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External support in Estonia to be spent on restarting the economy, innovation

BC, Tallinn, 04.12.2020.Print version
The Estonian government decided on Thursday that in the use of external support, Estonia will base its actions on the principles of restarting and invigorating a human-centered economy and conduct of major innovations, informs LETA/BNS.

"As the health crisis will subside and the vaccine will arrive, next year must become a year of restarting Europe and invigorating the economy," Estonian Prime Minister Juri Ratas said according to spokespeople for the government.

Ratas said that in Europe, an agreement on the EU's next long-term budget and the implementation of the economic recovery plan must be reached fast. He said that the recovery plans will provide a necessary feeling of confidence concerning the future for residents in Estonia and elsewhere in Europe, along with the possibility to exit the crisis. 

The agreement reached by the government covers, in addition to the structural funds of the new period, the recovery plan (RRF) and the Just Transition Fund, also the use of the resources  added to the structural funds of the outgoing period (REACT-EU) and the proceeds from the sale of carbon emission credits. 

The decisions passed by the government on Thursday do not concern the resources of the Common Agricultural Policy, the Agriculture and Fisheries Fund and the funds of the domain of internal security, on which decisions have yet to be adopted. 

According to Minister of Finance Martin Helme, the Estonian economy should be more resilient to potential future crises. 

"With the help of the support we can exit the crisis faster, but not only. With the additional financing, we wish to support long-term change and innovation in our economy," Helme said. "We can do it by supporting businesses, if we promote the introduction of new technologies, product development and more efficient use of resources. We also wish to develop the capability of the healthcare sector, offer better labor market and social welfare services and help the people in need with food aid," the minister added.

In the planning of the use of the resources the government based itself both on the country-specific recommendations of the European Semester as well as the Estonia 2035 action plan, which sets sights on future reforms and investments.  

The goals for the use of the structural funds must be negotiated with the European Commission and the use of the recovery fund approved by the Council of the European Union.


According to the decision in principle adopted by the government of Estonia, the aim of the structural support, broadly, will be to support the development of regions, economic growth and social cohesion. A total of three billion euros has been earmarked for Estonia for the 2021-2027 period, which will be spent for achieving five major goals. 

The first of the goals is smarter Estonia, which stands to get 717 million euros. The support will go to innovation, research, competitiveness of small and medium-sized companies, developing digital skills, and further developing of e-state.

The second goal is greener Estonia, which stands to get 795 million euros for the improvement of resource efficiency, improving the efficiency of energy use, adapting to climate change, circular economy, introduction of more sustainable solutions in transport, and water management.

The third goal is a more connected Estonia. Under that goal, 564 million euros will go towards environment-friendly transport, roads, and faster internet.

The fourth goal is more social Estonia, which stands to get 574 million euros for better linking education with the needs of the labor market, for social and healthcare investments, long-term care, the Estonian language, and integration.  

The fifth goal is Estonia that is closer to the people. Under that goal, 264 million euros has been earmarked for the development of urban areas, regional enterprise and local public services. 

The volume of the recovery fund (RRF) for Estonia is 1.106 billion euros, which does not require co-financing by Estonia. Of the fund's resources 20 percent must be channeled towards supporting the digital turnaround and 37 percent for supporting the green turnaround. The commitments as regards the financing of specific projects must be assumed by the end of 2023 and the investments and activities must be finished in July 2026.

The aim of the RRF is to support reforms and investments connected with the European Semester, including in areas that are to do with economic, social and regional cohesion, the green turnaround and the digital turnaround, healthcare, competitiveness, resilience, education and skills, research and innovation, smart, sustainable and inclusive economic growth, creation of jobs and investments, as well as stability of financial systems. 

The REACT-EU has been created for exiting the COVID crisis and the green, digital and resilient transformation of the EU economy, support for increasing the capabilities of the healthcare sector, invigorating the economy, labor market and social inclusion measures, food aid and other material aid for those in need.

The amount earmarked for Estonia under REACT-EU is 177.3 million euros, and no national co-financing is required in general. The resources of REACT-EU can be used in 2020-2023 and they will be added to the structural support of the outgoing budget period. 

The volume of support from the Just Transition Fund for Estonia is 340 million euros and its purpose is to alleviate the economic and social consequences of change in the regions which need the most support in the transition to a less polluting economic model. In Estonia, this concerns mainly East-Viru County. 

For the implementation of climate and energy policy measures also the proceeds from trading in carbon dioxide emission quotas can be used and, starting from 2021, also the assets of the Modernization Fund (MF) connected with the trading. The size of both sources of financing depends on the changing market price of CO2 quotas. 

Fifty percent of the proceeds from the sale of carbon emission credits has been earmarked for climate and energy policy measures. The money will be used, for instance, to support audits aimed at efficient energy use at major agricultural companies and the use of renewable energy solutions in schools. Money of the Estonian portion of the MF is to be used to finance a program in improving the energy efficiency of public sector buildings and a program in developing low-emissions public transport with an indicative size of 19 million euros in total in 2021 and 21 million euros in 2022.

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