I am presenting the 2025 state budget bill to the Riigikogu. With the 2025 budget and the related bills, we will, as a nation, place our finances on solid footing, after having drifted through uncertain waters. We are making difficult budgetary decisions now to ensure that the future will be easier.

In short, we are fixing things together: our defense will be secure and the budget efficient. Certainty leads to growth and that is the goal of our actions – certainty and growth.

Starting with the most important: Estonia will establish a plan to ensure robust national defense for next year and the years to come. A strong increase in defense spending will occur and a plan will be put in place to procure capabilities that provide confidence not only among ourselves and our allies but also send a clear message to potential adversaries that it is not worth testing our resolve.

The necessary acquisitions for defense and broader security will be the largest in the coming years. The total volume of the military defense sector from 2025 to 2028 will amount to €5.6 billion, to which we added another €1.6 billion for ammunition purchases during the state budget strategy negotiations, covering expenditures through 2031. Additionally, we will invest another €219 million in comprehensive national defense over the next four years. These billions for ammunition and hundreds of millions for internal security are to ensure readiness even against hybrid threats.

This is a significant sum of money. Every person in Estonia contributes to defense – from bakers to bankers, from hipsters to islanders. We deeply value and appreciate each person's contribution, however small, in protecting all that we share together. I ask everyone to judge and use this contribution wisely, gratefully and efficiently.

Our budgetary policy will also be put in order. Had we done nothing, Greece might have used distant Estonia as a cautionary tale as opposed to the other way around. But now, both countries have either resolved their issues or are on the path to recovery. If we had done nothing, living on debt would have spiraled out of control, like a party in a dormitory where no one remembers what day it is, what they're celebrating or who has an exam tomorrow.

To bring our budget in order, we will save more than €1 billion in public expenditures over the next four years – specifically €1.4 billion, considering decisions made earlier. Sobering, indeed. Thanks to these decisions, the 2025 budget deficit is projected to decrease to 3 percent of GDP or lower. The savings in interest expenses resulting from deficit reduction will be approximately €200 million over the next four years.

Moreover, this is not the end – our review of the state's efficiency will continue. Our aim should be a nimble, streamlined, automatic and quick system with minimal bureaucratic friction and lower costs – both in government, as well as in foundations and municipalities. With local elections coming up next year, it will pay to consider, when electing municipality and city leaders, their ability to run a tight ship, next to preaching high-sounding ideas.

The tax "festival" will also come to an end. A broad-based defense tax will be implemented to cover security expenses. This tax is as broad as security itself. Security affects everyone, and so must its funding. No part of society could shoulder this alone, but together we can manage. It's important to remember that while we are NATO, we are not all of NATO. For example, the planes that protect our airspace were purchased with the contributions of people from other countries. We provide security to our allies, and they provide it to us. Together.

The defense tax is specifically for defense and will be temporary. According to forecasts, the broad-based defense tax will bring €2.47 billion into the state budget between 2025 and 2028. For comparison, military defense spending over the same period will amount to €5.6 billion, with additional investments in internal security. After the defense tax decision, the government will maintain tax stability.

Once defense needs and budget-saving plans are in place, the quarterly debates that have created uncertainty among the public and in the economy – regarding which new tax might be introduced, from congestion charges to sugar taxes – will end. Instead, people will know that they can make their proposals during the 2027 Riigikogu elections, after which the newly formed government will make the next set of decisions. For ideas concerning local affairs, there will be the opportunity to seek a mandate during the October 2025 local elections.

The defense tax is temporary and will end by the close of 2028. The state, which through the decisions made this year, will get its finances in order, make cuts over three years and become much more efficient, will be able to fund future defense procurements within standard budget frameworks.

Those currently predicting the continuation of the defense tax are creating a self-fulfilling prophecy. Therefore, I urge against this mistake and for the agreement to be respected within society – the defense tax is for defense, it is temporary and further cuts will be necessary to get the country's finances back on track.

One could try to be clever here and argue that certainty is expensive. It is, but uncertainty is even more costly. Businesses and children are not born out of uncertainty. Would you build a home on unstable ground? Likely not. /.../

Creating certainty is also a matter of leadership style and decision-making. The responsibility of governance lies with those in office, whether in the Riigikogu, the government or any other role. The government's task is to maintain order and ensure certainty for tomorrow, while the opposition's responsibility is to provide oversight of these actions.

Our door is open to good ideas and smart solutions, regardless of who presents them. The upcoming [political] season will show whether this open channel is used to propose solutions or primarily to promote one's own first and family name, as well as party affiliation. This will also help the people of Estonia distinguish between meaningful ideas and empty words.

As President Alar Karis said on September 14, 2024: "It is clear that endless debate and discussion cannot continue. I remind you that we've been talking about taxes for almost a year. The public is probably waiting for action. Something needs to be done, and if something goes a little wrong, we should acknowledge that and try to fix it. But constant debate and discussion on a topic, like taxes, only exhausts people further."

I fully agree with the president. The debate has been long and comprehensive. I would like to thank everyone who contributed their input – this discussion allowed us to thoroughly consider all the options. It was more public, nuanced and inclusive than any other format would have allowed. I thank all the entrepreneurs, experts, journalists and policymakers who helped bring clarity to this discussion. We were all participants in this "festival." For now, however, the tax festival is over.

