Volume 11 Numbers 1/2

Winter/Spring 2002

Constitutional Watch
     A country-by-country update on constitutional politics in Eastern Europe and the ex-USSR

Estonia - After over two and a half years of stable government, the center-right coalition of Prime Minister Mart Laar collapsed in December 2001. In a surprise shift in party cleavages, the promarket Reform Party (RP) put together a new coalition with the left-leaning Center Party (CP). The new government, led by the former finance minister Siim Kallas (RP), was confirmed by the Riigikogu, or parliament, on January 22.

The old three-party coalition, composed of RP, the Moderate Party (MP), and the Pro Patria Union (PPU), had already begun to hit the rocks during the fall, when the partners started sniping at each other over a number of drawn-out and increasingly divisive reforms. In their coalition agreement, signed after the March 1999 elections, the three parties had pledged (among other things) to a radical reform of Estonia's local-government administration (Estonia Update, EECR, Vol. 10, No.1, Winter 2001), the introduction of electronic identification cards, and greater social spending. However, as time progressed, RP began to balk at all of these measures-disgruntling its coalition partners. During October and November, the parties formed a special reconciliation committee to hammer out their disagreements, but the effort failed soon after it began.

A second source of tension arose within the Tallinn city government, where the three parties were also in a ruling coalition. (See Estonia Update, EECR, Vol. 10, Nos. 2/3, Spring/Summer 2001.) Here, too, there was much acrimony over the leadership of two maverick mayors nominated by PPU; first, ex-banker Juri Mois and, later, businessman Tonis Palts. Both had sought to bring a strong dose of private-sector efficiency to the city government but soon encountered stiff opposition. In October, Palts's administration was rocked by scandal within a newly created department for public safety and minority integration. The creation of the department had been payback to a pair of Russian parties, on whose support the three-party coalition depended in the Tallinn city council. However, newspapers soon revealed that the department director had authorized a number of questionable projects for minority integration, many of which went to members of the Russian parties. Next, Palts came under direct attack from RP in November, when he announced a proposal to borrow nearly a billion kroons (roughly $57 million) in 2002 in order to complete, all at once, a number of infrastructural improvements for the city. For RP, this plan was the last straw, and, on December 6, it announced that it was withdrawing from the coalition and would seek to form a new city government with CP. Negotiations with CP proved surprisingly smooth; on December 13, the new city coalition was confirmed in office with CP leader Edgar Savisaar appointed mayor.

Although RP leaders in Tallinn repeatedly professed that their decision was purely a local one and should not affect the national coalition in any way, PPU and MP soon decided that they could not go on with RP, which they viewed as having betrayed them. On December 19, Prime Minister Laar announced that he would resign on January 8, forcing an entire government resignation, following Art. 92.2 of the Constitution.

During early January, speculation centered on whether RP would now pick up the gauntlet thrown down by PPU and MP and actually begin negotiations with Savisaar (CP) on a national government. The entire affair gradually began to cast RP in a somewhat negative light, since, for years, one of the chief motivations behind the RP-PPU-MO coalition had been to keep Savisaar from coming to power at any level, largely because of a fear of his autocratic leadership style. For example, in 1995, Savisaar had ruined his last experience in national government when it was revealed that he had secretly tape-recorded conversations he had had with some previous coalition partners. Moreover, the promarket RP had a number of particularly stark policy differences with CP, including CP's call for a progressive income tax, as opposed to RP, which not only wanted to preserve the existing flat-rate system but also to reduce the basic rate from 26 to 20 percent. Lastly, it was clear that the new coalition would not have a majority in the 101-seat parliament. Although CP was the largest faction, with 28 seats, and RP controlled 19, they would still need to woo the occasional support of either the mostly rural People's Union (PU) or other independents in order to govern stably.

After the two parties sounded out grassroots reaction to a possible coalition during special party gatherings on January 12-13, Kallas and Savisaar began direct negotiations the following week. Within four days, the two had signed a new coalition agreement, in which RP would receive the premiership as well as five ministerial posts, while CP would receive eight. In addition, RP would retain the post of parliamentary speaker. On policy issues, the two sides agreed to drop their mutually opposed taxation plans in favor of the status quo. Likewise, it became readily apparent that with just 14 months to go before parliamentary elections, the new coalition would not be able to undertake any major reforms. Still, the two parties agreed to make changes to the 2002 budget in favor of greater regional spending as well as extending a promise to raise pensions by July 1. These last moves represented a concession on the part of RP, since Siim Kallas himself had just helped to approve the first version of the budget in December 2001 when he was still finance minister.

