Identifier
Created
Classification
Origin
07TALLINN118
2007-02-23 09:24:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Tallinn
Cable title:  

ESTONIAN PARLIAMENTARY ELECTIONS II: WHAT'S

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INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
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TAGS: PGOV PREL EN
SUBJECT: ESTONIAN PARLIAMENTARY ELECTIONS II: WHAT'S
AT STAKE?

REF: A) TALLINN 92 B) TALLINN 79 C) TALLINN 88

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TAGS: PGOV PREL EN
SUBJECT: ESTONIAN PARLIAMENTARY ELECTIONS II: WHAT'S
AT STAKE?

REF: A) TALLINN 92 B) TALLINN 79 C) TALLINN 88


1. (SBU) Summary: Estonia's March 4 parliamentary
elections will produce a multi-party coalition
government that is unlikely to bring about any
significant changes in Estonia's domestic or foreign
policy. All of the major parties are campaigning on a
mixture of social and economic issues including
education, health care reform and wages. Although
foreign policy issues are on the back burner, there
are differences among the parties on key issues such
as Iraq and Russia that could influence Estonia's
long-term strategies in these areas. End Summary.

Another Coalition on the Horizon...
--------------


2. (SBU) Just over a week before Estonia's
parliamentary elections, we can state that the next
government is likely to be a coalition involving two
or three of the country's six major parties, even if
we don't yet know which ones. In spite of their
contrasting platforms, the two parties likely to do
best in the election -- Reform and Center -- are highly
pragmatic. Moreover, a booming economy will ease the
coalition negotiations, as there should be enough
money in the budget to give all the parties in the
next coalition a share to spend on their priority
issues. As a result of these factors, we expect the
next Estonian government will not make significant
changes in key economic or foreign policies.

It's the Economy. . . .
--------------


3. (U) Over the last several weeks we have asked
senior representatives from the major political
parties what they believe will be priority issues for
the new government. Invariably, domestic economic and
social issues topped their lists. Promoting continued
economic growth, with particular emphasis on the need
to address Estonia's growing labor shortage (Ref A)
and improve productivity, was a common theme. In
addition, investing in education, reforming the
healthcare system, addressing demographic issues, and
improving wage levels were also frequently cited as
priorities.


4. (SBU) Speaking frankly, Mart Laar, Pro Patria-Res
Publica (IRL) Prime Minister candidate told us that
Estonia needs to deal with the fact that it no longer
has a competitive advantage on low-cost labor.

Estonia needs to move toward a more knowledge-based
economy. Viljar Jaamu, Director of Enterprise
Estonia, agreed with Laar's assessment. He said that
the next government's challenge will be improving
Estonia's productivity to transition the economy into
higher value-added sectors and services.


5. (SBU) The populist Center Party has emphasized the
need for higher wages -- calling for a 23% increase in
wages each year over the next foQyears. Edgar
Savisaar, Center Party Chairman and Minister for
Economy, told us that wages have to go up in order to
stem the out-migration of workers. He dismissed
arguments that raising wages faster will have a
negative impact on economic growth, noting that when
the GOE increased retirement benefits several years
ago "nothing happened to the economy." The Reform
Party, has also campaigned on the need for higher
wages, although Reform has targeted attracting higher
paying jobs to Estonia. Reform Secretary General
Kristin Michal dismissed Center's wage pledge for its
lack of details and said that it seemed to smack of "a
top-down tendency, command-control mentality that will
only increase labor costs without attracting higher-
end jobs with better salaries."


