Estonians Vote as Euroskeptics Threaten to Shake Up Politics

(Bloomberg) -- Estonians are voting in general elections, with the two top political forces battling for the first chance to forge a new government and a rising populist party vying to upset a political landscape that's trying to deal with a $230-billion money-laundering scandal.

Prime Minister Juri Ratas's Center Party and the opposition Reform Party were neck-and-neck in opinion polls, pledging to remain faithful members of NATO and the European Union but clashing over taxation and education. In third place, the anti-immigrant, euroskeptic EKRE party is seeking to stir voter anger over the dirty-cash case involving Danske Bank A/S, a scandal that sent waves across Europe but remained a side-issue in the campaign.

With the two other parties in the ruling coalition expected to give whoever wins the vote a chance to secure a majority in parliament, the nation of 1.3 million may sidestep the type of turmoil triggered by populist gains in elections from Poland to Italy. Still, a strong showing by EKRE may force Center and Reform into an awkward coalition or start a bidding war for support and lead to tough coalition talks.

“If Center wins and its junior partners get backing in line with expectations, they'll probably try to continue with the present coalition,” said Juhan Kivirahk, a researcher with pollster Turu-uuringute AS. “If Reform wins, it would still prefer to cooperate with members of ruling block, while everyone tries to avoid EKRE. And finally, there is the option of a grand coalition between Center and Reform.”

Voting began 9 a.m. and will run until 8 p.m., although almost two fifths of voters have already cast ballots electronically.

Taxes, Education

Ratas, who took the reins from a Reform-led government in 2016, is seeking to accelerate a move away from the low-tax, pro-austerity policies the country has championed for most of the 27 years since it regained independence from the Soviet Union. His re-election bid is helped by years of robust economic growth, which has facilitated more spending on subsidies and public sector wages, even as poverty has remained high especially among the elderly.

While both main parties vow to boost pensions, Reform wants to effectively eliminate a central part of Center's anti-inequality platform by extending an income-tax break for low earners to all workers. They're also clashing over how long the country should maintain separate schooling for Estonia's Russian speakers, who make up about a quarter of the population and overwhelmingly back Center.

“The government's decisions haven't taken Estonia in the right direction,” Reform Chairwoman Kaja Kallas said at a TV debate of party leaders Saturday night. “One thing that has been Estonia's clear competitive advantage is a simple tax policy. This has to be fixed.”

EKRE has tried to leverage the Danske scandal, which is centered on the lender's Tallinn branch, to rile voters, urging prosecutors and the security service to release all the information they had on the issue. The scandal has also spread, with Swedbank AB acknowledging it handled suspicious transactions through its units in the Baltics linking it to the Danske case.

Two out of three surveys by Estonia's biggest polling firms put Reform ahead of Center, but within the margin of error. Reform had backing of 27 percent and Center 25 percent in a Feb. 26-28 poll commissioned by the Postimees newspaper, which included respondents who voted early. EKRE had 17 percent, versus 10 percent when Ratas's government took power in 2016.

"A grand coalition between the Reform Party and the Center Party would be fragile, because the Reform Party's platform has been focused on undoing the work of the Center Party over the past three years," said Piret Kuusik, a junior research fellow at the Estonian Foreign Policy Institute. "So it will depend on how many seats the smaller players get, and if they can form a majority with the winner."

To contact the reporter on this story: Ott Ummelas in Tallinn at oummelas@bloomberg.net

To contact the editors responsible for this story: Andrea Dudik at adudik@bloomberg.net, Michael Winfrey, Steve Geimann

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