The government plans to end support for passenger ferries from 2026, which would save the state €40 million.

Politicians say the move is necessary to help reduce the deficit, but representatives from the maritime sector warn it could impact Estonia's status.

Ministry of Climate Secretary General Marten Kokk said scrapping the policy will reduce Estonia's competitiveness in the sector. Sweden is investing €150 million this year in a similar measure, Finland €80 million, while Estonia's proposal was €9 million per year, the official said.

"This proposal was initially approved in the coalition agreement, we also had state aid approval for it, and we would have had the funds – but at the last moment, a political agreement was not reached. As a result, we are no longer including it in next year's budget in this form," he explained.

Jüri Lember, head of the Independent Seamen's Union, said Tallinn could remove the Estonian flag from one of its vessels and have it sail under a different country's jurisdiction.

He said Tallink's Victoria ferry has been operating at a loss on the Tallinn-Helsinki route for quite some time. Lember said the ship lacks sufficient cargo flows and passengers, and Tallink cannot sustain such negative results for long.

"I would actually call one large ship a complete enterprise: between its two crews, it represents 300 jobs. This could mean removing such a ship from under the Estonian flag and chartering it out elsewhere on the world's oceans. We know that after the pandemic, two Tallink ships are already standing idle in Europe as floating hotels, with virtually no Estonian jobs on board," Lember said.

Tallink CEO Paavo Nõgene also said on Thursday that without the support, it is very difficult to gain an advantage in the European Union and ensure connectivity in times of crisis.

"Without corresponding support, it is very difficult to achieve this on equal footing in the European Union today, and leaving the Estonian flag would mean mass layoffs and a loss of state revenue," said Nõgene.

"This is not in the interest of Estonia as a maritime country. Tallink has agreed with the Ministry of Climate to hold discussions about the situation at the beginning of the new year, and then the future of passenger shipping under the Estonian flag could become clearer," he added.

Lember said state support should disappear only when market conditions in shipping recover. He added that support measures are currently in place in Finland, Sweden, and Latvia.

"Our support should last as long as other countries are applying equivalent support," he said.

Võrklaev: The pandemic is over and Tallink is profitable

The cut was proposed by the former minister of finance and current member of the Riigikogu Finance Committee Mart Võrklaev (Reform).

The support was introduced as a temporary relief effort during the coronavirus crisis, and should be seen as such, he said.

The MP denied it would lead to Tallink switching flags and said the Estonian flag was not a condition of support: the requirements say that the ship must be from a country in the European Economic Area.

Võrklaev said funding does not guarantee that ships would sail under the Estonian flag or be required to do so.

"We're mostly talking about a single shipping company operating in Estonia (Tallink), which, as I've heard, has used this tactic in negotiations to get support from the state by threatening to leave the Estonian flag. In my view, that is not the best negotiation tactic," he said.

The MP said the pandemic is over, the company is once again profitable, and therefore spending taxpayer money is no longer justified.

"In state finances, we constantly have to make choices: whether to spend money on defense or on supporting one sector or another. If we spend money, we have to raise taxes elsewhere, which puts the state in a worse competitive position overall. These are all trade-offs, because we do not have one big pot of money that can be endlessly divided," Võrklaev said.

ERR reported in October that Tallink Group's profit fell by 90 percent in the first nine months of this year, to €5.1 million. The company attributed the decline to a difficult economic environment.

Tourism in Estonia has still not returned to pre-pandemic levels.

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