ESTONIA'S PM DIMISSES COALITION PARTNER BUT

C O N F I D E N T I A L TALLINN 000145 SIPDIS E.O. 12958: DECL: 07/23/2018 TAGS: PGOV PREL EN SUBJECT: ESTONIA'S PM DIMISSES COALITION PARTNER BUT GOVERNMENT CONTINUES CLASSIFIED BY CDA Karen Decker for reasons 1.4 (b) & (d). REF: TALLINN 144 ¶1. (C) On May 21, Prime Minister Ansip jettisoned the smallest partner (Social Democrats - SDE) in the ruling coalition after the Government failed to reach agreement on 383 Million EUR (6 billion eeks) in budget cuts. This weekend, Ansip's Reform Party and its remaining coalition partner (Isamaa and Respublica Liit - IRL) are expected to open negotiations to replace SDE with the People's Union, an opposition party with six seats in the parliament. (Note: IRL and Reform together control 50 of 101 seats in the parliament, leaving them one vote shy of a majority. End Note.) While President Ilves signed off on Ansip's request to fire the three SDE Cabinet Ministers (Finance, Interior and Population),he issued a public statement calling on Ansip to "seek a new political mandate from the parliament." Ilves does not have the legal authority to require Ansip to step down and Ansip has made clear he does not intend to resign as Prime Minister. ¶2. (SBU) The split in the coalition has been coming for weeks as coalition partners (Reform, SDE and IRL) engaged in contentious negotiations over budgets cuts and implementation of a new labor law (reftel A). The situation came to a head May 15 when the Reform Party publicly announced it would open consultations with other parties in order to get the support it needs to push its negative budget through the parliament (before summer recess starts on June 15). On the morning of May 21, the government approved a package of cuts totaling approximately 217 million EUR (3.4 billion eek) - just over half the amount necessary to keep the GOE's budget deficit small enough (3 percent) to stay on track for euro zone accession in 2011. Immediately following the cabinet meeting, citing an inability to bridge the remaining differences with SDE, Ansip announced he would seek the President's approval to eject the three SDE ministers from the government. (Note: the current Ministers of Agriculture, Justice and Social Affairs will oversee the portfolios of the dismissed ministers until new ones can be appointed. End note.) In his public remarks, Ansip castigated SDE for using "its membership in the government as a platform to enhance SDE's public profile" ahead of the upcoming European Parliament (June 7) and local government (October 18) elections. He also committed to continue the GOE's conservative fiscal policies. ¶3. (C) By dismissing the Social Democrats, Ansip has removed the biggest impediment to reaching agreement on the rest of the necessary budget cuts. It is very likely that Reform/IRL will press ahead on the budget in parliament even as jockeying to replace SDE continues. The leaders of the People's Union are scheduled to meet on Monday to discuss Reform/IRL's offer to open coalition negotiations. At the same time, the Greens, which also hold 6 seats in the parliament, have also expressed a willingness to support Reform/IRL's budget proposals. (Note: Both Reform and the Center Party - Estonia's largest opposition party - have rejected the possibility of going into coalition together. A near-term reconciliation between Reform and SDE is also unlikely. End Note.) ¶4. (C) COMMENT: Ansip's determination to stay in office and replace SDE rather than dissolve the coalition bucks political tradition in Estonia. It is clear, however, that Reform and IRL are hoping to avoid dissolution of the government and preserve some stability as Estonia attempts to keep its Eurozone hopes alive. Post will continue to monitor this situation and provide updates. END COMMENT. DECKER