SDE, Isamaa leaders question Reform's decisions on EU-funded major projects

SDE leader Lauri Läänemets (left) and his Isamaa counterpart Helir-Valdor Seeder, together with Prime MInister Kaja Kallas (Reform) at the signing of the coalition agreement in July.
SDE leader Lauri Läänemets (left) and his Isamaa counterpart Helir-Valdor Seeder, together with Prime MInister Kaja Kallas (Reform) at the signing of the coalition agreement in July. Source: Priit Mürk/ERR

Decisions made by the Reform Party in late June which involved scrapping three major infrastructure projects which would have utilized European Union recovery funds are back on the table now Reform is in office with Isamaa and the Social Democrats (SDE).

The three projects, a planned hospital for Tallinn, medivac helicopters and the extension of the rail network to Haapsalu, were struck off at the end of June, when Reform was in office in isolation.

The EU funding in question was drawn up in response to the pandemic, while the situation has moved on since then.

While this frees up around €120 million for other infrastructure projects seen as key in the changed security and energy situation, SDE and Isamaa's leaders are questioning the extent to which the decision was political, and also its legal grounds.

Of the three scrapped projects, the Haapsalu rail extension – Haapsalu was decades ago connected by rail – seems the most likely to potentially be resurrected and receives the blessing of both SDE and Isamaa's leadership, while two other major projects which EU funding has also been earmarked for, namely the Rail Baltica Ülemiste terminal and the Old City harbor tram extension, remain in place.

Finance Minister Keit Pentus-Rosimannus (Reform) says she the previous government decided to exclude the railway from the recovery plan, adding that legal disputes on the matter are not on the table.

She said: "As of now, it is up to the current government to decide how and with what we fulfill that part of the recovery plan which can be decided additionally. This concerns a little over €120 million."

However, junior coalition partners Isamaa and the Social Democrats (SDE) are calling for their say on a decision made before they entered office, but after the Center Party. Both parties' leaders say at least one of the two scrapped projects, the Haapsalu rail extension, is important for the region.

SDE leader Lauri Läänemets said: "We definitely support the Haapsalu railway,"noting that any leftover funds once the EU recovery funds have been used should be put towards that purpose.

As to the Tallinn Hospital, he said: "I think that the Tallinn hospital actually needs to be solved in a different way. We also need to cover the price increases and the money has to come from somewhere. Otherwise, the question is what other objects will be left out."

Triin Tomingas, adviser at the Ministry of Finance, said that from a purely legal point of view, not only her minister but also Läänemets and Isamaa's leader, Helir-Valdor Seeder, are all right on the issue as such.

The decision to remove three objects from the rehabilitation plan was made at a government session and not by the cabinet.

Reform was in office in isolation as minority government between June 3 and July 19, while the Tallinn Hospital was seen as a pet project of Reform's erstwhile coalition partner, Center.

This means the decision has legal weight, she said. 

However, it is also the case that following informal negotiations with the European Commission, a new recovery plan will emerge, on which the government has to decide.

"Then this plan will be officially submitted to the European Commission for approval and then to the European Council for the same," Tomingas said.

It is theoretically be possible to reverse Reform's decision made in summer, she added, but the message this would send might be concerning.

 "We simply do not give the impression of a serious partner if our decisions change over such a short time perspective," Tomingas added.

Both Läänemets and Seeder say that keeping the Haapsalu in the recoery plan requires a political agreement, which will not be forthcoming, since Reform opposes it.

As with halting major projects which use EU funds, adding new projects also requires long negotiations with the European Commission. 

Discussions about the ongoing cost of things promise to be even more complicated, while, so far, the commission has said that they do not want to provide any additional money for pre-agreed work.

Tomingas said: "As of today, it cannot be confirmed 100 percent whether the commission will agree to cover the price increases, but we will definitely try."

In the case of two other projects, a tram extension and the Ülemiste Rail Baltica terminal, additional money is definitely required, as there is no way to delay these projects.

Helir Valdor Seeder said of the June 29 decision that: "It was certainly not right and reasonable to make such a weighty decision at a time when a whole series of ministers were out of office," noting the legal aspect by which Haapsalu city authorities appealed the decision, but were met with a ruling from the Tallinn Administrative Court that the government had not actually decided to change the recovery plan, but simply indicated which objects it would be happy to remove from the plan.

Nonetheless, Seeder called the decision political, with the hospital decision particularly messy and difficult to retrieve.

The €120 million the government would recoup from scrapping the rail extension, hospital and helicopter plans work on the bases of:

    • €863 in recovery funds obtained from the EU (down from the original €982 million, after the Estonian economy fared better than forecast).
    • €360 million saved by erasing the hospital, helicopters and rail plan.
    • €56 million more will be spent on unexpected higher costs for those projects still in place, namely the Old Town harbor tram line and the Ülemiste terminal, along with further increased costs which lead to the government left with €185 million.
    • An additional decision to include the Viljandi Hospital in the recovery plan, of a little over €60 million, leaves about €120 million left, the finance minister noted.

 All ministries have sent their proposals to re-distribute this leftover fund, but, the finance minister said: "Of course, thoughts and ideas are almost four times more than €120 million."

 These projects include renewing 13,000 ha of bog-land environment ministry) and a digital tool aimed at closing the gender pay-gap (social affairs), and a new air surveillance radar (economic affairs ministry) has been saying for years that should be acquired in Western Estonia and are all subject to discussions during the state budget negotiation process, due to being in September.

Läänemets noted that SDE favor contributing to rural areas and economic development.

However, again a difference emerges with Reform's vision. Finance minister Pentus-Rosimannus says that since Covid has receded as the focus of recovery, a new EU program, called RePowerEU, should be utilized, mainly in decoupling from Russian energy sources, meaning energy projects, such as renewables in Ida-Viru County, should be a destination.


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Editor: Andrew Whyte

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