At today’s remote-participation sitting, the Riigikogu discussed the planning of the funds for the next European Union financial perspective, the recovery instrument and the Just Transition Fund as a matter of significant national importance initiated by the State Budget Control Select Committee.
Chairman of the select committee Urmas Reinsalu said in his report that the most important issues in the country had to be decided by the parliament as the representative assembly of the people. “Today we are in a situation where the external funds from the European Union are expected to amount to 4.65 billion euro. Of this, 1.1 billion euro are the Recovery and Resilience Facility funds, 0.35 billion are from the Just Transition Fund and 3.02 billion are funds from the Cohesion Fund that consist of the regional cohesion social fund,“ he specified.
“Considering the size of these funds and their impact on Estonia’s future and the related decisions, it is up to the legislature to give its input to the plans proposed by the Government,” Reinsalu said. He added that the Government had submitted to the Riigikogu a draft Resolution to approve a new system of own resources of the European Union. Reinsalu proposed that the parliament would have to approve the distribution plan for the funds of the European Union financial perspective, and all implementing Regulations on the European Union financial perspective would be brought to the sectoral committees of the parliament before they are approved.
In Reinsalu’s words, it is important that the parliament receive an overview of the measurable targets of the goals pursued with European funds. He called on all stakeholders to send their positions to the State Budget Control Select Committee. “This budget perspective is of historic weight in two senses: first of all, the liquidation of the consequences of the pandemic, and, second, the implementation of the digital and green transition,” Reinsalu said. “The most important aim when distributing European funds must be to increase wealth in Estonia through improvement of the international competitiveness of the Estonian economy. In the future, Estonia will become a net contributor to the budget in terms of Europe. This means that the money we will be directing to the Estonian economy in the coming years will have to be a springboard for creating new wealth.”
In view of the increase of wealth, Reinsalu pointed out some principles regarding funding plans. In his words, at least one third of the European Cohesion Policy funds should be in the measures that are co-funded by the private sector. In his opinion, at least one fourth of the Cohesion Policy funds should be directed to measures intended for the private sector. “The money planned in such a way will recycle back into the budget and it can be used repeatedly. Once the measures end, the money will still be there and this will increase our reserves as well,” he said.
Chairman of the select committee touched upon issues to keep in mind with regard to the financial perspective for the next seven years. He mentioned the remedial programmes for Estonian children who have returned from abroad, scholarships for Estonians all over the world who come to Estonian universities, the development of housing solutions for young families and the preparations for new-generation nuclear energy.
In addition, he highlighted the research potential of university and the creation of a platform of relevant experts, and financial instruments that help obtain capital for small and medium size enterprises who have exportable products. Also, the supporting of clusters in order to promote cooperation within economic sectors and their cooperation with the state. Automation of large-scale public services with the aim of reducing staff. In transport, dispersion of peak loads and a network of smart roads. In vocational education, and also professional higher education, supporting of continuation of apprenticeship programmes and study programmes at workplaces and procurement of equipment for it, scholarships for vocational training students for studying abroad in specialities they have chosen, and automation of medicine and the development of up-to-date medical platforms.
In conclusion, Reinsalu said that the strategic centre of gravity in the governance of the state actually lied in that plan, and the issue was whether the parliament would be included in it or not. “Political forces give their input. We must maintain a dialogue here and we must find a method how the parliament makes substantial decisions,” Reinsalu said.
Minister of Finance Keit Pentus-Rosimannus noted in her report that, if we think of the years ahead of us, Estonia is expecting a considerable economic growth over these years and it is indeed the private sector with its decisions and investments stimulating the economy that is going to make a very important contribution to this.
She noted that, in 2022–2027, around three per cent of gross domestic product per year would go towards stimulating the Estonian economy with the help of European funds and the new European funding period would bring the largest investments ever to Estonia. She pointed out as an example that, five years earlier, a little more than a billion euro a year had been invested in Estonia. Compared to this, in the coming years, investments will be practically twice as large and will amount to more than two billion euro a year.
The Minister of Finance pointed out that, if we were getting to use the greatest opportunities in history to give Estonia a new development impetus, we were facing questions of how we were going to use the money and what our vision was.
“Estonia’s vision could and should be Estonia that is greener than grass and as efficient as a quantum computer,” the minister spoke of the vision. “We should be a model of the new economy to all the others that others look to and wish to copy. Indeed, a successfully accomplished digital and green transition will give us good prerequisites for this.” In her words, the current funding plans have been drawn up in view of this vision and these funding plans will support Estonia’s future.
In Pentus-Rosimannus’s words, Estonia’s green transition is nothing abstract, but energy saved in the future, which will means lower costs. With the support of the European taxpayer, Estonia will get to use around 1.8 billion euro in order to boost the transition to a greener Estonia, she noted.
Carrying out the digital transition will be inevitable as well, in the minister’s words. She said that, in this age of looking for new solutions and of decreasing labour force, it was also necessary to boldly consider alternatives in the public sector, including the use of artificial intelligence.
In the situation where the productivity of the Estonian labour force has grown but is still around three quarters of the European Union level, implementation of new technologies will help. “Research and development, and cooperation between researchers, businesses and other authorities will need to grow considerably in Estonia. Funds have been earmarked for this as well in the new European Union budget period,” the minister promised.
Pentus-Rosimannus pointed out that Estonia would get to use 439 million euro for a new digital transition. More than 70 million of this is to support the digitisation of businesses, which means for example real-time data exchange solutions, which in turn will help save more than 200 million euro in a year for Estonian businesses.
