Recommendation for a COUNCIL RECOMMENDATION endorsing the national medium-term fiscal-structural plan of Estonia
Date: 2024-11-26
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Estonia, budget deficit, coordination of EMU policies, economic reform, fiscal policy, investment, macroeconomics, national planning, public debt, structural adjustment

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   EUROPEAN COMMISSION  Strasbourg, 26.11.2024  COM(2024) 713 final  Recommendation for a COUNCIL RECOMMENDATION endorsing the national medium-term fiscal-structural plan of Estonia  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

endorsing the national medium-term fiscal-structural plan of Estonia 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 121 thereof, 

Having regard to Regulation (EU) 2024/1263, and in particular Article 17 thereof, 

Having regard to the recommendation from the Commission, 

Whereas: 

GENERAL CONSIDERATIONS 

(1) 

(2) 

1 

2 

3 

4 

A reformed EU economic governance framework entered into force on 30 April 2024. 
Regulation  (EU)  2024/1263  of  the  European  Parliament  and  of  the  Council  on  the 
effective  coordination  of  economic  policies  and  on  multilateral  budgetary 
surveillance1,  together  with  the  amended  Regulation  (EC)  No  1467/97  on  the 
implementation  of  the  excessive  deficit  procedure2,  and  the  amended  Council 
Directive  2011/85/EU  on  the  budgetary  frameworks  of  Member  States3  are  the  core 
elements of the reformed EU economic governance framework. The framework aims 
at  ensuring  public  debt  sustainability  and  sustainable  and  inclusive  growth  through 
reforms  and  investments.  It  promotes  national  ownership  and  has  a  medium-term 
focus, combined with an effective and coherent enforcement of the rules.  

The  national  medium-term  fiscal-structural  plans  that  Member  States  submit  to  the 
Council  and  to  the  Commission  are  at  the  centre  of  the  new  economic  governance 
framework. The plans are to deliver on two objectives: i) ensuring that, by the end of 
the adjustment period, general government debt is on a plausibly downward trajectory, 
or stays at  prudent  levels,  and that the government  deficit is  brought and maintained 
below the reference value of 3% of GDP over the medium  term, and ii) ensuring the 
delivery  of  reforms  and  investments  responding  to  the  main  challenges  identified  in 
the context of the European Semester and addressing the common priorities of the EU. 
To that end, each plan is to present a medium-term commitment to a net expenditure4 

L, 

(OJ 

1466/97 

Regulation 

(EC)  No 

Regulation  (EU)  2024/1263  of  the  European  Parliament  and  of  the  Council  of  29  April  2024  on  the 
effective  coordination  of  economic  policies  and  on  multilateral  budgetary  surveillance  and  repealing 
ELI: 
Council 
http://data.europa.eu/eli/reg/2024/1263/oj). 
Council  Regulation  (EU)  2024/1264  of  29  April  2024  amending  Regulation  (EC)  No  1467/97  on 
speeding  up  and  clarifying  the  implementation  of  the  excessive  deficit  procedure  (OJ  L,  2024/1264, 
30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1264/oj). 
Council Directive (EU) 2024/1265 of 29 April 2024 amending Directive 2011/85/EU on requirements 
for  budgetary 
(OJ  L,  2024/1265,  30.4.2024,  ELI: 
http://data.europa.eu/eli/dir/2024/1265/oj). 
Net expenditure as defined in Article 2 of Regulation (EU) 2024/1263, namely government expenditure 
revenue  measures, (iii) expenditure  on  Union 
net  of (i) interest  expenditure, (ii) discretionary 
programmes fully matched by revenue from Union funds, (iv) national expenditure on co-financing of 

