On Wednesday, the Estonian government supported the draft law on the 2025 state budget in an emergency meeting.
The bill expects the state budget income to reach 17.7 billion euros next year, which is 900 million euros or 5.2% more than this year.
On the other hand, it is planned to increase the state budget costs by 600 million euros or 3.5% to 18.2 million euros.
The nominal budget deficit will remain at the level of 3% of gross domestic product (GDP). This is in line with the level of the deficit prepared in this year’s supplementary budget and confirmed in the Maastricht criteria. Due to the large costs of security and social protection, the national debt will increase by 930 million euros to 24.3% of GDP.
Along with the budget, the state budget strategy for 2025-2028 was also approved.
The Estonian government’s press service reported that in the next four years 5.6 billion euros will be allocated to Estonia‘s military defense, to which 1.6 billion euros were added as part of the planned state budget strategy for buy weapons for a long time. – a range of military systems in the period to 2031.
Therefore, defense spending will significantly exceed 3% of GDP in the coming years, reaching at least 3.3% of GDP each year and reaching 3.6% of GDP in 2027. Based on the data a currently, Estonia will take second place in NATO behind Poland and overtake the United States in terms of the share of defense spending.
Strengthening its independent defense capabilities, Estonia will continue to support Ukraine with an amount equal to 0.25% of GDP, or more than 100 million euros per year. This country will achieve as much as possible by using the products of the Estonian defense industry, thus marking the biggest industrial growth plan in the country to date.
According to the government, military defense is successful if it has public support and if citizens and authorities are prepared for emergencies. For this purpose, an additional 219 million euros will be allocated for investments in national defense on a large scale in the next four years, with 165 million euros for strengthening internal security. The funded projects will include the construction of the Estonian-Russian border, prevention of hybrid threats and strengthening of civil defense.
To finance the increase in defense costs, Estonia will impose a large-scale fixed security tax until the end of 2028. In four years, the government will collect up to 2.6 billion euros with the security tax, of which 594 million are revenue planned income from the corporate profit tax.
As a measure to stimulate the economy, 1.9 billion euros have been earmarked for investments and investment subsidies in next year’s budget. In terms of investment level, Estonia ranks first in the European Union.
An additional 402.6 million euros of income from the sale of carbon dioxide allowances will be directed to stimulate the economy in the coming years. Two thirds of this amount will be allocated for the construction of “Rail Baltica”. 50 million euros will be paid for investments in increasing energy efficiency in multi-apartment buildings, and 25 million euros will be allocated to support green technologies in the marine sector.
The government will invest 50 million euros in comprehensive solutions for the production and use of hydrogen that are more environmentally friendly. Another 74 million euros will be used to strengthen the electricity network and create new connection capacities. In order to promote the use of renewable energy resources and ensure the security of energy supply, with the help of private funding, boundary plans are being developed with a state mark for the connection of the wind generator park in the Gulf of Riga and the electricity quarter. connection between Estonia and Latvia.
In 2025-2028, the government will support large investments in high-tech production in the amount of 160 million euros, which will strengthen Estonian exports and create well-paid jobs outside the so-called golden circles .
By the end of 2025, the government will increase the level of the defense fund created in the state investment fund “Smartcap” to 100 million euros. The fund invests in companies that develop military products and technologies and in investment funds that support industry with high added value and deep technology in Estonia.
Next year, the state will allocate 262.6 million euros for operational support to higher education, which will allow a greater number of students to be trained, including information and communication technology, engineering, production and construction.
Reduction of state costs in the next four years reached one billion euros, but taking into account the decisions made earlier, – 1.4 billion euros. Public sector spending will decrease by 10% over the next three years.
The reduction in state interest costs as a result of the government’s decisions will be around 200 million euros in the next four years.
When reviewing the budget, the government optimized social services and decided to reform the unemployment benefit system that was created more than 20 years ago. The new system of unemployment benefits will enter into force on January 1, 2026, and it is expected that by 2028 it will save more than 45 million euros in the state budget.
Decisions in the area of welfare include the limitation of sickness benefit and parental benefit to twice the average monthly salary, starting from 2026. In addition, from 2025, social insurance contributions will not be given more for non-working parents. From 2025, pensioners living in nursing homes will no longer receive the benefit intended for pensioners living alone.
The state will also reduce red tape and administrative costs in research and development, and ministries will no longer receive funds for additional research projects. According to the government, the cuts will not directly affect researchers, centers of excellence and companies involved in research, work or innovation activities that contribute to Estonia’s competitiveness.
2024-11-15 11:27:00
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