Financing Estonia: Norwegian and Swiss aid not forever?

Photo: Sander Ilvest

Thus far, Switzerland and Norway have supported Estonia with dozens of millions of euros. In all likelihood, Swiss grants are hanging on a referendum.

«Estonian finances are in order,» is what coalition politicians like to constantly repeat, referring mainly to budget balance and the nonexistent governmental debt.

A factor less mentioned is financial aid and its share in the budget. From 2000 to the end of 2013, Estonia pocketed over €6bn of EU aid, equalling €4,552 per inhabitant.

«Foreign grants have become the main financial investment,» academician Urmas Varblane told a financial conference this spring. «Thanks to foreign aid, it has been possible to keep the state [going] and many reforms have not been necessary,» he added.

While we have almost begun to take EU aid for granted, less is known about Swiss and Norwegian funds which also reach into dozens of billions of euros.

Three programs

From outside the EU, financial help flows within three cooperation programmes – Estonian and Swiss cooperation programme, Norwegian grants and European Economic Area (EEA) grants. In the latter, it is also Norway that is the largest donor, but it also includes Iceland with its 300,000 inhabitants and Liechtenstein with just twenty thousand or so citizens but a GDP per capita ten times that of Estonia. Therefore, for the sake of simplicity, these are also often referred to as Norwegian support.

True: a Faktum & Ariko study of this August showed that 35 percent of people in Estonia are aware of the Norwegian and EEA grants. A year before that, the percentage was 27 among grown-ups i.e. awareness of Norwegian aid is pretty high.

All three programmes are aimed at reducing the social and economic inequality of states that joined the EU in 2004 or later, but also that of Greece, Portugal and until now even of Spain. While the Swiss aid is unilateral, EEA grants come with strings attached for the three participating states. Norway, for instance, gets the return benefit of additional customs free fish import quotas.

As stated, the grants are rather large – since 2009, the three programmes put together have yielded €78m or 1.2 billion Estonian kroons.

Alas, the Swiss support programmes run out this year and by 2015 specific projects are to be wound up. The application of Norwegian aid programmes lasts till 2016.

At the moment, the continuation of the programmes in future time periods is unclear. Talks are underway regarding Norwegian and EEA support till 2019, but they are not making too much progress. According to foreign ministry, Estonia is interested in renewal of the financial mechanisms.

When it comes to Swiss aid, the EU is in negotiations with Switzerland regarding mutual relations concerning a larger packages and this will probably be put to a referendum in Switzerland in 2016.

The definite projects financed within Swiss and Norwegian programmes greatly vary both in areas thereof and the volumes concerned. Swiss grants, for instance, have been split between six ministries – the largest beneficiaries being environment ministry (€7m), social ministry (€5.8m), economy/communication ministry (€5.4m). The money has been allocated to divisions (sub-offices) or directly to the ministries.

Thus, Alarm Centre received €1.5m to create a new work equipment – a geoinfo-system i.e. a digital map – 85 of which was financed by Switzerland and 15 Estonian state.

According to environment ministry foreign financing specialist Krista Tõnisson in charge of EEA and Norwegian aid for water bodies’ management said the projects financed are towards improvement of Estonia’s internal and marine water environment. 

Grants play large role

For various projects, Money has been granted to Estonian Environmental Research Centre, Geological Survey of Estonia, Peipsi Centre for Transboundary Cooperation, and MTÜ Laidevahe Loodus. The financing of the projects is in hundreds of thousands of euros and make up 85 to 100 percent of the overall costs of the projects.

As an example of that, Environmental Research Centre received €598,200 for maritime programming studies including cost-benefit analysis for reduction of pollution with use of LNG as ship fuel. For said programme, our own taxpayer money as not used.

Grants

Financial aid received by Estonia in 2009–2014:

•    European Economic Area grants – €21m

•    Norwegian grants –                        €23.7m

•    Swiss grants  –                               €33m