Estonian parties race to win voters with plans to make growth more inclusive

By bne IntelliNews February 27, 2015

Wojciech Kość in Warsaw -


In keeping with Estonia’s reputation as an online nation, the general election – officially scheduled for March 1 – has already begun, as voters were allowed to register their votes electronically on February 24 and 25.

The majority of the 979,000 Estonian electorate will, however, go to the polling stations on March 1 to elect a new parliament, after a campaign in which parties have tried to attract voters by outlining different visions of how to make the post-crisis growth more inclusive. Estonia’s security, following Ukraine’s conflict with Russia, is also an important issue.

The main party in the ruling coalition, the liberal Reform Party, claims that under its rule, the Estonian economy has done well.

Growth, however, has recently been sluggish. Growth came in at 1.8% y/y in 2014, with a 2% forecast for 2015.  But government debt is a mere 10.4% of the GDP, which is the lowest in the Eurozone, where it’s 96% on average. Meanwhile unemployment is at a fairly decent level of 7.4%.

“We want Estonia to be acknowledged as a Nordic country. A country with Nordic living standards and security, guiding the world, a leading country in terms of individual freedom and economic security,” Prime Minister Taavi Roivas said on 17 January.

The Reform Party proposes policy continuity, although it will be under pressure to address some important issues, as outlined by a recent country report from the OECD.

The organisation pointed out that moving on to the “fast track to full convergence with the living standards of the OECD’s high-flyers” will require more than simply utilising the “underlying strengths” of the economy. Estonia will need to improve productivity, which, in terms of GDP per hour worked, is less than half the average of the top half of OECD member states, the OECD said.

The country will also need to address income inequality, as data from Statistic Estonia suggested recently that the poorest Estonians were missing out on post-crisis growth. The issue of wages, particularly the minimum wage, has thus become one of the faultlines in the campaign.

The junior coalition party, the Social Democrats, are proposing a bolder programme.The Social Democrats strongly accentuate the need to roll out a policy oriented more towards the needy, with a proposal to increase the minimum wage from its current level of €355 per month to €800 in four years. In order to appease business, the party proposes to slash the level of social charges companies pay from the current 33% of salaries to 30%.

Finally, the junior coalition partner of the previous cabinet, Pro Patria-Res Publica (IRL), proposes to boost people’s incomes by exempting those earning under €500 per month from income tax.

Depending on the final coalition configuration, the Reform Party’s programme will probably be altered to contain proposals from either the Social Democrats or the IRL.

That the future government will emerge from the three parties is the most likely result. Recent polls suggest it is going to be a tight race between the three parties involved. The Reform Party and the Social Democrats would receive 22% and 18% of the vote, according to the last poll carried out before the vote, on 23 February. Pro Patria-Res Publica came in at 16% in the poll.

A lot will depend on how many seats the Social Democrats and the IRL will win. “The Reform Party would love a bidding war between IRL and Social Democrats,“ ERR wrote in an analysis on February 18.

However, the largest party is likely to be the Centre Party, its electorate largely made of Estonia’s Russian minority, which topped the last poll with a result of 27%. But the Centre Party is seen as a representative of Estonia’s Russian minority – making some 26% of the country’s total population of 1,315,000 – which makes it problematic in today’s climate of insecurity in the Baltic States after Russia invaded Ukraine.

Other political leaders have so far been firm in pledging to exclude the Centre Party from any coalition talks. That said, the Estonian president Thomas Hendrik Ilves said in an interview for the Postimees newspaper on February 25 that he would not hesitate to ask the Centre party – if it wins – to form the government first.

“The party that gets most votes will get the first chance. Let’s see who wins, I make the proposal,” Ilves said. “Then, the issue will be: will he be able to form the government,” he also added.

The electoral campaign has been marked by the rising importance of security issues. With a substantial Russian minority, there are fears in Estonia that Putin would like to replicate the Ukrainian scenario of coming to the rescue of compatriots, who Russia claims are the victim of discrimination.

Estonia’s Russians, however, have shown no desire to agitate for Russian rule or to emigrate to Russia.

“Over the last two-year period for which statistics are available, only 37 ethnic Russians moved from Estonia to the Russian Federation. This, despite the latter’s programme for resettling those it calls “compatriots,” and the regular complaints of Moscow officials that Estonia and other neighbouring countries are oppressing their ethnic Russian communities,“ Paul A. Goble, former special advisor for Soviet Nationality and Baltic Affairs at the US Department of State, wrote for the Quartz magazine on 16 February.

Overall, Estonians themselves do not seem too concerned with the Russian threat. According to one poll, only 5% of the Estonians fear that a war will break out between their country and Russia, while 21% believe it is possible. Six Estonians in 10 (61%) and almost all of the Russian-speakers (92%) do not believe there will be open conflict between Tallinn and Moscow.

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