Estonia's Reform party wins election but will have to broaden coalition

By bne IntelliNews March 2, 2015

Wojciech Kość in Warsaw -


Estonia’s ruling liberal Reform party finished ahead of the Centre party in elections on March 1, but it will need to build a three-party coalition to remain in power.

Prime Minister Taavi Roivas’s Reform party won 27.7%, which will translate into 30 seats in the 101-seat parliament, the Riigikogu. This is a drop of 3 seats compared to the 2011 vote.

The Centre party of former premier Edgar Savisaar, which had topped the last opinion poll before the election, came second with 24.8% of the vote to win 27 seats, up one seat from the previous election.

The left-leaning Social Democrats, the junior partner in the ruling coalition, was third with 15.2% or 15 seats, down by four from 2011.

Despite the possibility of early voting and e-voting, the election turnout came in at a not-so-impressive 63.7%.

With both coalition partners losing seats, they no longer have a majority in the Riigikogu and will be forced to seek a third partner.

Who might join in is unclear. A grand coalition of the Reform party and the Centre party is general considered unlikely, though they have been in the same coalition in the past and are in the same group in the European Parliament. But the relationship has been soured by criticism of Savissar’s stance on Russia's incursions into Ukraine. The Centre party’s electorate consists largely of ethnic Russians. Roivas, 35, ruled out a coalition with the Centre party on election night.

This means that Reform is likely to look to a former coalition partner, the conservative IRL party, which, however, is the biggest loser of the election. The party came in fourth with 13.7% of the vote, or 14 seats – a reduction of nine in comparison to 2011.

Following the election, speculations were rife whether either of the two newcomers to the parliament – the conservative-leaning Free party (8.7%, 8 seats) or the nationalist Conservative People’s party of Estonia (8.1, 7 seats) – could fit into the coalition jigsaw.

The arithmetic of the 101-seat parliament are, however, that it would take both newcomers to join in – making the coalition government less manageable.

According to the Estonian media, the two most likely coalitions were therefore liberal-conservative ones with a leftist tilt. This would be the Reform party, the Social Democrats and the Free party with 53 seats, or a coalition of the Reform party, the Social Democrats and the IRL, with a slightly more solid majority of 59 seats.

The election campaign had focussed on different visions of how to make the post-crisis growth more inclusive. Estonia’s security, following Ukraine’s conflict with Russia, was also an important issue.

The 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,” 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 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 IRL proposes to boost people’s incomes by exempting those earning under €500 per month from income tax.

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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