Economic growth means EU refinancing may fall short of one billion euros

Berlaymont Building, headquarters of the European Commission, in Brussels.
Berlaymont Building, headquarters of the European Commission, in Brussels. Source: Andersen Pecorone/wikimedia commons

While Estonia was set to receive nearly one billion euros in Connecting Europe Facility (CEF) funds as of the end of last year, strong economic growth may see that figure reduced, ETV news show 'Aktuaalne kaamera' (AK) reported Monday night. Finance minister Keit Pentus-Rosimannus says that this should not mean funding for a proposed central hospital in Tallinn, one of the main objects the aid was earmarked for, is in jeopardy.

As of December last year, Estonia's support needs were estimated at €969.52 million, of which nearly €760 million is confirmed, but higher-than-forecast economic growth may mean the original target figure will be revised downwards.

Triin Tomingas, Strategy Adviser at the Ministry of Finance told AK that: "In all likelihood, Estonia's support will be smaller because our economy has withstood the crisis better than expected."

"We reached an agreement in principle on the content of the recovery plan with the European Commission over the weekend. Final steps are currently being taken to conclude the negotiations and document, and we look forward to formally approving the plan in the coming weeks," she continued.

"Specifically, we currently have the certainty that we will get 70 percent, or €759.7 million," Tomingas added. 

The remaining 30 percent will be finally calculated in June next year, on the basis of recent GDP data.

The CEF support is provided to all 27 member states in two phases, 70 percent, based on GDP per capita, population and unemployment for the period 2015-2019, followed by the remaining 30 percent, based on real GDP growth in 2020.

Twenty percent of the total recovery facility has to be channeled into digital revolution aspects, and 37 percent into projects relating to the green turn.

These investments will total €600 million, i.e. well over half the sum, whatever it ends up being.

Finance minister: We want to start many of the projects this year

Finance minister Keit Pentus-Rosumannus (Reform) told AK that: "Since the size of the recovery facility depends on how well the economy of one country or another is doing, it ends up being such a two-sided coin that, on the one hand, we are pleased that we have been growing fast, even though that means that the aid directly intended to help us out of the crisis is also in fact smaller."

"The ultimate, final size of the recovery facility will be clear next summer, which will be a bit tough for each member state, as there is a lot of investment and a lot of programs that we would definitely want to start already this year," Pentus-Rosimannus continued.

One such project is the proposed Tallinn Hospital due to be built close to the Song Festival Grounds (Lauluväljak) which is estimated at €520 million and which Tallinn city government hopes to get €280 million of from the state. Tallinn is putting up €100 million of the total.

If the proposed CEF aid ends up smaller than originally expected, this may mean additional funding has to be found from elsewhere since, Pentus-Rosimannus said, the drop in aid will not come at the expense of the hospital's construction.

€280 million of CEF money is hoped for that purpose, she added.

The CEF is an EU fund for infrastructure investments across the union in transport, energy and digital projects which aim at a greater connectivity between EU member states over the period 2014–2020, and involves grants, financial guarantees and project bonds.

The Climate, Infrastructure and Environment Executive Agency now oversees it.

While the funds have been particularly in focus since the arrival of the pandemic, the European Central Bank has since 2014 lent vast sums to the member states' banks in what UK financial daily the Financial Times called historically unprecedented interventions to boost the economy.

The reforms, investments and measures planned in the recovery plan must be implemented by August 2026, ERR reports. Payments will be made by the European Commission up to twice a year, depending on the results achieved.


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Editor: Andrew Whyte

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