Gallery: Possible coalition planning on ditching 'protection money' scheme

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The Reform Party, Eesti 200 and the Social Democratic Party (SDE), who have been in talks since last Wednesday for the formation of a government coalition following the 2023 Riigikogu elections, plan to lose a controversial scheme of parliamentary party-allocated regional investments in Estonia's annual state budget — popularly known as protection money.

Speaking at a press conference held late Wednesday afternoon, Margus Tsahkna, representing Eesti 200 in the ongoing negotiations, said that the distribution of protection money in its current form will be stopped.

"We want to make regional investments in the actual, literal sense of the word — where regions themselves have a say in what they need money for in order for quality of life to improve there and productivity to increase in these regions," Tsahkna said.

He added that the distribution of regional investments must be transparent and a local decision-making process.

Reform representative Mart Võrklaev confirmed that his party has been of the opinion for years that protection money shouldn't be distributed. "Everyone should have an equal opportunity to apply for regional investments," he said.

SDE chair Lauri Läänemets said that if it's possible to agree during negotiations on truly effective regional investments, then that is what they should do.

The potential future coalition partners are also planning on appointing a special government representative to Ida-Viru County in Northeastern Estonia. Võrklaev said that a more exact agreement doesn't yet exist regarding this, but party negotiators believe that reforms need to be carried out in Ida-Viru County, and that will require a government representative on the ground there.

The three parties also want to accelerate the mobilization in Ida-Viru County of resources from the Just Transition Fund (JTF) and, if possible, establish an additional fund for the development of the Ida-Viru region.

According to Võrklaev, the potential coalition's goal is to place significant emphasis on regional development. The Reform politician said that the three parties will continue to support the merging of local governments and added that the plan is to establish merger grants — although in what amount has yet to be agreed.

The parties want to increase local governments' financial autonomy, but not by giving them additional money from the state budget. Rather, they are considering the implementation of local taxes. They are also looking for ways to make public land available for local governments to use as well as provide more money for the maintenance of local roads.

According to Tsahkna, local governments' interest in the development of entrepreneurship on their own territory must be increased, and he believes the government should encourage this, for example by means of tax incentives.

He said that it's a significant challenge to review what the duties of local governments and what the duties of the state are, and acknowledged that right now, local governments are shouldering a lot of services, especially in the social and healthcare sectors, that shouldn't be theirs to bear, considering their limited revenue base.

Läänemets said that the key terms in regional development are reducing inequality and local governments' capabilities.

"Rural wealth that is created there is significantly smaller than in the two major urban areas," he acknowledged. "And not reducing inequality through support [measures], but through work, economic processes; through jobs."

The SDE chair said that the other aspect involves local governments' capabilities. "We know that there are local governments in difficult situations," he said. "We have to ensure that the use of EU funds isn't hampered by these financial concerns as well, otherwise inequality will increase again."

He likewise brought up that local governments' revenue bases should be improved through changes to the tax system such as local taxes or some other solutions.

Läänemets added that the planned coalition doesn't intend to address the wealth of only higher-income people and the middle class, but will attempt to resolve the wage poverty issue as well.

According to Võrklaev, the parties intend to promote rural development by expanding loan guarantees for building homes in the countryside as well as potentially building apartment houses in rural areas.

He said that the planned coalition's goal is to ensure the security of Estonia's domestic food supply and that they intend to designate domestic food a vital service.

The Reform representative added that they will make efforts to ensure that Estonian lands are not sold to Russian and Belarusian citizens.

Eesti 200 wants to make Estonia 'land of headquarters'

Speaking at Wednesday's press conference, Tsahkna said that there is still no money in Estonia's state budget, which is putting pressure on them to seek substantive solutions and implement bigger reforms.

"What's important is that we've decided to increase the potential and ambition of the Estonian economy," he said. "If until now, people have talked about how to support companies, talked about support measures, and talked about how to bring in investments, then our government's ambition is the headquarters principle — how to empower and support Estonian companies moving out of Estonia so that we can buy up other companies elsewhere and become a land of headquarters."

Boosting economic ambition is very important, Tsahkna stressed. "That's where the money will come from too," he added.

Potential sixty-seat majority

Last Tuesday, March 7, the 2023 Riigikogu-election winning Reform Party decided at a party board meeting to invite Eesti 200 and the Social Democratic Party to initiate coalition talks, Prime Minister and Reform chair Kaja Kallas announced at a press conference that day.

Both parties accepted the invitation, and talks began at Stenbock House the next day.

Reform won 37 seats in the 101-seat Riigikogu in the elections to conclude March 5. Together with Eesti 200's 14 and the SDE's 9 seats, the anticipated coalition would command a 60-seat majority in Estonia's unicameral parliament.


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Editor: Aili Vahtla

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