16.10.2014
The cost of Rail Baltic and the financing of its construction is a very important issue for Estonia and it needs to be discussed as openly as possible. An important starting point for financing is that the European Union is ready to finance Rail Baltic to connect the Baltic states with Central and Western Europe, but not in full, and such projects always require self-financing.
From the beginning of the project, in 2011, it has been clear that Estonia will also have to pay its own contribution and that the entire project will not be fully funded by the European Union (EU). Self-financing has always been required in EU-funded projects and this is nothing new. In official terms, the EU will finance the Rail Baltic project to the extent of 85% of the eligible costs (i.e. after deducting future profits).
In addition, it is important to remember that the more than 600 million euros requested for support cannot be used to finance other projects, as it is specifically intended to improve cross-border connections. Support for the Rail Baltic project can be applied for from the European Community Fund (CEF), which aims to focus only on cross-border projects. In the Baltic region, the most suitable transport project for the region in terms of mountain height is the Rail Baltic railway project. The same support cannot be used to build national roads, establish health trails or renovate kindergartens.
It is also important to note that the cost of the project and therefore the amount of the own contribution or support is not yet precisely in place. This depends specifically on the final cost of the project and, for example, each additional kilometer or special technical solution increases the total cost and also the amount of Estonia's own financing. It also directly affects the profitability of the project. As of now, the cost of the Rail Baltica Estonian corridor, based on current planning data, is approximately 1,14 billion euros, so Estonia's own contribution must be calculated at approximately 500 million euros. The data, including the cost, will be specified in the preliminary design phase.
There are several options for financing Estonia's own contribution, and they need to be thoroughly analyzed in cooperation with the Ministry of Finance. It is also important to spread the financial burden over different years, but the exact financing basket can be decided by the government together with the Riigikogu, in turn doing so in cooperation with Latvia and Lithuania.
We can initially request support from the CEF for 191 million euros, the first application for which must be submitted in February 2015. In addition to the 191 million euros, additional support from the CEF can also be requested in the future if the project has started properly. In principle, applying for the entire 644 million euros from EU funds is not ruled out, but this requires rapid progress with the project - those who are faster have greater opportunities for additional funding.
Financing a project in stages is a common practice. This in turn stems from the logic of the EU budget structure and, in particular, the fact that the rules do not allow the European Commission to commit a large amount of money to a single project up front. Countries must demonstrate progress on the project, which is a prerequisite for receiving additional funding. Similar financing has worked in the EU for years for other large infrastructure projects.
Information about the logic of CEF co-financing is available on the Rail Baltic website: http://www.railbaltic.info/et/uldtutvustus/public-kkk/15-rail-baltic-projekti-korduma-kippuvad-kuesimused.
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