We are living at a pivotal time. Russia’s war against Ukraine has lasted for almost four years, and throughout this time Estonia and Europe have stood shoulder to shoulder with the Ukrainians. Together, we are seeking and finding ways to provide even stronger support so that Ukraine can hold its own both militarily and economically, for as long as it takes. I am sure they are capable of doing so.
Being part of the European Union is our choice, and public support for it remains high. It gives us a sense of security; it brings free trade and freedom of movement; it allows us to shape Europe’s future together.
Europe has changed a great deal since 2022. It has become more united, more likeminded with countries in our region. And it has become stronger. Estonia’s diplomats and politicians have been working tirelessly to achieve this for the last few years. I thank everyone who represents Estonia’s interests in Europe and the wider world – your contribution has been invaluable.
However, we are still a long way from where we want to be. Estonia has two main goals in Europe in the coming years: security and restoring Europe’s economic competitiveness. These objectives are, of course, closely linked. One is not possible without the other.
Ladies and gentlemen,
This year as a whole has been marked in the European Union by the bolstering of security. For the fourth year running, we have been faced with an aggressor who is attempting to redraw borders by force. It is in the interests of Europe and of Estonia to continue to support a rules-based world order governed by international law. An order based on sustainable economic development and the championing of democratic values. To help Ukraine win the war, we need real, tangible deterrence in addition to soft power. We have come a long way in a very short time.
No war lasts forever. It is in the vital interest of Estonia that Europe continues to enhance its military cooperation and boost its defence capabilities; that it maintains sanctions against Russia and continues to support Ukraine militarily and economically. I am pleased to see that defence readiness and security have become top priorities for Europe. The European Union was founded as a peace project to bind together the great opponents of World War II in Europe through economic cooperation. It worked. However, it is clear to all that the greatest security threat to us emanates from the other side of our eastern border. We need to respond to that threat with ever bolder action, investing not only in economic strength, but also in arms and defence.
What seemed impossible to some in Europe only last year is now a reality. In NATO, we made major decisions in June to increase defence spending. And in the EU, its budgetary rules now also provide more flexibility to rapidly increase our spending on defence. A total of 16 Member States, Estonia among them, requested this. We also agreed on the 150 billion euro SAFE loan instrument to enable Member States to affordably and collectively procure defence equipment. Estonia has submitted a plan to obtain a loan of at least 2.3 billion euros from SAFE. The EU structural funds can now also be reallocated for defence purposes – the Estonian government has decided to do so to the value of 195 million euros. In addition, we are targeting support from the new European Defence Industry Programme , which has an initial budget of 1.5 billion euros during the current budgetary period.
However, the enemy has upped the ante over the last 12 months as well. We are seeing threats in the Baltic Sea region with regard to the shadow fleet, drone incursions, violations of airspace. There is an urgent need to boost our drone and air defence capabilities in Estonia and Europe more broadly. Next year, Estonia will be contributing more than 5% of GDP from our national budget to defence. We must continue to work to ensure that countries well beyond the border also understand the importance of the defence readiness of the Eastern Flank.
As such, we are looking to the European Union for support in the form of joint financing. Of course, the European Union will not replace NATO in bolstering our defence capabilities, but the EU can assist in us producing and obtaining things together more quickly and on a larger scale, for example through joint procurements. All of us stand in the same queues, after all. Additional defence resources are needed already before the next EU budget period both to protect the eastern border as well as fill critical capability gaps more broadly.
I will be discussing this with fellow heads of government next week at the Eastern Flank Summit in Finland and at the European Council in Brussels. Together with the Baltic Sea states and other European countries, we stand stronger.
Esteemed Riigikogu,
We must achieve peace in Ukraine only on terms that are just and that suit Ukraine. Ukraine’s sovereignty is not a bargaining chip. And Europe itself discusses and decides its own affairs. Europe has the means to put pressure on Russia; the steps taken so far should not be underestimated. On the contrary. We have adopted four packages of sanctions in the European Union this year, recently reaching the 19th package. We are already working on the next. The emphasis has been on cutting off the aggressor’s cash flow – exports of crude oil, LNG and LPG. Moreover, EU countries recently decided to stop purchasing Russian gas altogether: LNG by the end of 2026, and pipeline gas by autumn 2027. We expect the same swift action to end oil imports. This summer, Europe also imposed additional import duties on agricultural products not yet covered by EU tariffs as well as nitrogen-based fertilisers from Russia and Belarus.