Not surprisingly, however, the coalition agreement also declared an end to any attempt to carry out administrative reform through the forced merger of local governments. Instead, it called on municipalities to join together on a voluntary basis. Meanwhile, at the national level, the coalition promised to carry out a merger of the economics and transportation ministries that would reduce the size of the government to just 13 ministers. In foreign policy, the new coalition pledged to maintain Estonia's strong course toward the EU and NATO, although CP had criticized the previous government for not taking a strong-enough stance on agricultural policy as well as for falling behind other countries' accession progress. In this respect, the new team will have its work cut out, since, formally at least, the EU has vowed to finish all enlargement talks by the end of this year. The installation of a new government in Tallinn would not necessarily threaten these plans for Estonia, although it would surely precipitate a delay.

Similarly delayed would be a plan to sell Estonia's two main electricity plants to an American firm, NRG Energy. The deal, signed in August 2000, had raised stiff resistance from CP and other opposition parties, since it would have obliged Estonia to buy electricity from NRG for some 15 years at higher-than-market prices (in order to bring a return on NRG's investment). However, by the end of 2001, NRG had failed to put together a loan package for the privatization, which prompted the outgoing Laar administration to nullify the deal as one of its last decisions in office. The move sent the entire notion of privatization back to square one, although it also opened the way for a new consensus to be formed about how to reform the all-important energy industry.

In an important departure from previous government policy, the new coalition agreement-at the behest of CP-also pledged to spend extra money on providing public housing for those people compelled to give up previous homes or apartments as a result of Estonia's extensive policy of property restitution. This policy, heavily favored by the nationalist PPU, had often resulted in people being forced to move out of old dwellings when these were suddenly returned to the previous owners from before the Soviet nationalization of property in 1940. Now, CP hopes at least to alleviate this transition with greater aid for those facing possible eviction. Additionally, CP pushed for a promise to review the previous government's plan to introduce more teaching in the Estonian language in the country's Russian-language high schools. This plan had upset leaders of the minority Russian community, who claimed it was part of a veiled attempt at assimilation.

Lastly, on constitutional issues, the coalition agreement reaffirmed a plan that most Estonian parties had already agreed to, namely a constitutional amendment allowing for the popular election of the president, in contrast to the electoral-college system currently in use (Art. 79). In addition, RP and CP vowed to change the local-election law so politicians could no longer be members simultaneously of both the parliament and municipal councils. Indeed, it was this particular overlap between the Tallinn city council and parliament that had precipitated the government crisis, since many of the PPU, MP, and RP politicians, who had come to blows in Tallinn, also worked together in the national parliament, and, on a purely personal level, it was no longer possible for them to cooperate. Third, the coalition agreement expressed opposition to a plan to create a separate constitutional court, which would replace the existing Constitutional Review Chamber, a subsection of the Supreme Court. The coalition appeared to believe that this would be too costly.

Ultimately, on January 18, President Arnold Ruutel formally nominated Kallas as prime minister, and three days later Kallas received the overwhelming support of 62 Riigikogu deputies. Although the vote was secret, the results showed that PU was ready to back the new government, although it was not officially part of the coalition. This placed the Kallas administration on a somewhat delicate footing, although it was also clear that if RP and CP remained united, it would be a relatively strong minority government.

The conclusion to the whole government shake-up came on January 26, when Ruutel confirmed the new cabinet in office. The ministerial lineup on CP's side proved somewhat of a surprise, when the party's first nominee for finance minister-a little-known banking official from the island of Saaremaa-was rebuffed by Kallas, relying on his previous experience as minister. Later, CP put forward for the position a former agriculture minister and current deputy, Harri Ounapuu. In addition, CP seemed to use the occasion of a largely transitional government to provide experience for its younger members. As defense minister, the party nominated its 28-year-old deputy chairman Sven Mikser, and in the post of education minister it put forward a 27-year-old legal scholar, Mailis Rand.

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