Preliminary Assessment of Financial Instruments Planned for the European Union Budgetary Period 2028–2034

The aim of the project is to establish an evidence-based basis for deciding where and how to use financial instruments during the European Union budgetary period 2028–2034, and in which situations they should be combined with grants. The preliminary assessment will help ensure that the European Union funds available to Estonia are directed to where they are most needed and where they can have the greatest impact.

The assessment focuses on identifying market failures and financing needs. We analyse the areas and target groups where the market is unable to finance the necessary investments in sufficient volume or on suitable terms, as well as the main reasons for these gaps. The analysis takes into account regional differences, as well as the size and stage of development of enterprises.

The preliminary assessment covers 12 areas:

• entrepreneurship,
• defence,
• forestry,
• hazardous substances,
• circular economy,
• housing and cultural heritage buildings,
• maritime affairs and the aquatic environment,
• health and well-being,
• adult education,
• fisheries,
• agriculture and food processing,
• other rural entrepreneurship.

Based on the market failure analysis, we will develop proposals for an investment strategy and potential financial products, and provide recommendations on when it is appropriate to use financial instruments separately and when they should be combined with grants.

An important part of the assessment is to develop recommendations that would enable public funds to be used as effectively as possible. To this end, we will examine, among other things, how financial instruments can be used to reduce investment-related risks, attract private capital and leverage the impact of public funding, while avoiding situations where public funding crowds out market-based financing.

The results of the assessment will support decisions on the appropriateness of using the financial instruments planned for 2028–2034 and assess whether and how their use could be extended to new areas. The project will also establish the evidence base needed for the preparation of the national plan, including justification for the use of financial instruments based on market needs, the need for risk mitigation, and opportunities to attract and leverage private capital.

Commissioned by the Estonian Ministry of Finance, the project is being implemented by LevelLab, Civitta and the Institute of Baltic Studies.