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What Ratas’ removal means for Estonia

The resignation of Prime Minister Ratas and his government comes after accusations of corruption within the Centre Party. Politics in Estonia is entering a phase rarely seen before in its modern history.

January 26, 2021 - Samuel Kramer - Articles and Commentary

The new Prime Minister of Estonia Kaja Kallas. Photo: Estonian Presidency of the EU in 2017. flickr.com

On January 13th 2021, Estonian politics began to tilt on its axis. Estonian Prime Minister Juri Ratas announced his resignation following the Prosecutor’s Office announcement that five members linked to his Centre Party were involved in possible corruption and influence peddling. The syncretic Centre Party, which has been featured prominently in Estonian politics since the 1990s and governed the country for the last five years, was toppled. What caused the downfall of the Centre Party’s second government? Who might benefit from the resulting electoral reverberations? The answer lies in the Centre Party’s post-Soviet history.

All that glitters is not gold (or real estate)

Ratas resigned over accusations that members of his party assisted real estate developer Hillar Teder secure a government loan at below-market rates. In the summer of 2020, the state credit agency KredEx lent Teder 39 million euros for his Porto Franco real estate project. According to State Prosecutor Taavi Pern, Kersti Kracht, an adviser to Finance Minister Martin Helme, and Centre Party Secretary-General Mihhail Korb facilitated the loan. Furthermore, Hillar’s son Rauno Teder agreed to donate 1 million euros to the Centre Party in exchange for development access rights in Tallinn’s Old City Harbour. The Centre Party governs the city, making its support for any developments invaluable. Half of the 39 million euros loan was paid before the State Prosecutor’s investigation concluded and subsequently froze the Porto Franco project. As of this writing, Kracht and Teder are under arrest.

According to the Supervisory Committee on Party Financing (ERJK) database, Teder has provided funds totalling 170,000 euros to the Centre Party since 2019. Since 2013, he has also provided 681,000 euros to the liberal Reform Party, 368,000 euros to the centre-right Isamaa and 40,000 euros to the Social Democratic Party, despite an interruption in 2016-2017 (a time of cabinet instability). Teder seemingly targeted political parties in power, as his donation pattern (Reform and Social Democrats, followed by Centre) mirrors the cabinet composition. Despite this, Teder denied in October 2020 that his donations had any connection to his business activities.

The Centre Party leadership is paying dearly for these donations. The State Prosecutor’s report specifically named the Centre Party as one of the suspects. Apart from Ratas’ departure and Korb’s resignation from Centre Party leadership, Tallinn mayor Mihhail Kõlvart was called in for questioning, though he was not under suspicion by the authorities. Most of the key figures in Centre Party leadership are trapped in the scandal’s quicksand. The Centre Party’s current polling is 21 per cent, two points lower than its 2019 election result. By contrast, the rival Reform Party has remained stable at 28 per cent. Compared to the optimism Ratas’ team sparked in 2016, the lackluster polling suggests the Centre Party will need to reinvent itself again.

All things to all people: how the Centre Party overextended itself

The Centre Party originated as a splinter from the perestroika-era Popular Front (Rahvarinne) of Estonia. The Rahvarinne was formed in the late 1980s as a local committee to support Soviet leader Mikhail Gorbachev’s reform efforts. Founder Edgar Savisaar proved controversial, and the Front splintered after 1991. The remaining faction reformed itself as the Centre Party, ostensibly a “party of the liberal middle class with humanistic goals aiming to bring democratic reforms.” Nonetheless, the party developed a populist, traditionalist tendency which sat awkwardly with its self-proclaimed liberalism. Despite belonging to the socially liberal Alliance of Liberals and Democrats (ALDE) faction in the European Parliament, Centre Party figures remained ambiguous about subjects like same-sex marriage and took a hard line on criminal justice. The party also rhetorically supported the Russian-speaking community, comprising approximately a quarter of Estonians, which ensured that it retained a solid vote threshold. Since 1999, the party vote share remained above 23 per cent, garnering many votes in the Russian-heavy Ida-Viru and Harju counties.

After Edgar Savisaar was replaced by Juri Ratas, the Centre Party came to power. In 2016, it toppled a Reform-Isamaa-Social Democratic coalition and convinced ethnic Estonian voters that it was a responsible, pro-European force. Following the 2019 elections, it formed the government despite coming in second place by allying with Isamaa and the far-right Estonian Conservative People’s Party (EKRE). EKRE ministers became notorious for provocative statements, forcing Prime Minister Ratas to apologise regularly and leading liberal-minded Russophones to move towards the Estonia 200 party. One Centre Party member, Raimond Kaljulaid, quit due to the party’s coalition agreement with EKRE after the 2019 elections and eventually became a Social Democrat. Kaljulaid explained in a 2019 interview: “I quit the party the very next day [after the coalition agreement was made] … we explicitly told voters, and I told them that too, that we would not do that (i.e., enter into coalition with EKRE-ed). So, it was the wrong move.” Juri Ratas tried to make his party into a catch-all movement that could accommodate populists and Russophone liberals – parliamentary realpolitik meant that his efforts at supporting everything pleased nobody.