At our initiative, the European Union is increasingly restricting the shadow fleet and those who provide services to it. More than 550 vessels are under EU sanctions. All of this makes it much less convenient for Russia to carry out its activities.
Estonia’s primary aim for the remainder of the year is taking Russia’s frozen assets into use. We will be discussing how best to achieve this with leaders already before Christmas. We want to issue this money – at least 90 billion euros over the next two years – as a loan to Ukraine. This loan should only have to be repaid if Russia compensates its war damage and Ukraine’s territorial integrity is restored. Last week, the European Commission made a formal proposal which Estonia has long sought and awaited. It would be a landmark step for the continuation of Ukraine’s resilience. The week before last, I met with Chancellor Merz of Germany. We have a very good mutual understanding. It is positive to see that Germany is very much on the same page as Estonia in supporting Ukraine, bolstering defence and reforming the European economy. Alongside Germany, we stand strongly behind the use of Russia’s frozen assets.
It is true that war is won on the battlefield, but it is also won with money. Contrary to Russian propaganda, analysis shows that Russia’s economy is not doing well: the success stories we are hearing are largely a bluff. Russia has not amended any of its original objectives. It still seeks to redraw the entire security architecture of Ukraine and Europe. In the same way, there is no reason for us to weaken our pressure on Russia. Quite the reverse: we must double down and show even more resolve.
Unfortunately, one area in which the European Union is not moving as quickly as we should be in political terms is enlargement. Ukraine has been vigorous in reforming its country in order to speed up the EU accession process. Moldova and several other countries have also chosen the European path. Enlargement is, for us, a geopolitical necessity. The greater the spread of European values, the safer, more prosperous and more people-friendly the world we live in.
We must be increasingly vigilant regarding negative developments within the EU itself. In a complex security situation, we cannot allow our team to score own goals. The explosive spread of disinformation, fuelled by a wide network of platforms and the rapid rise of AI, is problematic to say the least. Efforts must be made to defend our democracy, to expose false narratives and to thwart Russia’s henchmen.
Ladies and gentlemen,
We must ask ourselves what kind of future Europe we want: a continent encapsulated within itself and lost in the nostalgia of past glories, or one which is boldly developing and rigorously defending its interests? We can see that global competition is only growing. Trade is characterised by increasing aggressiveness. We have to ask what we can do in Europe to be first in breakthrough technologies. We need to move more rapidly towards strategic autonomy in security and critical sectors of the economy, as well as in ensuring computing capabilities. We must ensure that we have appropriate supply chains on the global market and rely on free trade, especially with countries that are friendly to us, where our own position is weaker.
We are lagging behind many of our global competitors in terms of our volume of investment, especially in new research-intensive areas. The EU’s share of the world’s AI computing power is less than 5%, compared to as much as 75% in the US and 15% in China. Our capital markets are too fragmented. We need to pull our weight and reverse this trend. We must take advantage of the benefits the single market offers. Our decisions must channel investments into the European economy, support the strengthening of the industrial base, reduce dependency on third countries and ensure a fairer competitive environment for our entrepreneurs.
Another challenge for Europe’s economy is unwarranted red tape, which hinders business and slows economic growth. I have convened an advisory council on growth and efficiency whose proposals have led us to embark on a radical programme to reduce and simplify unnecessary requirements. Around 700 proposals have been made by entrepreneurs, of which more than 320 have already been approved by the government. Those requirements will disappear. A total of 50 proposals have been implemented to date. Your role in making life in Estonia easier is also important, as the abolition of many requirements involves changing the law. Along with proposals made by ministers, we have taken decisions to abolish more than 500 requirements since we formed the new government in April. Reducing regulation and administrative burden is one of the main expectations our entrepreneurs have of the government.
Estonia has also been a vocal advocate of simplifying EU law, in terms of both submitting and processing proposals. We have brought our digital and real-economy experience to the table. We have demonstrated how the smart use of data and automated reporting can reduce the administrative burden on businesses.
More than 60 proposals from Estonian entrepreneurs concern the simplification of EU legislation. We have also discussed their implementation with Commissioner Valdis Dombrovskis. The European Commission has launched a programme of simplification, with seven package proposals submitted so far.
