Estonia's contribution to EU budget to increase from 2021

Money. Source: Siim Lõvi/ERR

Estonia's contribution to the European Union's long-term budget could increase from €200 million to €320 million from 2021 due mostly to the United Kingdom leaving the European Union and Estonia's faster than expected economic growth.

In the current budget period for the Multiannual Financial Framework (MFF), which spans 2014 to 2020, Estonia pays an average of €200 million annually into the European Union's budget, which is equal to 0.86 percent of gross national income (GNI).

But from the next budget period, 2021 to 2027, this could increase to 1.06 percent of GNI, or approximately €320 million annually. The figures released by the European Commission can be found here

ERR reported on Monday that agricultural subsidies and funding from the cohesion fund may also decrease from 1.03 percent and 2.32 percent of GNI to 0.79 percent and 1.39 percent, respectively.

Despite this, however, Estonia will still receive significantly more in funding than it pays out.

"The reduction of [subsidies] is primarily due to the growth of the welfare and size of the Estonian economy. The amount of direct agricultural subsidies received by Estonia would increase [otherwise] at 2018 prices by 12 percent, and at current prices by almost 30 percent," the Ministry of Finance explained to ERR.

The average contribution to the European budget will increase in the next budget period, excluding the U.K., from 0.81 to 0.90 percent of GNI. At the same time, "net payers" who contribute more to the EU budget than they receive back, on average pay a smaller percentage of their GNI. Therefore, contributions of the largest payer, Germany, should increase from its current 0.75 percent to 0.88 percent of GNI in the next budget period. In comparison increases for other countries such as, the Netherlands will be 0.67 percent and 0.83 percent, Austria 0.79 percent to 0.91 percent, Sweden from 0.71 percent and 0.85 percent, and Denmark from 0.78 percent to 0.88 percent.

The European Commission, which has proposed the new budget plan, says the increase in budget contributions is needed due to inflation, economic growth, Brexit, and reinforcing the European Union's priority policies.

The Commission is also calling on member states not to attach excessive importance to the direct amounts of contributions and payments, since these calculations do not take into account the indirect economic benefits of EU membership. 

In Estonia's case, the European Commission's figures show, the benefit is on average €2.74 billion per year in 2018 prices in the next budget period, or 8.85 percent of Estonian GNI. In the EU as a whole, the economic benefit of the single market is estimated to be an average of 5.92 percent of GNI.

Adviser to the Fiscal Policy Department at the Ministry of Finance Erik Marksoo told ERR there is still time for countries to contribute their ideas into the European Commission's proposal, which has now been the subject of a statistical review.

Under the Commission's proposed plans, there will be an increase for all countries, and when GNI is compared, richer countries pay the same as countries which fall below the EU average. 

The European Commission first presented its budget proposal last summer, but it must now be approved by member states. Negotiations between government representatives have been ongoing for 18 months, but serious discussion among the heads of state and governments has just begun.

The first major substantive debate on the proposal for a new budgetary framework will be held at the December European Council meeting.


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Editor: Helen Wright

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