President of the European Commission Ursula von der Leyen has proposed relaxing rules related to debt. Is it already clear how much of defense spending can be excluded when applying these rules? Do we have more information on this?

We are still discussing the precise details, but it is clear that by Thursday that the budgetary rules will be relaxed to allow for an increase in defense spending. This is very important for Estonia, as we have set a target of five percent of GDP for our defense spending. This means we can deliver on our plans to strengthen our defense capabilities and do it quickly.

It is also the case that, if it is said that Member States will be given more freedom to increase defense spending, then no country will be able to claim they cannot increase their defense budget by citing budgetary rules. It is therefore up to each country to decide at what pace and how quickly it can do so, based on its own objectives and capabilities.

This year, Estonia's defense spending is about 3.5 percent of GDP, and you have said it could rise to five percent in the coming years. Does this mean that this 1.5 percent increase would be outside the budgetary rules?

Yes, we have a target of five percent of GDP for defense spending, and I've said that. Now it all depends on how quickly we can get the necessary equipment and capabilities. The development of defense capabilities goes hand in hand with NATO's objectives, and in a few weeks the Minister of Defense (Hanno Pevkur – ed.) will present a concrete plan for this. This will be discussed in the cabinet, where we will decide on how and at what pace to move towards the five percent.

This proposal will, ultimately be up to the Member States to implement. At the same time, we know that there are still countries in the European Union that are not very concerned about the war in Ukraine or are indifferent to it. What do you think this process will look like? Is there likely to be any resistance or delay?

It is clear from my experience so far – and I would like to remind you that the first Defense Council in European history took place recently –  that even those countries that have been rather critical of aid to Ukraine supported the change in the budgetary rules to allow for greater and faster defense investments.

Discussions and negotiations among officials are still ongoing, so let's see how the process develops.

The assumption is that we should still reach the point where countries are given a free hand to make additional defense investments. And let's face it, the timing is such that the budgetary rules will probably have to be flexible in order to meet security and defense needs.

This €150 billion, which is part of this proposal, where is that money coming from?

The Commission can itself spell out exactly how this funding will be used. They have indicated that a little under €100 billion is unused Recovery and Resilience Fund (RRF) money. That may be one possible source, but there could also be others. The European Commission itself will make these proposals about how to channel the funds. One of the biggest potential sources is likely to be the RRF.

The Polish Defense Minister has already said that the Member States should not take out loans, but that the money ought to come from the common budget of the European Union. He is referring to the same amount, around €800 billion. Is this really a possibility or just wishful thinking?

I would say that, given the security situation and the fact that Europe has to make a major effort, it is difficult to imagine that six months ago anyone would have imagined Europe would change its budgetary rules so dramatically to make defense investment would become possible. So we are discussing all options, including, if necessary, the use of collective borrowing, and whether countries support that in order to support the growth of the defense industry and to increase defense capabilities.

But we are starting now with the solutions that have been proposed by the Commission and jointly by the countries, which will give countries the freedom to invest more quickly and to buy the equipment they need and to increase their defense capabilities. From there, we will move forward step by step. Thursday's debate is intended to discuss those details.

In principle, is Estonia in favor of a common defense loan?

Yes, Estonia has supported a common approach to defense, but there are also countries that do not support it. It is a great opportunity for us to have a free hand, because if you look at defense investment, last year Estonia was the second largest contributor per capita to defense in NATO. We also have one of the lowest debt burdens in the European Union, which gives us some peace of mind – we have the capacity to buy arms quickly if necessary. Our aim is to ensure that our own defense is always secure, and we will do our utmost to achieve the necessary level of defense capabilities.

Should we be concerned about the current debt burden or would that be premature? During the Coronavirus pandemic, the European Union borrowed, the United States borrowed and, in fact, all the major countries of the world took out loans that contributed to inflation. Is that something we should be worried about now, or is it more important that the money is being channeled into arms and that we can help Ukraine?

I would say that security and independence are a priority for a small country like Estonia, which knows its enemy Russia very well. I believe that the people of Estonia, and the people of Europe, understand that security has to be guaranteed. A prosperous and freedom-loving region cannot take any other route toward this goal. That is what has to be guaranteed.

It is also important to understand that spiraling inflation is a wider problem in the world. If, during certain periods, the price of money was practically zero, then in many cases, problems were solved simply with more money – by 'printing' money. Today, the price of money is not at zero, so any loans and actions we take have to be thought through carefully. If funds are channeled into defense and capacity building, I believe these are good investments.

Member of the European Parliament Riho Terras (Isamaa) said on Tuesday morning that the U.S. has betrayed us. Latvian politicians are also saying that (NATO's) Article 5 no longer applies. When some politicians are handed the microphone, often, all they say is that we are next.

Riho Terras may understand that high ratings suit Isamaa at the moment and that it is easy to generate panic in the run-up to local elections. However, I think Isamaa should refrain from such rhetoric.

Have the Brits presented Estonia with any kind of wish list regarding Estonia's capabilities and the desire to participate in peacekeeping in Ukraine?

We have the outlines of the plans of all our major allies as they have presented them to the other countries. I think we will also be able to discuss these plans in some form of council on Thursday. I assume that these plans are in line with what we also discussed in Ukraine with President Volodymyr Zelenskyy. We discussed it again yesterday, including the role of Europe in peacekeeping, the relationship between Europe and the United States, and the relationship between money, arms and other capabilities.

This will first be discussed at the level of the capitals, where the relevant planning will be coordinated. Prior to that, the defense chiefs will meet and plan the activities of the defense forces. It is only then that the details will be worked out.

The reason I asked this is because there is a fear that British soldiers stationed in Tapa might be taken to Ukraine.

Our policy has been, and we have said this to the British, that additional Ukrainian capabilities cannot come at the expense of the eastern flank. This principle has also been kept at the forefront of European discussions.

---

Follow ERR News on Facebook and Twitter and never miss an update!