the  Member  States 

frameworks  of 

2024/1263, 

30.4.2024, 

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path, which effectively establishes a budgetary constraint for the duration of the plan, 
covering 4 or 5 years (depending on the regular term of legislature in a Member State). 
In  addition,  the  plan  is  to  explain  how  the  Member  State  will  ensure  the  delivery  of 
reforms and investments responding to the main challenges identified in the context of 
the  European  Semester,  in  particular  in  the  country-specific  recommendations 
(including  those  pertaining  to  the  macroeconomic  imbalances  procedure  (MIP),  if 
applicable),  and  how  the  Member  State  will  address  the  common  priorities  of  the 
Union. The period for fiscal adjustment covers a period of four years, which may be 
extended  by  up  to  three  years  if  the  Member  State  commits  to  delivering  a  set  of 
relevant reforms and investments that satisfies the criteria set out in Regulation  (EU) 
2024/1263. 

(3) 

(4) 

Following the submission of the plan, the Commission is to assess whether it complies 
with the requirements of Regulation (EU) 2024/1263. 

Upon  a  recommendation  from  the  Commission,  the  Council  is  to  adopt  a 
recommendation to set the net  expenditure path  of the Member State concerned and, 
investment  commitments 
the  set  of  reform  and 
where  applicable,  endorses 
underpinning an extension of the fiscal adjustment period. 

CONSIDERATIONS  CONCERNING  THE  NATIONAL  MEDIUM-TERM  FISCAL-
STRUCTURAL PLAN OF ESTONIA  

(5) 

On 11 October 2024, Estonia submitted its national medium-term fiscal-structural plan 
to  the  Council  and  to  the  Commission.  The  submission  took  place  following  an 
extension  of  the  deadline  set  out  in  Article  36  of  Regulation  (EU)  2024/1263,  as 
agreed with the Commission in view of the reasons provided by Estonia. 

Process prior to the submission of the plan 

(6) 

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On  21  June  2024  the  Commission  sent,  according  to  Article  9  of  Regulation  (EU) 
2024/1263,  the  reference  trajectory5  to  Estonia.  The  Commission  published  the 
reference trajectory on 11 October6. The reference trajectory is risk-based and ensures 
that, by the end of the fiscal adjustment period and in the absence of further budgetary 
measures  beyond  the  adjustment  period,  general  government  debt  is  on  a  plausibly 
downward trajectory or stays at prudent levels over the medium term, and the general 
government  deficit  is  brought  below  3%  of  GDP  over  the  adjustment  period  and  is 
maintained  below  that  reference  value  over  the  medium  term.  The  medium  term  is 
defined  as  the  ten-year  period  after  the  end  of  the  adjustment  period.  In  accordance 
with  Article  7  and  8  of  Regulation  (EU)  2024/1263,  the  reference  trajectory  is  also 

programmes  funded  by  the  Union, (v) cyclical  elements  of  unemployment  benefit  expenditure and 
(vi) one-offs and other temporary measures. 
Prior  guidance  transmitted  to  the  Member  States  and  Economic  and  Financial  Committee  includes 
trajectories  with  and  without  an  extension  of  the  adjustment  period  (covering  4  and  7  years, 
respectively).  It  also  includes  the  main  initial  conditions  and  underlying  assumptions  used  in  the 
Commission’s  medium-term  government  debt  projection  framework.  The  reference  trajectory  was 
calculated on the basis of the methodology described in the Commission’s Debt Sustainability Monitor 
2023  (https://economy-finance.ec.europa.eu/publications/debt-sustainability-monitor-2023_en).  It 
is 
based  on  the  Commission  2024  spring forecast  and  its  medium-term  extension  up  to  2033,  and  long-
term GDP growth and ageing costs are in line with the joint Commission-Council 2024 Ageing Report 
(https://economy-finance.ec.europa.eu/publications/2024-ageing-report-economic-and-budgetary-
projections-eu-member-states-2022-2070_en). 
https://economy-finance.ec.europa.eu/economic-and-fiscal-governance/national-medium-term-fiscal-
structural-plans_en#estonia 

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consistent  with  the  debt  sustainability  safeguard  and  the  deficit  resilience  safeguard. 
The  reference  trajectory  of  Estonia  sets  out  that,  based  on  the  Commission’s 
assumptions  and  assuming  a  4-year  adjustment  period,  net  expenditure  should  not 
grow by more than the values provided in Table 1. This corresponds to an average net 
expenditure growth of 3.1% over the adjustment period (2025-2028). 

