2021.01.14 10:04

Estonia's government collapses – what happens next?

ERR News2021.01.14 10:04

Estonia’s government has resigned following a scandal surrounding Prime Minister Jüri Ratas. What happens next in the Baltic country?

The explainer below has been compiled by the Estonian public broadcaster ERR News. The full article can be found here.

What happened?

At around 03:00 on Wednesday morning, Prime Minister Jüri Ratas announced he would resign from the post of prime minister of Estonia after corruption allegations related to a €39-million loan to the Porto Franco real estate development in Tallinn were made public the day before.

What does this mean?

According to the Estonian constitution, if a prime minister either dies or resigns this triggers the resignation of the whole government. So, this means Estonia's Center, the far-right Conservative People's Party of Estonia (EKRE) and Isamaa coalition government has resigned and a new coalition must be formed.

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What happens now?

Ratas will act as a caretaker until the new government has been formed. During this time, the government can continue its activities.

On Wednesday, Estonian President Kersti Kaljulaid said she would give the Chairman of the Reform Party Kaja Kallas permission to form a government.

The Reform Party won the most seats – 34 – at the last election and must now negotiate with other parties to reach the 51-seat mark, giving the government a majority in the Riigikogu.

Kallas will meet with Kaljulaid on Thursday and she will then have two weeks to form and present a government. If she cannot do so, another party will be asked to form a government. If that party also cannot do so, this may lead to extraordinary elections.

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Will the far-right EKRE be part of the new coalition?

At the moment, this seems unlikely – but it has not been completely ruled out.

EKRE would need to form a government with Center or Reform to reach a majority but neither seemed keen on Wednesday.

Reform and EKRE do not see eye-to-eye on values, so even though the two parties have enough seats to make a two-party coalition it is thought to be unlikely this will happen. SDE has ruled out working with EKRE, so those two parties will not be in a coalition together.

What's going on with Porto Franco?

The Porto Franco real estate development was given €39.4 million in state aid through KredEx loan last year to help counter the effects of the economic effects of the coronavirus.

Critics at the time questioned why a loan was being granted to an unfinished project as state aid was issued to companies demonstrably hit by the coronavirus pandemic and its restrictions, such as the €100-millon granted to ferry line Tallink or the €47 million issued to fuel retailer Alexela.

On Tuesday, an Internal Security Service (ISS) investigation into KredEx was made public.

The Center Party itself and five people have been declared suspects, including Center Party Secretary-General Mihhail Korb, Kersti Kracht, adviser to finance minister Martin Helme (EKRE), and businessman Hillar Teder.

Hillar Teder is a frequent donor to Center, providing the party with €60,000 in the fourth quarter of 2020, and his son Rauno Teder is the majority shareholder in Porto Franco.

Hillar Teder allegedly struck a deal with Mihhail Korb, who resigned Tuesday, to provide €1 million in donations to the Center party in return for easing the process of getting the contract for access routes to Porto Franco. This also involves the Center Party-controlled City Government.

Kersti Kracht is suspected of influence peddling and has been temporarily suspended as finance ministry adviser by Martin Helme.

The other two suspects have not been named and are reportedly not public figures.

In October, Ratas denied a €60,000 donation made by Teder to the Center Party is linked to the support loan granted to the Porto Franco development led by Teder's son.

Mihhail Korb said the donation had been made due to satisfaction with the Center Party's policies. Teder said he agreed with the party's "bold decisions" and has donated over €1 million to parties since 2013.

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