The reversals for Centre continued into 2021. On December 30th 2020, a few weeks before the Porto Franco investigation became public, the Russian-majority city of Narva’s municipal council elected its first Social Democratic mayor, ending three decades of Centre Party rule. Even Narva and Ida-Virumaa, with its Russophone population and former industrial cities ripe for Ratas’ syncretism, turned against the Centre Party’s perceived hegemony. Notably, the prominent Russophone Centre Party MEP Yana Toom said the change in mayors and subsequent instability was “a positive movement.” Like Kaljulaid, Centre Party voters were promised one thing and received another. The next elections will reveal how many voters will take the same step and abandon the Centre Party.

Can Centre stay whole?

According to the Estonian Constitution, upon a government’s resignation the president appoints a prime ministerial candidate to form a new government. President Kersti Kaljulaid appointed the Reform Party leader Kaja Kallas as the Prime Ministerial candidate on January 14th. Later that week, Kallas and Centre Party deputy chairwoman Mailis Reps announced a possible grand coalition agreement. This ensures short-term stability because there are only two coalition partners, a majority in the parliament and a desire to govern – all of which preclude a snap election. The Kallas-Reps coalition advances the European trend of female-led governments, seen from Finland’s Marin cabinet to Lithuania’s Šimonytė government to Moldova’s President Maia Sandu.

Despite Reform and Centre’s hasty coalition announcement, this pact’s success is questionable due to internal dissension and deep partisan differences. The two parties’ rivalry runs deep, and the leadership’s personal animosities may derail the coalition-building process. Centre Party founder Edgar Savisaar declared in 2013 that “Reform Party has been hurting Estonia for a long time” and in 2004 called the party “traitors” for breaking up a coalition in 1995. The Reform Party returned Centre’s favor – Kaja Kallas’ father, former Prime Minister Siim Kallas, declared in a 2019 interview, “The Centre Party has never loved us. And neither do we!” Another former Prime Minister, Andrus Ansip, declared, “I would have rather seen a coalition with the Social Democrats and Isamaa.” These bold statements are politicians’ bread and butter, but they mean indigestion for a coalition of rivals.

Looking ahead to the 2023 parliamentary elections, both parties could suffer from abandoning traditional positions while newer parties nibble at their base. The Centre Party, having first entered a coalition with the EKRE in 2019, risks further alienating its constituents by working with Reform, a party that advocated Estonifying the education system. Condemning the closeness to EKRE, Yana Toom warned that “the Russophone voter does not recognise their own party.” Similarly, Reform Party voters accustomed to seeing the Centre Party as a Russophilic Other would need to rationalise the upcoming grand coalition. While the major parties tussle over ministers, EKRE climbs in the polls. In the past week, it gained the most of all parties, rising 0.5 per cent to almost 15 per cent of the vote. Coalition chaos could spark further increases to EKRE’s ratings as frustrated voters turn to populist alternatives.

Other European countries have experienced similar instability due to grand coalitions. Germany spent ten out of the last 14 years under unity governments. The Social Democratic Party (SPD) plunged from 40.9 per cent in 1998 to 21 per cent in the 2017 Bundestag elections, a dismal showing for the country’s oldest party. Continued cooperation with the centre-right Christian Democratic Union (CDU) means that the SPD could not claim sole ownership of the government’s successful policies. The SPD is so intertwined with the CDU that the Brookings Institution considered its candidate for chancellor, Olaf Scholz, “the closest thing in German politics to a male Merkel.” The lack of distance from its main rival empowered smaller competitors like the Greens and Die Linke on the left, as well as the Alternative for Germany on the right, to lure away the SPD’s base with promises of ideological distinctiveness. Estonia’s two parties would do well to ensure they remain separate enough to avoid fuelling the dejection that feeds populism worldwide.

The Porto Franco case robbed Centre Party leadership of its preeminent position in Estonian politics. Centre’s ranks are decimated and the polling looks grim. Most importantly, voters who were promised a fresh start face the same sclerotic governance they ostensibly voted out. Juri Ratas sprung to power in 2016 by de-demonising the Centre Party and reassuring Estonian voters it could govern. Four years later, his momentum crumbled under the strain of unwieldy coalitions and subordinates’ actions. The party’s vacillation could cost it electoral credibility during the upcoming votes.

Samuel Kramer is a PhD candidate at the University of St. Andrews. He has a Bachelor’s degree from George Washington University and a Master of Arts from Georgetown University’s Center for Russian, Eurasian, and East European Studies. He has experience in the public sector, non-profit research, and due diligence. Mr. Kramer specialises in minority rights in the post-Soviet space and their intersection with the democratisation process.

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