Table 1: Reference trajectory provided by the Commission to Estonia on 21 June 2024 

2025 

2026 

2027 

2028 

Average 2025-2028 

Maximum net expenditure growth 
(annual, %) 

3.3  

3.3  

2.9  

2.9  

3.1 

Source: Commission’s calculations. 

(7) 

In  line  with  Article  12  of  Regulation  (EU)  2024/1263,  Estonia  and  the  Commission 
engaged in a technical dialogue in September and October 2024. The dialogue centred 
on the net expenditure path envisaged by Estonia  (including the availability of fiscal 
space)  and  its  underlying  assumptions  (in  particular  a  different  fiscal  starting  point, 
GDP projections and the GDP deflator), as well as the envisaged delivery of reforms 
and  investments  responding  to  the  main  challenges  identified  in  the  context  of  the 
European  Semester  and  the  common  priorities  of  the  Union  in  fair  green  and  digital 
transition, social and economic resilience, energy security and the build-up of defence 
capabilities. 

(8) 

The plan submitted by Estonia does not report on a consultation process with relevant 
national stakeholders (including social partners) prior to submission. 

Other related processes 

(9) 

On  15  October  2024,  Estonia  submitted  its  Draft  Budgetary  Plan  for  the  year  2025. 
The Commission adopted an opinion on this Draft Budgetary Plan on  [26 November 
2024]7. 

(10)  On  21  October  2024,  the  Council  addressed  to  Estonia  a  series  of  country-specific 

recommendations (CSRs) in the context of the European Semester 8. 

SUMMARY  OF  THE  PLAN  AND  THE  COMMISSION’S  ASSESSMENT  OF 
THEREOF  

(11) 

In  line  with  Article  16  of  Regulation  (EU)  2024/1263,  the  Commission  assessed  the 
plan as follows: 

Context: macroeconomic and fiscal situation and outlook  

(12)  Economic  activity  in  Estonia  contracted  by  3.0%  in  2023,  driven  by  a  sharp  fall  in 
exports and a decline in private consumption. According to the European Commission 
Autumn 2024 Forecast, the economy is expected to further decline by 1.0% in 2024, 
on the back of falling consumption and investment as well as weak exports. In 2025, 
real GDP is set to increase by 1.1%, as foreign demand for Estonian exports is slowly 
recovering, although domestic demand is set to remain rather weak. In 2026, real GDP 
is  forecast  to  increase  by  2.6%,  as  domestic  demand  is  expected  to  rebound, 

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8 

Commission Opinion on the Draft Budgetary Plan of Estonia, 26.11.2024, C(2024)9052 final. 
Council Recommendation on economic, budgetary, employment and structural policies of Estonia, not 
yet published. 

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particularly private consumption and investment. Over the forecast horizon (i.e., 2024-
2026),  potential  GDP  growth  in  Estonia  is  expected  to  progressively  increase  from 
0.1%  in  2024  to  0.3%  in  2026,  mainly  driven  by  an  improvement  in  real  GDP.  The 
unemployment  rate  stood  at  6.4%  in  2023  and  is  projected  by  the  Commission  to 
amount to 7.5% in 2024, 7.7% in 2025 and 7.2% in 2026. Inflation (GDP deflator) is 
projected to decrease from 8.1% in 2023 to 5.1% in 2024, and is projected to remain at 
4.0% in 2025 before falling to 3.3% in 2026.  

