European Commission endorses €969.3 million recovery fund for Estonia

NATO battle group's military parade at Tapa Army Base. April 20, 2017.
NATO battle group's military parade at Tapa Army Base. April 20, 2017.

European Commission president Ursula von der Leyen announced an allocation of €969.3 million from the European Union's recovery and resilience plan to Estonia on Tuesday, which should aid the country in fighting the coronavirus crisis and revitalizing the economy. The sum can end up being smaller since Estonia's economy has recovered faster than expected.

"Our experience with the COVID-19 pandemic has shown how important a strong healthcare system is. I am proud that NextGenerationEU will help Estonia achieve that goal. The plan allows Estonia to digitalize its economy and society even more. Investments into energy efficiency and sustainable mobility will accelerate Estonia's transition to a green economy," von der Leyen said.

The recovery and resilience plan is the main NextGenerationEU measure, which will see allocations of up to €800 million to European countries to support investments and reforms.

According to the European Commission, decision was made while assessing if the proposed investments and reforms would support green and digital transitions, help solve problems and support growth potential, the creation of jobs and economic and social resilience.

The plan supports green and digital transitions in Estonia

The Estonian plan's contribution to the green transition amounts to 42 percent of its total allocation of €969.3 million and is built on three pillars: green transition in enterprises, sustainable energy and energy efficiency, and sustainable transport.

The plan will see oil shale phased out of the energy sector, which will be laid down in a national development plan for the energy sector. The implementation of the plan is also expected to help introduce green hydrogen technologies in the entire value chain from production to consumption.

Increased sustainability in transport is planned to be achieved through the creation of new connections between various modes of sustainable transport, with a focus on rail and active modes of transport such as cycling.

The Estonian plan's contribution to the digital transition amounts to 21.5 percent of its total allocation and focuses on two main priorities: the digital transformation of enterprises and the further modernization of public services. 

The plan includes the creation of an investment scheme that should provide financial support to companies on different aspects of the digital transformation, from research and development and the development of strategies to the take-up of technologies. 

The plan also addresses the key issue of digital skills, through measures aiming at awareness-raising for managers of small- and medium-sized enterprises and support for the upskilling and retraining of information and communication technology specialists.

Building on Estonia's position as a frontrunner in the digitalization of public services, the plan includes a series of measures aiming at giving a new impetus to the digital transformation of public administration. The proposed reforms and investments include the migration of part of the government's information systems to a secure cloud, the development of new digital solutions ensuring a simplified and more efficient delivery of public services and a reorganization of the management of information systems and data held by public institutions.

An investment supporting the deployment of very-high capacity broadband networks in areas of market failure is also expected to reduce the digital divide and ensure that all citizens can take advantage of advancements in the delivery of digital public services in Estonia.

Strengthening the resilience of Estonia's economic and social situation

The plan is expected to contribute towards the improvement of macro-economic performance through the mitigation of the economic and social impact of the COVID-19 crisis, while promoting Estonia's export competitiveness, innovation and entrepreneurship, through digital and green solutions, thus supporting smart, sustainable and inclusive growth.

The goals of social and territorial cohesion are addressed with measures aiming at making public services more accessible through digitalization, by improving internet connectivity in particular in rural areas, thus reducing the digital divide, by improving transportation connectivity, as well as by the creation of sustainable jobs and skills in different parts of Estonia.

Social cohesion is also expected to be strengthened by measures on the unemployment benefit and measures to reduce the gender pay gap.

The Estonian plan includes measures aimed at strengthening the country's health, economic, social and institutional resilience. In particular, the plan focuses directly on improving the resilience and accessibility of the healthcare system, and it includes measures aimed at improving access to social services in Estonia.

Supporting investment and reform projects

The plan includes reforms and investments in strengthening primary care, addressing health workforce shortages, modernizing e-health governance and improving health infrastructure should increase the accessibility and resilience of the health care system. 

The access to social services is expected to be improved by measures on long-term care, including those modernizing and simplifying the support system for children with higher care needs, and by the action plan on the integration of social and healthcare services. 

The measures to reduce the gender pay gap should contribute to social cohesion. The investment in support for young people to gain work experience and improve their skills is expected to contribute to addressing skills shortages, as well as alleviating youth unemployment. 

The extension of the duration of the unemployment benefit by 60 days in case of adverse labor market conditions contributes to some extent to strengthening the social safety net. The reforms and investments in the health, social and digital areas should also contribute to reducing regional disparities.

Money could arrive in the end of 2021

The European Council now has four weeks to approve the Commission's proposal, after which the Commission will have two months to make the transfer. If the plan is approved in the European Council, Estonia could be paid 13 percent of its total allocation, which is €126 million.

The Commission will give its approval for transactions based on intermediate and final targets in the proposed recovery and resilience plan, which reflect progress in implementing investment and reforms.


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Editor: Kristjan Kallaste

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