The leaders of Estonia's coalition parties are unanimous in saying that the country's defense capabilities have to be increased given the current security situation, and that NATO's defense plans provide for continued investment.

"Whether it will eventually come to five percent, 4.7 percent or 6.2 percent is still a matter of calculation. The percentage itself is not the main issue here. The main issue is investing in defense," said Eesti 200 Chair and Minister of Education and Research Kristina Kallas.

"Certainly, this has to be taken into account in the debate on the state budget strategy. It is a lot of money. It is €200 to €600 million a year. We will discuss what this means in relation to the state budget strategy, which year, and at what speed we can move towards this five percent," said Prime Minister Kristen Michal (Reform).

The government is now trying to identify where this extra money might come from. The intention is certainly to move ahead with public sector cuts, but that won't pay for everything.

"We can't do it through cutbacks, because the size is just that – €600 million a year. We cannot put the Estonian state on pause. We also cannot go on taxing the average middle-income Estonian family. Rather, we are at the point where Estonia's fiscal fundamentals will start to change. That means it's going to be on credit. Whether that is through the European Union or via a loan taken out by Estonia, which we are going to use to contribute to national defense," explained Minister of the Interior Lauri Läänemets (SDE).

To take out such a loan, amendments would have to be made to the Maastricht criteria for borrowing funds, which currently require a country's budget deficit to be no higher than three percent of gross domestic product (GDP). The Estonian government believes defense spending should be excluded from those calculations.

"Otherwise, it is so illogical, because if you are investing in defense, which is required by the whole of the European Union, and at the same time you are going through an excessive deficit procedure. It's not entirely balanced. So these debates are already going on in Europe. In February we have a European Council meeting on defense issues, and so by the summer we probably will be wiser," Michal said.

There has been talk in the past of Estonian receiving an EU derogation from the Maastricht criteria. However, it has generally been concluded that asking for one would lead nowhere. Kristina Kallas believes the current situation is different.

"If Estonia is going to ask for a derogation from the budgetary rules for this, in order to deal with not containing the growth of its other fixed costs, that would be another reason. However, if the reason is that the whole of Europe, in fact the 32 NATO member states, have to deal with their own fixed costs, then it is a matter for all of us," Kallas said.

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