(13)  Regarding  fiscal  developments,  in  2023  Estonia’s  general  government  deficit 
amounted  to  2.8%  of  GDP.  According  to  the  European  Commission  Autumn  2024 
Forecast,  it is  set  to  reach  3.0% of GDP  in  2024 and to  stabilise at  3.0% of GDP in 
2025  and,  on  a  no-policy  change  basis,  also  in  2026.  The  European  Commission 
Autumn  2024 Forecast  includes Estonia’s draft budget  for 2025 that the  government 
proposed  to  the  national  parliament  in  September.  General  government  debt  was 
20.2%  of  GDP  at  end-2023.  According  to  the  European  Commission  Autumn  2024 
Forecast,  the  debt  ratio  is  expected  to  increase  to  23.2%  of  GDP  at  end-2024.  It  is 
projected to increase to 24.2% of GDP at end-2025 and 25.5% at end-2026. The fiscal 
projections  by  the  Commission  do  not  consider  the  policy  commitments  in  the 
medium-term  plans  as  such  until  they  are  underpinned  by  credibly  announced  and 
sufficiently specified concrete policy measures. 

Net expenditure path and main macroeconomic assumptions in the plan 

(14)  Estonia’s national medium-term fiscal-structural plan covers the period 2025-2028 and 

presents a fiscal adjustment over four years.  

(15)  The  plan  contains  the  information  required  by  Article  13  of  Regulation  (EU) 
2024/1263,  with  the  exception  of  the  information  on  the  consultation  of  domestic 
stakeholders  prior  to  submission’  (required  by  Art.  13  (g)(vi)  of  Regulation  (EU) 
2024/1263). 

(16)  The plan commits to the net expenditure path indicated in Table 2, corresponding to an 
average  net  expenditure  growth  of  4.7%  over  the  years  2025-2028.  The  average  net 
expenditure  growth  reported  in  the  plan  over  the  adjustment  period  (2025-2028)  is 
higher than the reference trajectory transmitted by the Commission on 21 June 2024. 
The  net  expenditure  growth  path  in  the  plan  exploits  the  fact  that  Estonia  has  some 
space  for  fiscal  deconsolidation,  which  was  not  reflected  in  the  Commission’s  prior 
guidance transmitted to Estonia on 21 June 2024. The fiscal space originates from the 
low  level  of  debt  in  Estonia  in  combination  with  the  expected  narrowing  of  the 
primary deficit at unchanged policy. It increases the maximum net expenditure growth 
rate  that  would  ensure  that  general  government  debt  stays  at  prudent  levels  over  the 
medium  term,  and  that  the  general  government  deficit  is  maintained  below  the 
reference value over the medium term, as shown in table 3. The plan assumes potential 
GDP  growth  to  increase  to  1%  in  2025  (from  0.7%  in  2024),  before  decreasing  to 
0.5%  in  2027  and  2028.  In  addition,  the  plan  expects  the  growth  rate  of  the  GDP 
deflator to increase to 4.0% in 2025 (from 3.7% in 2024), before gradually declining 
to 2.8% in 2028. 

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Table 2: Net expenditure path and main assumptions in Estonia’s plan 

2024 

2025 

2026 

2027 

2028 

Average over the 
period of validity of 
the plan 2025-2028 

1.9 

7.1 

5.1 

3.6 

3.2 

4.7 

1.9 

9.2 

14.8 

18.9 

22.6 

n.a. 

0.7 

1.0 

0.9 

0.5 

0.5 

3.7 

4.0 

3.6 

3.2 

2.8 

0.7 

3.4 

Net expenditure 
growth 
(annual, %) 

Net expenditure 
growth 
(cumulative, from 
base year 2023, %) 

Potential GDP 
growth (%) 

Inflation (GDP 
deflator growth) (%) 

Source: Medium-term fiscal-structural plan of Estonia and Commission calculations 

Implications of the plan’s net expenditure commitments for general government debt 

(17) 

If the net  expenditure path  committed to  in  the plan and the underlying assumptions 
materialise, general government debt would, according to the plan, gradually increase 
from 23.7% in 2024 to 28.6% of GDP at the end of the adjustment period (2028), as 
per the following table. After the adjustment, over the medium term (i.e. until 2038), 
the debt ratio is projected to continue to grow according to the plan, albeit at a slower 
pace, reaching 32.6% by 2038. 

