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The government supports the European Union’s economic recovery plan

11. June 2020 - 0:00

Stenbock House, 11 June 2020 – After the discussion at the cabinet meeting, the government approved Estonia’s positions for the negotiations on the European recovery plan and the European Union budget for 2021–2027. Europe must find a quick and effective way to help overcome the difficulties caused by the corona crisis. The government is ready to participate in the implementation of one-off and time-limited support measures.

According to Prime Minister Jüri Ratas, the aim of the recovery plan is to help member states bring the European economy out of the crisis as quickly as possible and do so in a way that increases investments in the green and digital revolution and supports Europe’s resilience to crises. “The countries of the European Union must react decisively and quickly so that the impact of the crisis on the economy and thus the well-being of people is as small as possible and the recovery from it would be quick,” said Ratas. “Our economy is so closely linked to other Member States that our people’s well-being depends on the well-being of others. For us to do well, Europe must also do well.” The most important markets of Estonian entrepreneurs are located in Europe. Thus, the economic recovery measures in Europe are both directly and indirectly important support for Estonian entrepreneurs and employees,” said the prime minister.

The investments made to revitalise the economy must be forward-looking and help to achieve the European Union’s digital transition, sustainable investment to achieve climate goals, and strengthen the internal market. To do this, the government is ready to consider taking a one-off, exceptional, temporary, and clearly timed loan to finance the recovery plan through the EU budget.

The government does not support the covering of current expenses from the recovery plan. It must also be ensured that Member States do not guarantee each other’s obligations to the EU budget. The distribution of loan repayments in the future must be transparent and predictable for the countries. The government prefers a repayment scheme through a gross national income based contribution.

To finance the EU budget and the recovery facility, the government does not support new sources of European revenue, i.e. new own resources, and prefers to continue funding as before, mainly through national wealth-based contributions. Member States must maintain unanimity in tax matters. In addition, the budgetary burden of countries with below-average living standards should not increase more than that of richer countries.

It is important for Estonia that the European Union has a budget for the new year. In the context of the 2021–2027 budget plan, the government considers it important to support the Member States with additional cohesion policy funding, which will help to support employment, businesses, and the health care system quickly under flexible conditions, if necessary. It is also important to increase funding for businesses and the support of the Rural Development Fund for rural areas and the agricultural sector to overcome the crisis. Harmonisation of direct agricultural support continues to be important for Estonia. The urgent actions needed to relaunch the economy should start this year, with additional funding for the current 2014–2020 budget period.

The government considers that the European recovery plan must be approved by consensus. Legal certainty is also important: the EU’s recovery plan must be in line with the Treaties. The government wants the decision on the financing of the recovery plan to be decided by the plenary of the Riigikogu.

The economic recovery plan must slow down the economic crisis. The European Commission estimates that the EU will decline by 7–16% in 2020, the European Central Bank estimates that the euro area will decline by 5–12%, and the International Monetary Fund estimates that the EU will fall 7.1% and the euro area 7.5%. The Commission forecasts a recession of 6.9% in Estonia in 2020.

The EU heads of state and government will discuss the European Economic Recovery Plan and the next long-term EU budget for 2021–2027 in a video conference next Friday, 19 June. The adoption of the recovery plan and the next long-term budget requires the unanimous support of all EU Member States and the consent of the European Parliament. Member States want to reach an agreement by the end of next month.