It is essential that the internal market is a level playing field for entrepreneurs and that it is easy for them to develop their products and offer their services across borders. In the coming years, Estonia will also be leading the way in digital progress, underscoring the importance of cybersecurity, the use of AI and the development of digital services.
In February, I will be discussing how to boost Europe’s competitiveness with fellow European leaders. I see four main objectives in that debate for Estonia: breakthrough technologies and the adoption of AI; digital solutions; the substantial simplification of the regulatory environment; and a more effectively functioning internal market, especially for services and capital.
Esteemed Riigikogu,
Climate targets also form part of our competitiveness. In Estonia, the direct benefits of reducing emissions will translate into energy security: independence from Russian gas and oil; new jobs in the green tech sector; and cleaner air and a cleaner environment for our children.
Estonia is already home to a number of successful green-tech companies. For example, Skeleton Technologies is one of the world’s leading developers of supercapacitors and energy storage solutions, while NEO Performance Materials’ magnet plant in Narva also combines clean manufacturing, renewable energy and high-tech innovation. Those are just two examples.
However, climate change cannot be tackled by issuing top-down directives on paper: conditions on the ground must be taken into account. For this reason, Estonia supports the European movement towards a 90% reduction in emissions by 2040 compared to 1990, but the right conditions must be created if we are to achieve this. We also want to mitigate the negative effects that have arisen from implementing past decisions. Here I am thinking of land use, and also of ETS2, whose implementation has been postponed by a year, but where further changes are needed.
Ladies and gentlemen,
Years of work to reduce our dependence on the Russian and Belarusian electricity systems have reached the finish line. In February we successfully completed the nearly 15-year-long process of synchronising the electricity systems of Estonia and the other Baltic countries with those of Central Europe. We received nearly 1.2 billion euros in support for this from the European Union. It was an historic achievement and a symbolic step that ended our energy dependence on the East and linked us, strongly and irreversibly, to Europe.
The well-functioning European energy market has granted us security of energy supply. To further increase that certainty, we are continuing to work on new energy connections with both Finland and Latvia. It is also important to complete, with European support, the Rail Baltic project, which is of vital importance from the perspectives of both security and the environment.
Esteemed Riigikogu,
Last week, the government discussed the European Commission’s proposals for the new EU budget period and submitted our positions to you for your consideration. I am pleased to be able to say that Estonia’s efforts to convince the Commission have borne fruit.
The budget put to Member States for negotiations has grown to nearly 2 trillion euros and will direct much more of our shared funds to areas that matter to us. Among other things, support for cross-border transport links – on which the completion of Rail Baltic depends – will be doubled if the budget is passed. Moreover, defence, which has so far received only marginal support from the MFF, would enjoy a five-fold increase to more than 131 billion euros. Via the Ukraine reserve, 100 billion euros has been earmarked to support Ukraine. In the area of innovation, the planned Competitiveness Fund will help to cover investment needs throughout the product life cycle. At this stage, of course, all of this is just a proposal. More than a year of complex negotiations lies ahead.
The European Commission has offered Estonia 6.5 billion euros to finance its national plan. This is a significant amount of money that would contribute to the implementation of investment and reform needs in line with Estonia’s goals. It would also enable us to cover needs in terms of both agricultural subsidies and internal security. No less important to us are transport and energy connections and ensuring their resilience. We have significantly increased defence spending, and our economies are under increased pressure due to the security situation. The EU budget can and must mitigate the negative socio-economic impact of the geopolitical crisis on the countries along its eastern border.
Ladies and gentlemen,
Looking broadly, we do not have a lot of time – we need solutions that work today. Estonia must encourage the European Commission and other Member States to prioritise quick but considered decisions. Belief in the power of unity and a better tomorrow is particularly important in the current security situation. Here I would like to thank the Riigikogu, and especially the European Union Affairs Committee, for their outstanding cooperation in this fast-paced decision-making process.
We need to ensure that the way the European Union works is explained better. Consensus must be sought on the future of Europe that takes into account the wishes of the continent’s citizens and enhances our common well-being. This will also help to build a sense of ownership in the EU’s collective decisions, where we sit at the table as influential decision-makers. It is in Estonia’s interests to be closely integrated with Europe and to strengthen the effective enforcement of the freedoms that underpin the European Union. Above all, we must invest in crisis resilience and in areas that will also ensure economic success for the future.
Thank you for your attention!