Table 3: General government debt and balance developments in Estonia’s plan 

Government debt 

(% of GDP) 

Government balance 

(% of GDP) 

2023 

2024 

2025 

2026 

2027 

2028 

2038 

20,0 

23.7 

25.2  

26.4 

27.6 

28.6 

32.6 

-2.4 

-2.7 

-3.0 

-2.7 

-2.3 

-2.1 

-1.5 

Source: Medium-term fiscal-structural plan of Estonia 

Thus, according to the plan, general government debt would remain  well below the 
Treaty reference value of 60% of GDP over the medium term. This is plausible based 
on the plan’s assumptions, as debt would be projected to stand below 60% of GDP 
by 2038 under all deterministic stress tests of the Commission’s Debt Sustainability 
Analysis.  Therefore,  based  on  the  plan’s  policy  commitments  and  macroeconomic 
assumptions, the net expenditure path put forward in the plan is consistent with the 
requirement  for  debt  set  out  in  Articles  6(2)  and  16(2)  of  Regulation  (EU) 
2024/1263. 

Implications  of  the  plan’s  net  expenditure  commitments  for  the  general  government 
balance 

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(18)  Based  on  the  plan’s  net  expenditure  path  and  assumptions,  the  general  government 
deficit would reach 3% of GDP in 2025 and then gradually improve to 2.1% in 2028. 
Thus, according to the plan, the general government balance would not exceed the 3% 
of GDP reference value at the end of the adjustment period (2028). In addition, in the 
ten  years  following  the  adjustment  period  (i.e.  until  2038),  the  government  deficit 
would not exceed 3% of GDP. Therefore, based on the plan’s policy commitments and 
macroeconomic  assumptions,  the  net  expenditure  path  put  forward  in  the  plan  is 
consistent with the requirement for the deficit set out in Articles 6 point (b), and 16(2) 
of Regulation (EU) 2024/1263. 

Consistency of the plan with the deficit resilience safeguard 

(19) 

If  the  plan’s  assumptions  and  commitments  materialise,  the  structural  deficit  would 
remain below 1.5% of GDP throughout the adjustment period. Therefore, based on the 
plan’s  policy  commitments  and  macroeconomic  assumptions,  the  common  resilience 
margin  referred  to  in  Article  8(1)  of  Regulation  (EU)  2024/1263  will  continue  to  be 
respected, and therefore the additional improvement in the structural primary balance 
referred to in Article 8(2) of Regulation (EU) 2024/1263 is not required. 

Consistency of the plan with the debt sustainability safeguard 

(20)  According to the plan, general government debt is set to remain below 60% of GDP 
throughout the adjustment period. Therefore, the debt sustainability safeguard does not 
apply. 

Macroeconomic assumptions of the plan 

(21)  The  plan  is  based  on  a  set  of  assumptions  which  differ  from  the  Commission’s 
assumptions  transmitted  to  Estonia  on  21  June.  In  particular,  the  plan  uses  different 
assumptions for the initial fiscal position (including debt, primary expenditure growth 
and structural primary balance for 2024), real GDP growth and GDP deflator growth. 
A  careful  assessment  of  these  differences  in  assumptions  is  necessary,  especially  as 
average net expenditure growth in the plan is higher than in the reference trajectory. 

The  differences  in  assumptions  with  the  most  significant  impact  on  average  net 
expenditure  growth  are  listed  below,  together  with  an  assessment  of  each  difference 
considered in isolation. 

