“We are making tough budgetary decisions today so that things are easier tomorrow,” he said. “Estonia is gaining a budgetary plan that will ensure secure defence in the coming years, which in turn will give us and our allies a sense of security, and warn our enemies against testing our resolve. Every single person in Estonia contributes to the country’s defence. We ask for and greatly appreciate that contribution, a modest effort on all our part to protect what we collectively have. I also ask everyone to judge and make use of the contribution of the people wisely, gratefully and sparingly.”
The Prime Minister stressed that the budget is not just about boosting defence. “It is also about getting our public finances and fiscal policy in order,” he said. “Doing nothing would have meant that living in debt would have gotten as out of hand as a house party at which you are no longer sure what day it is, what the party is for, whether there are exams the next day or who is meant to take them. To get things in order, we will be saving 1.4 billion euros in public spending over the next four years. As a result of these tough decisions, next year’s budget deficit will be reduced to, and even below, 3% of GDP. The savings on the state’s interest costs resulting from the reduction in the deficit will be around 200 million euros over the next four years.”
The Prime Minister also highlighted the fact that there will be no further changes to taxation following the introduction of the Security Tax. “Once the plan for our defence needs is in place, then as with the savings from the rebalancing of the budget, the debate about what new taxes are coming – which has been creating uncertainty for people and the economy every quarter of late – will come to an end,” he explained.
Among plans to support business and foster industry, Prime Minister Michal underscored the importance of the defence industry. “Defence will grow into a new branch of industry that unites the country’s defence potential with opportunities for economic growth, since we plan to double the size of the Defence Industry Fund to 100 million euros,” he said. “Over the next four years, this will kick-start the biggest industrial growth plan in Estonia’s history. Furthermore, we have pledged 0.25% of our GDP, which is itself around 100 million euros, to help Ukraine each year, so over four years this will amount to 400 million euros. This is an opportunity for our defence industries to develop and produce what Ukraine needs to fight Russia and defend the freedom of the whole of Europe, including our own.”
In his speech, Prime Minister Michal also stressed that key investment decisions which benefit society as a whole can be made even in times of cutbacks. “The future is not just austerity,” he said. “Important choices can still be made in tightened circumstances, whether it is 74 million euros to bolster the electricity grid and provide new connection capacity, the long-awaited renovation of the art building on Freedom Square or the completion of the renovations to the National Library. The average old-age pension will be rising in 2025 to 814 euros, and allowances for children and working-age people with severe disabilities, which have remained unchanged for years, will be going up as well. The transition to Estonian-language education will also continue, for which we are providing 61.8 million euros in funding.”
Finally, Prime Minister Michal acknowledged all of his colleagues and the government’s partners for their contribution to getting Estonia’s public finances in order, describing their hard work as remarkable. “My thanks go out to the previous governments and to the Riigikogu, whose efforts to put things right have not been in vain or gone unnoticed,” he said. “I would also like to thank the Ministry of Finance, our partners in government and all our ministers, with whom we put this effective budget together. I wish the Riigikogu every strength, as there are many difficult decisions to be made, but they are for the sake of a better future: with this 2025 budget we are laying the foundations for secure growth.”
The full text of the address by Prime Minister Michal can be found online at:
https://valitsus.ee/uudised/peaminister-kristen-michali-kone-2025-riigieelarve-eelnou-uleandmisel