The end of one thing is always the beginning of something new. For the public sector, businesses and the people of Estonia, the next chapter will be the start of an economic growth festival. There is passion and potential in this area. We have the resources and opportunities. Everyone holds a front-row ticket, and I look forward to seeing enthusiastic participation.

A few words to kick this off: starting with the narrower, but priority, defense sector, which not only ensures security but also contributes significantly to our economy.

A new industrial sector is emerging from the defense field, where the country's defense potential meets economic growth opportunities. We plan to double the size of the defense industry fund to €100 million. Thanks to this, over the next four years, Estonia will implement the largest industrial growth plan in its history.

Additionally, we have committed to allocate 0.25 percent of our GDP annually, approximately €100 million, to assist Ukraine. Over four years, this amounts to €400 million. This presents an opportunity for our defense industries to produce and develop the tools Ukraine needs to fight for the freedom of all Europe, including our own, in its war against Russia.

The goal and ceiling of growth in the defense sector is not just the volume of military aid Estonia provides to Ukraine; rather, it serves as a launching pad to replicate the success we've seen in the IT sector, unlocking potential similar to the booming energy sector and the refinement of materials.

Looking at broader needs, we are also reforming the public procurement law. In the defense sector, we will implement offset principles in purchasing ammunition, aiming to create maintenance, development and service centers here in Estonia – companies that provide skilled jobs. In the coming years, defense investments will direct nearly €500 million into infrastructure, providing significant work for our businesses right here in Estonia.

Broader steps are necessary to foster growth. Regarding the budget, this includes the faster and smarter use of EU funds. Whether it's the accelerated construction of Rail Baltica infrastructure, where we will direct two-thirds of our carbon credit sales revenue – about €270 million over four years – or investing €50 million from carbon credit sales into building renovations. From the Ministry of Climate's investment budget, 70 percent will be allocated to road construction, 17 percent to Rail Baltica development and 5 percent to the IT sector.

The goal of the major investment attraction plan is to support the steps of Estonian entrepreneurs, or those wanting to establish here, in making significant new investments that will result in increased prosperity across the country.

For the period 2025-2028, we have allocated €160 million, which will enable the financing of approximately two projects per year, totaling eight major investments. Our energy choices are based on the principle that the more clean energy we produce at a lower cost, the better it is for every household and business.

Therefore, the Ministry of Climate will continue to invest in promoting the adoption of renewable energy and increasing the climate resilience of electrical grids. The ability to attract skilled labor, as well as the capability to quickly and efficiently verify backgrounds as a partner to businesses, is another aspect of the capacities we can create through budgetary choices.

The growth potential spans from energy to maritime industries. The state does not manage companies or business decisions – there is even a nomination committee for state-owned enterprises to appoint the government's representative to the supervisory board – but we can certainly make business operations simpler and processes faster. From planning to permits, everything can and must be done more quickly.

In terms of the budget, we have made good use of our resources when we consider such priorities. However, the future is not just about cost-cutting. Even in tight circumstances, important decisions can still be made. For example, we are directing €74 million towards strengthening electrical grids and building new connection capacities and €50 million for comprehensive solutions to the production and adoption of green hydrogen.

Additionally, we will proceed with long-awaited projects, such as the renovation of the Art Hall building on Freedom Square (€9.9 million) and the completion of the National Library renovation (€17.7 million). The average old-age pension will continue to grow in 2025, reaching €814, and we will increase long-stagnant support for children and working-age individuals with severe disabilities. The transition to Estonian-language education will also continue, funded by €61.8 million.

I would like to specifically thank previous governments and the Riigikogu for their efforts in setting things right – your work has not gone unnoticed or unappreciated. Thank you to all of you.

The only regret I have is the decision made in 2017 to loosen budgetary rules. Even back then, experts from the Bank of Estonia warned that the short-term gains from this decision would be far outweighed by future harm. Today, we are dealing with the consequences of that choice, but we are not discouraged nor hiding from them. Through cost-saving measures, we have reduced the projected 2025 budget deficit from 4.4 percent to 3 percent of GDP and in the state budget strategy discussions, we have agreed on a path to reach 1.4 percent of GDP.

I also want to thank the Ministry of Finance for responding to the public's desire for a more detailed overview of the budget. The first step on this path is providing transparency on how money is used in various sectors and institutions. Some of this information is in the [state budget bill's] explanatory memo and part of it is available online via a separate dashboard. This is an important step forward and I am sure we will receive valuable feedback from the public to help the Ministry of Finance improve even further next year.

In closing, I would like to thank the ministers with whom I worked to assemble an effective budget. In our coalition, there are three parties, each with their own vision of how to improve life in Estonia. Together, we have created the 2025 state budget, with projected revenues of €17.7 billion and expenditures of €18.2 billion.

Defense spending will amount to 3.3 percent of GDP. According to preliminary estimates, this places us among NATO's top three countries in terms of defense spending, behind Poland and ahead of the United States. With these budget decisions, we are securing the safety of our people and our country, investing in strengthening the economy and significantly reducing state expenditures.

There are many difficult decisions, but they are all made for a better future. I ask the Riigikogu to support the 2025 state budget proposed by the government, which works to turn certainty into growth.

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