• 

• 

The plan assumes a more favorable initial fiscal position than assumed by the 
Commission. For 2023 and 2024, the plan reflects  updated outturn data and 
national  forecasts  for  debt,  primary  expenditure  growth  and  the  structural 
primary  balance.  This  contributes  to  higher  average  net  expenditure  growth 
over  the  adjustment  period  in  the  plan  than  according  to  the  Commission’s 
assumptions.  Based  on  the  data  available  at  the  time  of  the  Commission’s 
assessment  of  the  plan,  the  Commission  deems  the  starting  point  to  be 
realistic  in  view  of  the  updated  structural  primary  balance  and  output  gap 
calculations. Consequently, this assumption is deemed to be duly justified. 

The plan assumes a different  real  GDP growth  path  from  the  Commission’s 
assumptions  for  the  period  2021-2028.  This  contributes  to  a  somewhat 
different average net expenditure growth path  over the adjustment period in 
the  plan.  Based  on  more  recent  national  forecasts,  compared  to  the 
Commission  assumption,  growth  is  expected  to  be  stronger  in  2025  but 
weaker  from  2026  onwards.  Overall,  on  average,  the  GDP  growth  remains 

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• 

similar  to  the  Commission  assumption  and  therefore  this  assumption  in  the 
plan is deemed to be duly justified.  

The plan assumes a GDP deflator growth that is 0.8 percentage points higher 
on average in 2024 and 2025 compared with the Commission’s assumptions. 
This  contributes  to  a  higher  average  net  expenditure  growth  path  over  the 
adjustment  period  in  the  plan  than  according  to  the  Commission’s 
assumptions.  The  higher  GDP  deflator  growth  is  based  on  more  recent 
national forecasts and is in line with the Commission Autumn 2024 Forecast. 
Consequently, this assumption is deemed to be duly justified. 

Overall,  all  the  differences  in  assumptions  taken  together,  and  added  to  the  fiscal 
space,  lead  to  an  average  net  expenditure  growth  in  the  plan  that  is  higher  than  the 
reference trajectory. The Commission will take into account the above assessment of 
the plan’s  assumptions  in  future assessments  of  compliance with  the net  expenditure 
path. 

Fiscal strategy of the plan 

(22)  According  to  the  indicative  fiscal  strategy  in  the  plan,  the  commitments  on  net 
expenditure  will  be  delivered  through  both  expenditure  restraint  and  discretionary 
revenue increases. The various revenue measures listed in the plan include changes to 
the  Income  Tax  Act  and  increases  in  excise  duty  rates,  the  introduction  of  a  motor 
vehicle tax as well as the introduction of a fixed-term security surcharge  (which will 
be  collected  through  a  VAT  increase  as  of  mid-2025  and  through  an  increase  in 
taxation of all incomes of natural persons and of corporate profits as of 2026). On the 
expenditure  side,  Estonia  intends  to  carry  out  a  budget  revision  for  2023-2027  to 
increase the efficiency of the use of state budget  funds and the provision  of relevant 
services  and  activities  at  optimal  costs  based  on  the  state's  goals.  At  the  same  time, 
Estonia  also  intends  to  increase  defence  spending  and  defence  investments.  The 
specification of the policy measures to be adopted is to be confirmed or adjusted and 
quantified  in  the  annual  budgets.  At  the  same  time,  there  are  risks  to  the 
implementation of the indicative fiscal strategy in the plan, which stem from the fiscal 
adjustment  being  partly  based  on  discretionary  revenue  increases.  Given  the  slow 
forecasted  recovery  in  growth,  the  tax  revenue  collection  risks  being  lower  than 
assumed  in  the  plan.  In  addition,  the  Draft  Budgetary  Plan  for  2025  specifies  the 
policy  measures  through  which  the  net  expenditure  commitment  for  2025  will  be 
achieved. 

