TALLINN - In an unusual step, President Toomas Hendrick Ilves has appealed for the government to focus on the crisis at hand rather than on the party maneuvering that has recently dominated the country's political scene.
"The government needs to stick together, at least until the crisis is over," Ilves said in an article in Eesti Paevaleht on the May 9.
The governing coalition in Estonia has been publicly squabbling in recent weeks as Estonia faces its most challenging economic crisis since independence in 1991. Public confidence in the current regime is in freefall as the government fails to agree on action to deal with the country's looming budget deficit.
In recent weeks Prime Minister Andrus Ansip, a member of the Reform Party, published an open letter criticizing Finance Minister Ivari Padar of the Social Democratic Party.
"I'm dissatisfied with the speed of working out the means of stabilizing the national monetary system and the content of the proposals we have received," the prime minister said.
There are also clear philosophical disagreements within the coalition. Both favor spending cuts, but Ansip would see those cuts combined with asset sales, while Padar looks to tax increases.
In a provocative move Ansip indicated he would be prepared to take over the Finance Ministry himself. Conversely the Center Party, in a somewhat symbolic gesture, started to collect signatures for a vote of no-confidence in the prime minister.
"The coalition has serious disagreements, which is why decision making is so bogged down. Prime Minister Ansip delayed making decisions and did not want to cooperate with the opposition," said Ain Seppik, vice-chairman of the Center Party.
The government coalition consists of three political parties 's Estonian Reform Party (Eesti Reformierakond), Union of Pro Patria and Res Publica (Isamaa ja Res Publika Liit), and the Estonian Social Democratic Party (Eesti Sotsiaaldemokraatlik Erakond).
SCALE OF TROUBLES
The scale of the government's budgetary problem is significant. According to Padar, the current budget shortfall will require a further reduction of 5.5 billion kroons (351 million euros), just to achieve a deficit of 3 percent of GDP.
Estonia must maintain a budget deficit below 3 percent in order to fulfill the Maastricht criteria and adopt the euro 's a top priority for the country.
In recent years the Estonian economy has managed to keep its debt level low. However, the government now plans to borrow both from the European Investment Bank and also, more controversially, 2.3 billion kroons from Swedbank.
Local press has reported that Swedbank appears to be considering the application, though sources close to the bank have said this considering period is actually just the normal approval process rather than any comment on the credit worthiness of the Estonian government.
Current tax revenues are falling below forecasts and social costs are rising as unemployment escalates. April unemployment rose to 60,712, or 9.3 percent, while some are forecasting it will reach 100,000 by the end of 2009.
Unemployment forms the basis of the latest battlefield for the government. On May 6 the Reform Party and IRL recommended not increasing unemployment benefits when the new Employment Act comes into force, as well as lowering the upper limit. However, the Social Democrats would not agree and requested that the Employment Act be postponed. The party also made a proposal to increase unemployment insurance to 4 percent from the current 3 percent.