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Central bank governor emphasizes transparency when using EU recovery fund

Governor of the Bank of Estonia Madis Müller.
Governor of the Bank of Estonia Madis Müller. Source: Priit Mürk/ERR

Governor of the Bank of Estonia Madis Müller told ERR one of Estonia's largest fiscal challenges in recovering from the coronavirus economical crisis is the allocation of €1.5 billion in European Union support measures between investment objects.

Estonia is set to receive more than €1.5 billion in funds from the European Union recovery fund, part of the EU long-term budget, over the next three years. The only confirmed project currently known is the development of Tallinn Hospital, a giant hospital complex in Lasnamäe, estimated to cost a total of €340 million.

In July, European heads of state agreed to initiate the recovery fund in order to reinvigorate the European economy after it was hit hard by the coronavirus pandemic. The entire package totals around €750 billion, with €390 billion being meant as direct support grants and the remaining €360 billion coming in the form of loans to facilitate the recovery in member states.

These funds are meant for confirmed projects to be developed in the next three years and have to be used within six years. The majority of the recovery fund will be put in use according to a programme that is still being drawn up in the Ministry of Finance and will be presented to government sometime in fall and a final version will be presented by the end of the year.

The principles of resource allocation have also become unclear in Estonia with the government often amending rules in order to distribute resources, as was the case with the Porto Franco development, which Müller criticized in early-August.

ERR turned to the Bank of Estonia governor Madis Müller on Monday to find out if there is risk that similar cases could turn up with EU recovery resources. He said further allocation of the resources must be thought through and conducted clearly.

"I agree that direct state loans to companies are problematic. The Bank of Estonia has recommended the government support companies by offering sureties. Loan risk and interest rate assessments should be left to commercial banks and other professional creditors," Müller said.

He continued: "But the use of funds received from the European recovery fund is another key question in Estonian finance. The priority is the state's loan policy and getting the budget deficit under control in the coming years. But considering the amounts allocated from the recovery fund, the selection of objects where the state will borrow money to is also very important. They must be as transparent as possible and conducted according to logical and objective principles that will benefit the Estonian state as much as possible. Otherwise, we might invest without solid discussions and the positive effects will not be achieved."

Müller emphasized that there is no need for a committee to discuss the support measure allocation. He said that corresponding international standards already exist, they just have to be followed.

Indrek Kiisler interviewing Madis Müller (left). Source: Priit Mürk/ERR


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Editor: Kristjan Kallaste

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