Reform  and  investment  intentions  in  the  plan  responding  to  the  main  challenges 
identified in the context of the European Semester and addressing the common priorities 
of the Union 

(23)  The plan describes policy intentions concerning reforms and investments to respond to 
the main challenges identified in the context of the European Semester, especially the 
CSRs  and  to  address  the  common  priorities  of  the  EU.  The  plan  includes  eleven 
reforms and investments, of which six are financially supported by the RRF and four 
by the Cohesion policy funds. 

(24)  Concerning  the  common  priority  of  a  fair  green  and  digital  transition,  including  the 
climate  objectives  set  out  in  Regulation  (EU)  2021/1119,  the  plan  includes  several 
reforms,  in  addition  to  implementing  the  measures  in  the  Estonian  recovery  and 
resilience plan (RRP). Firstly, the plan includes the Renewable Electricity 100 reform, 
which  calls  for  a  transition  to  renewable  electricity  consumption  by  2030.  Secondly, 

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the plan includes the adoption of the Climate Resilient Economy Law. The law to be 
adopted will lay the foundations for a climate-proof economy  by setting Greenhouse 
gas  emissions  targets,  encouraging  the  uptake  of  clean  technologies  and  greater 
resource  valorisation.  These  two  measures  intend  to  address  the  2024  CSR  (and  the 
earlier  year  CSRs  from  2023,  2022  and  2020),  that  calls  Estonia  to  take  action  to 
reduce the share of oil shale in the energy mix and raise resource productivity through 
bio-based innovation.  

(25)  Concerning  the  common  priority  of  social  and  economic  resilience,  including  the 
European  Pillar  of  Social  Rights,  in  addition  to  implementing  the  measures  in  the 
Estonian  RRP, the plan  includes several  reforms. Firstly, the plan includes measures 
improving  the  quality  and  availability  of  special  care,  by  reorganising  agencies  and 
service locations to ensure modern living conditions for people with mental disorders. 
Secondly, the rehabilitation system will be reorganised to ensure that people in need of 
rehabilitation receive services according to their own needs, that services are easy to 
access  and  supported,  and  that  services  are  delivered  in  an  integrated  way  through 
multidisciplinary cooperation. Thirdly, various improvements in the healthcare system 
will be developed and implemented. Fourth, the plan includes further reform of long-
term care. The organisation and funding of the 24/7 nursing service will be transferred 
to  the  Health  Insurance  Fund  as  of  2025.  Fifth,  the  plan  includes  the  reform  of 
the  extension  of 
unemployment  benefits  and  unemployment 
unemployment insurance coverage to new forms  of work is being deliberated. These 
five measures intend to address a 2024 CSR (and implicitly the CSRs from 2023, 2022 
and 2020) that calls Estonia to take action to strengthen social protection, inter alia to 
address old-age poverty and by extending the coverage of unemployment benefits, in 
particular  to  those  with  short  work  spells  and  in  non-standard  forms  of  work.  They 
also intend to address the 2024 CSR (and implicitly the earlier year CSRs from 2023, 
2022 and 2020), that calls on Estonia to improve access to and financing of healthcare 
and  long-term  care.  The  plan  also  includes  a  vocational  education  reform.  This 
measure concerns the 2024 CSR (and implicitly subpart of the earlier year CSR from 
2019),  that  calls  on  Estonia  to  improve  the  skills  supply  through  reskilling  and 
upskilling  and  by  better  attracting  and  retaining  talent.  However,  beyond  the 
commitments in the RRP, the plan does not include measures to address the subpart of 
the  2019  CSR  to  take  action  to  reduce  the  gender  pay  gap,  including  by  improving 
wage transparency. 

insurance,  and 

(26)  Concerning the common priority of energy security, the plan includes the Renewable 
Electricity  100  reform,  which  calls  for  a  transition  to  renewable  electricity 
consumption by 2030, in addition to implementing the measures in the Estonian RRP. 
This measure intends to address the 2024 CSR (and the earlier year CSRs from 2023, 
2022 and 2020), that calls Estonia to take action to reduce the share of oil shale in the 
energy mix and raise resource productivity through bio-based innovation.  

