia, Latvia, and Lithuania of a fast and environmentally friendly railway connection with Europe will become a reality. The additional funding for the whole project increased by 1.56 billion euros in current prices,” said Ratas. This means closer connections with our neighbours and a better connection with Europe for our people, an environmentally friendly mode of transport and travel, but also a fast north-south line for transporting goods, investments, and new possibilities for developing entrepreneurship in the whole region.

In addition, with the various supports from the European Union, Estonia can make important investments in education, connections, renewable energy, research, development of entrepreneurship, improved border management, and internal security.

The new long-term budget and the recovery plan impose no new taxes. The change will be made in the calculation of own resources, which will include non-recycled plastic packaging waste in addition to the gross national income.

Estonia will receive 6.8 billion euros from the new long-term budget for 2021–2027. In addition, Estonia will receive more than 1.5 billion euros in supports from the recovery plan. Therefore, Estonia will receive almost 2.17 billion euros more from the new budget than from the current one. Taking loans is also an option.

For every euro contributed to the EU budget, Estonia will receive 2.8 euros for the next seven years (3.5 euros with the funds of the recovery fund included).

The new long-term budget of the EU amounts to 1.074 trillion euros and the recovery plan to 750 billion euros, of which 390 billion are supports and 360 billion are loans. The funds are intended for projects approved within the next three years and should be used within six years. The majority of the recovery funds will be used on the basis of a plan currently being prepared at the Ministry of Finance. The initial plan will be submitted to the government in autumn and the final plan by the end of the year.

In order to stimulate the economy in years of crisis, the European Union will be taking a joint loan to fund the recovery plan. Increasing investments in Member States in a coordinated manner is a significant step in exiting the crisis. In addition to supports, loans can be taken under the recovery plan. Estonia has not yet decided on taking a loan from the EU with a presumably favourable interest.

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