Prime Minister Michal: the government will submit a budget of security and prosperity to the Riigikogu

The prime minister emphasised that with these budget decisions, the government is securing Estonia's freedom, supporting economic growth, and increasing the incomes of the people.

"In drawing up this budget for security and prosperity, we have taken fundamental, far-reaching, and forward-looking steps that seem impossible at first glance - we reduced taxes while increasing defence spending. Another example of this is the simultaneous raise in wages and cuts in budget expenditures."

The prime minister said that increasing Estonia's defence spending to an average of over 5% of the GDP within four years means that 2.8 billion euros will be added to defence spending over the next four years.

"In 2026, defence spending will increase by 844.5 million euros compared to 2025. The steeply increasing defence spending will allow us to develop the Estonian air defence faster, increase the army's firepower, create a deep-warfare capability, and place significant emphasis on the development of drone and electronic warfare, as well as cyber security. It also concerns extensive infrastructure works," he explained.

Michal stated that the government is guided by the principle that economic growth and increased prosperity are supported by a lower tax burden and a more efficient and flexible state.

"The tax changes will leave approximately 780 million euros in the economy next year. The tax burden in Estonia will decrease by 1.4 percentage points: from 36.6 per cent to 35.2 per cent. This means that the competitiveness of the Estonian economy and business environment will clearly improve. We can think more boldly about making new investments and creating jobs," said Michal.

The prime minister emphasised, among other things, that a simple and uniform tax system will be restored in 2026. "A system that punished ambition and excessively taxed the salary bracket of €1,200-2,100 is being thrown into the dustbin of history. As a result of this change, the people earning an average salary will receive almost a thirteenth salary, or more than €1,800 per year," said Michal.

According to the head of government, the budget also prioritises salary increases for key front-line workers - the salary fund for rescue workers, police officers, teachers, and cultural workers will grow by up to 10%. Pensions will continue to increase in line with the applicable index, and the subsistence benefit system will become more flexible.

The prime minister also highlighted investments in research and infrastructure.

He particularly emphasised the importance of a responsible fiscal policy. The budget deficit for 2026 will be 4.5% of the GDP, but this remains within the defence expenditure exemption clause of the European Union. The prime minister confirmed that special attention will be paid to state expenditures and that their reduction will begin already during the validity of the exemption clause.

The speech of the prime minister: Political statement of Prime Minister Michal on the submission of the 2026 state budget to the Riigikogu

Photos from the Riigikogu: https://www.flickr.com/photos/stenbockimaja/albums/72177720329246516/

Government Communication Unit