64 million euro have been earmarked for further development of public services. The 48 million euro for ensuring a fast and robust Internet connection will mean that 23 000 addresses will get an opportunity to connect as a result of this investment.
In the minister’s words, in order to develop competitiveness, it will be necessary to develop both transport and energy infrastructure connections with Europe in Estonia. She mentioned the 5G Internet as well as Rail Baltic and Tallinn-Helsinki tunnel. She thinks that railway transport, which is going to receive the greatest cash injection in history, is keeping up with the entire green transition. In 2026, Rail Baltic will have been completed with the European taxpayers’ money, which besides mobility opportunities for people will mean an additional fast opportunity for movement of goods.
In the minister’s words, this time round, European funds will also be the necessary support to exit the crisis to the sectors that need help most. Support will be provided to young people who have remained away from school and work. A trans-sectoral model for the organisation of child protection will be launched and the facilitation of the employment of young people with little work experience will be continued. It will be possible to invest in the healthcare sector in Saare, Hiiu and Järva Counties as well as in Narva, Tartu and Tallinn.
Pentus-Rosimannus said that an estimated 40 per cent of the entire European funds plan for the coming years was for predetermined use. She pointed out as examples large investments in train traffic, and activities relating to road construction and the Estonian Unemployment Insurance Fund. However, 60 per cent of these funds creating the future will be distributed in reopened competition according to the principle that the best project, the best idea wins.
Lenno Uusküla, Research Fellow in Macroeconomics at the University of Tartu and Head of Research of the Foresight Centre, spoke in his report of the reasons why budget policy was made and what could be achieved with it and where various fundings might fit in this big picture. Uusküla said that although it was European Union money, it was nevertheless part of all the money that was being distributed.
He pointed out that, in market economy, in the case of budget policy, it was necessary to address market failures. Another major aim is to smooth the economic cycle. This means that downturn phases are very costly. Unemployment is very costly for society. On the other hand, there is an attempt to cool the growth phases and to avoid booms.
In Uusküla’s words, the just transition funding addresses market failures, and speaking of the recovery fund to tackle the COVID-19 crisis, it is a bid to smooth the economic cycle where market failures have been taken into account.
In Uusküla’s words, monetary policy support to budget measures is very important. “Estonia on its own cannot influence the decisions of the European Central Bank. However, if we keep apace with the budget policy of the European Central Bank and the rest of the European countries, the general policy of the European Central Bank actually suits us very well,” he said. “Besides, the size of our debt burden determines whether the financial sector is doing well or not, whether businesses and households can take loans when they think that they will be better off in the future. This also depends on commitments regarding future expenditure.”
When speaking of the recovery fund, Uusküla pointed out that budget policy had cross-border implications. “If one country incurs expenses and the other does not, the other gets a ‘free lunch’ in principle thanks to that. If we act together in Europe, this enables to overcome this jointly and to avoid a situation where someone is trying to gain ‘free lunches’ from there,” Uusküla illustrated his statement.
In his words, the COVID-19 crisis is not an ordinary crisis because no country can pull itself out of it on its own. It is not arising from our economic policy choices.
In Uusküla’s words, the digital, green and health transition are serious challenges because the growth of productivity has stagnated in Europe despite the fact that we are speaking of how digital technologies are developing. In his words, the role of science is very important in this. However, the dilemma is whether to support the innovative side of business or universities. “Business seeks to profit itself from investment. A university will try to ensure that everyone benefits evenly and therefore an investment in a university should have a much wider platform than the supporting of the production of just one business,” he explained.
Concerning digital solutions, in Uusküla’s words, it is very important that people wish to use them and they know how to use them. When speaking of health care expenditure, Uusküla noted that simply moving funds into health care might not help if people continued to act foolishly.
As regards the planning of the funds of the Just Transition Fund, Uusküla emphasised the importance of seeing the big picture. He pointed out as an example the Ida-Viru County and the termination of oil shale extraction. “It is very complicated to turn miners into data miners and the entire chain of various jobs will have to move here,” Uusküla said. “At first it is necessary to gather the low-hanging fruit with regard to CO2. Simply a cost-effectiveness analysis will need to be done there for absolutely everything, but a meaningful and systemically governed process is also needed. Involvement is very important so that the people feel that they are in control. In addition, it will be necessary to build bridges, and social and psychological support will be needed.
In conclusion, Uusküla said that it was not known what the future would hold and what the future world would look like. However, in his words, it was possible to consider what we wished, what we needed to do in order to get there, what the conditions were that had to be met in order that the world would be as we wished it to be, and what would happen if the conditions were different.
During the debate, Lauri Läänemets (Social Democratic Party), Helir-Valdor Seeder (Isamaa), Oudekki Loone (Centre Party), Aivar Sõerd (Reform Party) and Kalle Grünthal (Estonian Conservative People’s Party) took the floor as representatives of their factions. Eduard Odinets (Social Democratic Party), Martin Helme (Estonian Conservative People’s Party) and Jürgen Ligi (Reform Party) also took the floor.
Verbatim record of the sitting (in Estonian)
Photos of the sitting (Author: Erik Peinar, Chancellery of the Riigikogu)
The video recording of the sitting will be available on the Riigikogu YouTube channel.
(Please note that the recording will be uploaded with a delay.)
Your feedback is important. Please share it with us!