For several weeks, there has been discussion about whether unused money from the EU's cohesion funds could be directed toward defense. In Estonia, the amount of such unallocated funds totals €1 billion.

It has now emerged that commissioners are considering allowing only the use of the Regional Development Fund. This is stated in a document seen by the publication Euractiv, and the same information has reached Estonia's Ministry of Finance.

In Estonia's case, this would concern €640 million, but it is unlikely that the entire amount would go toward defense, said Triin Tomingas, head of the Foreign Funds Department at the Ministry of Finance.

"We are awaiting more precise clarity on what exactly will be changed in the fund regulation and to what extent. Based on that, it will become clear how much of the €640 million could be reallocated in Estonia's case. Looking at the current rules and various rumors alongside them, one could say that about half — around €300 million — might be theoretically considered for defense or defense-related investments."

Tomingas stressed the funds are not intended for the purchase of military equipment or ammunition. Instead, it can be used for investments that support the defense industry, such as infrastructure, civil protection, resilience, energy security, and cybersecurity.

Dual-use investments would also be allowed.

The official said that by Tuesday evening it should become clear to what extent the regulation of the Regional Development Fund will be changed. Even if the loosening of the rules allows Estonia to allocate the entire €600 million to defense, she believes that is unlikely.

"It's important to stress that this would come at the expense of certain sectors where this funding has already been planned, and choosing which areas to cut would likely be a difficult decision, where to draw the threshold below which funding should not be reduced. These are substantive discussions that must take place once we know the exact rules of the game," she said.

For example, it is currently stipulated that 30 percent must be allocated to green initiatives. These funds cannot be shifted from certain green investments to defense if doing so would drop the share below the required 30 percent.

Additionally, it is important to note that allocated funds — even if not yet disbursed — cannot be repurposed.

"We're talking about money that is not yet tied to obligations where no support decisions or contracts have been made," Tomingas said.

Defense spending must be implemented quickly

Another key part of the equation, Tomingas added, is what defense-related ideas and needs would be funded in this case, and whether such projects could be launched quickly enough.

"Pace is one of the important criteria for us because we must be able to use all the funds by the end of the financing period, otherwise, we'll simply lose them."

The rules for using the Regional Development Fund state that a certain amount of money must be spent each year. If less is used, the amount allocated for subsequent years is also reduced.

Therefore, the question remains whether the European Commission can process the changes quickly enough. According to Tomingas, Cohesion Policy Commissioner Raffaele Fitto has promised to carry out the necessary procedures within two to three months on an expedited basis.

"So in essence, there should be clarity by summer both at the European level and regarding our next steps," she said.

The European Regional Development Fund is intended to help reduce regional disparities within the European Union. According to the document obtained by Euractiv, the review of funding for the 2021–2027 period offers an opportunity to redirect resources toward more urgent new challenges. Of the €392 billion fund, the European Commission estimates that 90 percent should go to the defense sector.

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