(27)  Concerning the common priority of defence capabilities, the plan includes a list of tax 
reforms  under  the  umbrella  term  ‘security  surcharge’.  While  the  tax  revenue  raised 
with  new  or  modified  taxes  is  fungible,  the  justification  used  by  the  government 
implies  that  it  is  a  measure  to  increase  defence  capabilities.  However,  beyond  the 
aforementioned ‘security surcharge,’ the plan does not include explicit deliberation of 
defence-related reforms and investments. 

(28)  Concerning other policy measures beyond the common priorities of the EU, the plan 
does not include, beyond the commitments in the RRP, measures to address the 2020 
CSR (and the subpart of the 2019 CSR) that calls on Estonia to step up the efforts to 

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ensure  effective  supervision  and  enforcement  of 
framework.  

the  anti-money 

laundering 

(29)  The  plan  provides 

information  on 

the  consistency  and,  where  appropriate, 
complementarity  with  the  cohesion  policy  funds  and  the  Estonian  RRP.  The  plan 
mentions that improving the quality and accessibility of special care, reorganising the 
rehabilitation  system,  and  reforming  long-term  care  all  contribute  to  the  Cohesion 
Policy's  Partnership  Agreement's  target  P04  (Social  Estonia)  and  to  the  RRF's 
component  6  (healthcare  and  social  protection).  The  reform  of  unemployment 
allowance  and  unemployment  insurance,  and  the  extension  of  unemployment 
insurance coverage to new forms of work, also contribute to the RRF's component 6 
(healthcare and social protection). The renewable electricity 100 reform contributes to 
the RRF's components 4 (energy and energy efficiency) and 8 (REPowerEU). 

(30)  The plan provides an overview of the public investment needs of Estonia regarding the 
common  priorities  of  the  EU.  Regarding  the  common  priority  of  a  fair  green  and 
digital transition, the plan identifies the need for additional investments related to the 
implementation of the Climate-resilient Economy Act. Regarding the common priority 
of  social  and  economic  resilience,  the  plan  identifies  the  need  for  additional 
investments  related  to  the  integration  of  the  social  and  health  sector.  Regarding  the 
energy  security  common  priority,  the  plan  identifies  the  need  for  additional 
investments  needed for the synchronisation with  the European electricity system  and 
to increase the share of renewable energy. Regarding the common priority of defence 
capabilities,  the  plan  identifies  the  need  for  additional  investments  related  to  the 
enhancement of defence capabilities. 

Conclusion of the Commission’s assessment  

(31)  Overall, the Commission is of the view that Estonia’s plan fulfils the requirements of 

Regulation (EU) 2024/1263. 

OVERALL CONCLUSION 

(32) 

In accordance with Article 17 of Regulation (EU) 2024/1263, the net expenditure path 
as set in the plan should be recommended by the Council to Estonia. 

HEREBY RECOMMENDS that Estonia 

1. 

Ensure  that  net  expenditure  growth  does  not  exceed  the  maxima  established  in 
Annex I to this Recommendation. 

In  addition,  the  Council  invites  Estonia  to  ensure  the  delivery  of  reforms  and 
investments  responding  to  the  main  challenges  identified  in  the  context  of  the 
European  Semester,  in  particular  in  the  country-specific  recommendations,  and 
addressing the common priorities of the Union. 

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ANNEX I 

Maximum growth rates of net expenditure 
(annual and cumulative growth rates, in nominal terms) 

Estonia 

Years 

2025 

2026 

2027 

2028 

Growth rates 
(%) 

Annual 

Cumulative (*) 

7.1 

9.2 

5.1 

3.6 

3.2 

14.8 

18.9 

22.6 

(*) The cumulative growth rates are calculated by reference to the base year of 2023. 

Done at Strasbourg, 

Done at Brussels, 

For the Council 
The President 

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