Discussions continue within the European Union on how to redirect funds originally intended for the green or digital transition, as well as transportation investments, toward the defense sector.

Triin Tomingas from the Ministry of Finance told ERR that one specific proposal under discussion in the EU is to allocate €1 billion from the Cohesion Fund. This is money that was designated for Estonia in the current budget period but has not yet been utilized.

So far, Estonia has used about 70 percent of its Cohesion Fund allocation, but nearly €1 billion of the €3.4 billion total remains without specific contracts. According to Tomingas, Cohesion Fund money can be used until the end of 2029.

"The areas where we still see unspent [Cohesion Fund] resources today include building energy efficiency, research and innovation, circular economy and waste management, road and rail investments, regional development support, digital support and 5G investments," Tomingas said.

She clarified that unspent funds include money allocated for financing sections or projects of Rail Baltic, as well as road sections along the Tallinn-Tartu route.

Cohesion Fund money comes with a commitment to the European Commission to use it for specific areas or purposes and the EU monitors how these funds are spent.

For example, Cohesion Fund money has been used for the construction of the Rail Baltica railway and these funds must be used in a way that ensures the railway is operational by the end of 2030.

According to Tomingas, about half of the €1 billion could be more easily or flexibly redirected to the defense sector.

"In any case, if such a reallocation occurs, we need to review various restrictions. For instance, if cutting funds from one area jeopardizes another central fund allocation or means missing a deadline — resulting in financial losses — we must take that into account," Tomingas said.

However, she noted that based on current information, the remaining funds from the Cohesion Fund could not be used to purchase military equipment or ammunition.

"Based on what we know now, the redirected funds could be used to finance defense industry research and development, infrastructure investments for the defense industry and dual-use investments that serve both civilian and military purposes. However, this money could not be used to directly purchase military equipment or ammunition," she said.

Tomingas added that many details remain uncertain.

"Primarily, we are waiting for clarification on whether the requirements for climate investment commitments will be relaxed, whether co-financing rates will be increased and whether restrictions on reallocating funds between different programs will be lifted. These factors will ultimately determine the extent to which such reallocations are possible," she said.

Currently, Estonia has agreed with the EU that 30 percent of the European Regional Development Fund must be allocated to climate-related measures. The total volume of the Regional Development Fund is €1.7 billion, which accounts for about half of the entire Cohesion Fund allocation.

Ave Schank-Lukas, deputy head of the European Commission Representation in Estonia and acting head of the office, stated that the European defense package introduced on Wednesday does not yet include provisions for reallocating Cohesion Fund money.

Schank-Lukas added that details on whether and how member states could redirect unused Cohesion Fund resources should become clearer next week when the Commission presents specific proposals.

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