6. (SBU) More than any other economic issue, the
parties are divided over tax policy. Center has made
eliminating Estonia's flat tax a priority, although
after two years as a member of a government committed
to the flat tax, it is clear that Center will give up
this position in coalition negotiations if that is
necessary to get into the next government. And it
will be necessary since Reform and the IRL both oppose
Center's tax plan. Andrus Ansip, Prime Minister and
Reform Party leader, has said that protecting the
flat-tax is a non-negotiable red-line in Reform's

TALLINN 00000118 002 OF 003


platform. Reform plans to continue lowering income
taxes by 1% a year until the tax rate is 15% in 2015.
Reform has also pledged not to introduce a tax on
reinvested corporate profits, because the party views
the current tax structure as one of the cornerstones
of Estonia's economic competitiveness.

Foreign Policy, a Difference of Degrees
--------------


7. (U) As in previous elections, parties have placed
relatively little emphasis on foreign policy issues in
their campaigns. In our discussions with the major
parties, all stated decisively that the elections
would not significantly change Estonia's foreign
policy goals. However, two issues have emerged that
divide the parties: Estonia's military presence in
Iraq and relations with Russia.


8. (SBU) The Center Party and People's Union
politicians have been in the forefront with their
unease over Estonia's participation in Iraq. In last
year's parliamentary debate on reauthorizing Estonia's
Iraq mission, some members of both parties supported
limiting the mission mandate to six monthQ(rather
than a year). In the run up to the vote, Center MP
Ain Seppik openly expressed his concerns to us that
Iraq was turning into a "quagmire with no exit
strategy" for Estonia. He said Center and People
Union MPs were growing more and more convinced that
Estonian troops should return from Baghdad.
Alternatively, Reform party leaders including PM
Andrus Ansip and FM Urmas Paet are among the strongest
supporters for Estonia's Iraq mission. In a speech to
Parliament on February 20, Paet declared that leaving
Iraq now would be "irresponsible." IRL also supports
the Iraq mission and the party has supported keeping
the troops there for as long as they are needed.
However, apart from Iraq, there continues to be strong
cross-party support for Estonia's mission in
Afghanistan and Kosovo.


9. (SBU) Although not a major issue in the elections,
Estonian-Russian relations will remain a contentious
and sensitive matter for the next government. The
still unsigned Russian-Estonian border treaty has not
been an issue in this campaign -- but may haunt the
next government. (Note. Particularly now that it
appears the Latvians will sign their border treaty
soon. End note.) While Reform has demonstrated a
pragmatic interest in working with Moscow on concrete
matters (e.g., cooperation on transport, law
enforcement, environment, etc.),it has not hesitated
to milk the controversy over the Soviet "Bronze
Soldier" monument for its own political gain at the
expense of support from Estonia's Russian-speaking
minority and relations with Moscow (Ref B). In
contrast, the Center Party has consistently taken a
more conciliatory approach on minority issues and
relations with Russia, which is largely responsible
for the party's very high level of support among
Russian-speakers.


10. (SBU) While Estonia's role in the EU has not been
a key campaign issue, Jana Vanaveski, Foreign Affairs
Advisor to President Ilves, told us the results of the
election will directly affect Estonia's ability to
shape EU policy making. In her opinion, it is
important that Estonia has ministers that speak
English and personally attend ministerial meetings in
Brussels. When there are Ministers with key
portfolios -- like Minister of Economy Savisaar -- who
do not speak English and rarely go to Brussels, it
diminishes Estonia's ability to influence EU policy.
Given the growing importance of EU discussions on
energy security, for example, the next government's
decision on key ministerial positions are critical.
In our meetings with party leaders, only the Social
Democratic candidate for PM, Ivari Padar, cited
Estonia's role in the EU as one of the most important
issues for the next government.

Comment: Why the Elections Matter
--------------


11. (SBU) Comment. In just over 15 years, Estonia has
emerged as a staunch ally in the GWOT and a reliable
partner in promoting the Freedom Agenda. The country's
dynamic economy serves as a model for other countries

TALLINN 00000118 003 OF 003


in the region. While we do not expect any significant
policy changes following these elections, the shape of
the next coalition government may change the tone of
Estonia's approach to key issues including Iraq,
Russia and the EU. End Comment.


GOLDSTEIN