PM: Defense spending rise only unexpected for those not monitoring security situation

In an interview with ERR, Estonian Prime Minister Kristen Michal (Reform) said that the need to raise defense spending should not come as a surprise to anyone other than those who do not follow the security situation.
Your proposal for a five percent increase in defense spending actually came as quite a surprise on Tuesday. How did it come about so suddenly?
It can probably be unexpected for those who are not monitoring the security situation. The security situation is serious, our neighbor is a threat to the whole of Europe, to the Baltics, and to the Nordic countries. And the need to increase the various defense capabilities of the Estonian state has long been spoken about. NATO has new defense capability goals, which have been discussed since last fall. So, this growth and the need to set a higher target cannot be a surprise. Is it now precisely five percent that has been discussed? I would say it is fair to suggest that if our main security ally, the United States, is giving out that message, and our neighbors adopt same target, then given that Estonia is among the leaders in NATO in terms of defense contributions, and we are also a neighbor of Russia and know the risks, then I think it is also fair for us to set a higher target.
What happens now? Will discussions begin in Estonia or further afield?
These discussions are of course taking place across Europe and across NATO. The European Council is approaching in February, where we will discuss defense issues, and the NATO summit in The Hague is also coming up, around Midsummer. These are the places where the discussions will happen regarding the exact costs and their extent are. I foresee that there will certainly be a debate on a central European defense fund, which I think the Baltic countries will definitely see as one of the ways to increase their defense spending, especially given that we are in this buffer here on the eastern border.
And another option that we are certainly discussing is the European funding rules, that is to say, borrowing for defense spending. Perhaps there is an analogy with the Coronavirus period, when it was possible to make certain investments that were not then factored into the increase in debt. Because let's be honest, these are the ways defense spending can be increased in a manageable way, and those countries that have to do it will get it done.
There is already talk today about whether taxes should perhaps be raised again to obtain the required funds.
I do not think that we should take tax increases as a subject for debate at the moment. I do not think there is room for that and we ourselves have taken the position that the tax moratorium will be in force until 2027. So, I therefore suggest we look at core funding from the European Union. I would also suggest that we evaluate it when the EU funding rules change, so that it is also possible to borrow a way that fits within our own budgetary constraints.
What else could contribute to a five percent increase in defense spending? Growth in the defense industry, for instance?
In Estonia, an increase in defense investment certainly means an opportunity for defense industry growth. This means that Estonian companies in different parts of Estonia will be able to create new jobs and create products and services that they can later export. After all, quite a number of very impressive defense companies have already emerged and are operating here in Estonia, in Ukraine and in the wider world.
On Tuesday, Kristina Kallas, the leader of Eesti 200, complained that the five percent had not yet been negotiated with the coalition partners.
Defense objectives or the increase in defense capabilities has been discussed in various government cabinet meetings, both among the security cabinet regular cabinets. It is more of an ongoing issue. Of course, the five percent target is not quite what we have jointly agreed on in the government. However, I think that the partners will go along with this initiative, because they also understand the situation we are in, what our neighbor is like and how much effort we have to make. So with the increase in defense investments, I don't think there will be that much disagreement between the partners.
Why five percent, why not six percent for example?
Five percent is due to the fact that the new President of the United States has set a target of five percent in NATO. Poland, Latvia, Lithuania have set themselves a similar target. So, I think that, given the geography and the region that we are in and capability needs that we have, that would be a rough target. Of course, when something is in place will depend a little on how the defense planners are able to implement some of those tenders. For us, this still means, in practice, that some defense tenders will have to be brought forward in order to get something from them sooner.
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Editor: Aleksander Krjukov, Michael Cole