REPuBLIc OF EsT0NIA
() MINisTRY OF
Mr Andrzej Domaiiski
President (ECOFIN)
. Our ref.t4.Oq, 2.OS No 44I/ 4/1..03.O-1
Council of the European Union
Mr Vaidis Dombrovskis
Commissioner for Economy and Productivity,
Impiementation and Simplification
European Commission
Dear Sirs,
On 6 March 2025, the European Council welcomed the intention of the Commission to
recommend to the Council the activation, in a coordinated manner, of the national escape
clause under the Stability and Growth Pact to accommodate higher defence spending. The
Commission Communication (C(2025)2000 final) of 19 March 2025 proposes a framework
for the application of flexibility under the EU fiscal framework.
Estonia hereby requests the activation of the national escape clause for the period 2025 to
2028. This request is in accordance with Article 26 (1) of Regulation (EU) 2024/1263, and
considering the Commission Communication mentioned above.
Article 26(1) ofRegulation (EU) 2024/1 263 establishes that the national escape clause can be
activated if three conditions are met: (i) there are exceptional circumstances outside the
control of the Member State, (ii) finances of the Member State concerned, and (iii) the
deviation from the net expenditure path as set by the Council does not endanger fiscal
sustainability over the medium term:
1. As acknowledged by the European Council, the urgency for the EU Members States to
significantly increase their defence spending results from the repercussions that Russia’s
continued war of aggression against Ukraine has for European and giobal security in a
changing environment. This situation is an exceptional circumstance outside the control of
each Member State.
2. The government of Estonia considers that this exceptional circumstance requires a
significant build-up of defence capabilities with a major impact on its public finances.
According to the available statistics published by Eurostat and Statistics Estonia, general
government total defence expenditure (government expenditure by function (COFOG division
02)) in Estonia amounted to 2,0 percent of GDP in 2021, 2,2 percent in 2022, and 3,2 percent
in 2023. Defence spending is estimated at 3,4 percent ofGDP in 2024 and 3,7 percent ofGDP
in 2025 according to the Spring Forecast of the Ministry ofFinance.
Suur-Ameerika 1/10122 Tallinn / Estonia / +372 611 3558 /
[email protected]
www.rahandusrninisteeriurn.ee / Reg. code: 70000272
For the years to come, the government has announced a pian to increase defence spending to
at least 5% ofGDP from 2026 onwards.
3. An increase in defence capabilities will lead to higher net expenditure than the path
endorsed by the Council for Estonia on 26.11.2024.
The govemment of Estonia acknowledges that, apart from the leeway for defence expenditure,
the EU fiscal rules will continue to operate normally and deviations from the endorsed net
expenditure paths other than those specified under the national escape clause will be recorded
in the control account (Article 22 of Regulation (EU) 2024/1263) throughout the period of
activation of the national escape clause.
Fiscal sustainability is an enabling condition for dynamic and competitive economies.
Looking ahead, structurally higher defence expenditure in the EU Member States may require
policies to preserve fiscal sustainability and compliance with the fiscal rules.
Yours sincerely,
Jtirgen Ligi
Minister of Finance of Estonia
Copy to:
Mr Tuomas Saarenheimo
President
Economic and Financial Committee
Mr Maarten Verwey
Djrector-General for Economic and Financial Affairs
European Commission
Tanel Steinberg +372 6113519
[email protected]
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