Jüri Ratas's government will remember last week for a long time to come as the week the Pro Patria and Res Publica Union (IRL) charged on two fronts. They began with an attack against the increased alcohol excise duty, and now they're going after the Center Party's all-Estonian free public bus lines as well.
Finance Minister Toomas Tõniste (IRL), otherwise inconspicuous, stood out when he told ERR last Tuesday that he will consider nixing the increase in alcohol excise duties announced for February "if need be". He has rather bleak numbers to back this up: they show that the hopes are quickly fading that the higher excise duty will bring an additional €25 million into the state's coffers this year, and €58 million in 2018. This won't happen. Even more so, the excise revenue is lagging behind that of previous years by tens of millions of euros.
The reasons are obvious. First off there is the shopping tourism along the Latvian border that started already under the previous government. Latvia has turned into Estonians' choice destination to get cheap booze, with some 3,000 cars crossing the border every hour just to go shopping and turn around. Second, the number of Finnish booze tourists has gone down. Third, the consumption of alcohol is decreasing due to changed consumer habits and changing trends in what is seen as socially acceptable.
As director of the Estonian Institute of Economic Research, Marje Josing, put it in late October: while more and more people appreciate healthier lifestyles, the availability of cheap booze just across the border in Latvia could mean that consumption is about to increase again.
From the point of view of the budget, Tõniste's opinion of the announced excise hike may be appropriate, but in terms of the coalition's internal wellbeing it certainly isn't. Tõniste painfully treaded on his coalition partner's foot, as the tougher excise policy is part of the alcohol and health policy of the Social Democrats' chairman, Minister of Health and Labour Jevgeni Ossinovski. On top of that, both the Center Party as well as the Social Democrats' ministers, still IRL's coalition partners, read about Tõniste's opinion on ERR.ee for the first time. The government hadn't discussed this option before.
While the other ministers were still wondering if what was happening was a solo run, IRL chairman Helir-Valdor Seeder added fuel to the fire, saying in daily Eesti Päevaleht on the same morning that he was worried about IRL having abandoned its right-wing convictions when the party signed the coalition agreement a year ago.
Seeder promised a resounding no to any and all new taxes and tax hikes. Seeder backed up his finance minister and said that the coalition agreement wasn't "sacrosanct".
Prime Minister Jüri Ratas (Center) on Thursday tried to calm journalists, saying that there were no fights in the coalition, but just a discussion of the issue. Still, he didn't leave it unsaid that now isn't the right time to change the government's excise policy. What he didn't say was that if IRL should insist on dropping the planned excise hike, come February they will have to close a €40-45m hole in the budget.
IRL stepped on that very same rake not too long ago and haven't quite recovered from it. Back then, Seeder demanded that the government abandon the idea of a tax on sugary drinks, following which Ratas and Ossinovski made it IRL's responsibility to find a way to compensate for the loss of €8 million in budgeted revenue.
They closed the hole in the Ministry of Defence by moving half of the €20 million allocated to purchasing new ammunition from next year off to 2019. IRL's own Minister of Defence, Jüri Luik, one of Estonia's most competent foreign and defense policy experts, had to put up a brave face and play the party's game, though he did come up with the explanation that the second half of the purchase was put off by a year because not all of the ammunition would arrive at once, since for safety reasons producers didn't keep it in stock, but produced only after receiving an order. Well.
IRL's hope to close the hole in the budget they created killing the sugary drinks tax by partially postponing a defense procurement never became reality: the media caught wind of what was going on. Former defense minister and current chairman of the Riigikogu's National Defence Committee, Hannes Hanso (SDE), criticized the step, which he said nobody could honestly defend. IRL's former chairman and former minister of defense, Margus Tsahkna, remarked during a national defense debate in parliament that no government had cut into defense spending before to make good on campaign promises that might be "sweeter" than national defense in the campaign for the 2019 Riigikogu elections. IRL's trading ammunition for the sugar tax will no doubt remain a topic in Estonian politics for a good while.
The €40-45 million price tag of dropping the excise hike planned for February is nothing IRL can handle alone. There is no sign at the moment that the Center Party or the Social Democrats will want to help them at the cost of giving up something themselves. Which means that IRL have painted themselves into a corner. If the excise hike does happen, which at the moment seems likely, and Seeder and Tõniste's opposition to it leads nowhere, then the opposition can paint IRL as losers leading up to the 2019 elections.
They could fail as well on the second front they opened, namely where they are attacking the Center Party for its campaign promise generally labelled "free public transport" by the media. This push is backed up by a powerful ally of Prime Minister Ratas, Minister of Economic Affairs Kadri Simson (Center). It was her who was in Seeder's crosshairs when he said on Friday that IRL won't support a national requirement for local governments to offer free public transport. According to Seeder, the idea does make sense in some areas of the country, but not as an obligatory measure on the national level.
IRL's attempt to force the Center Party to give up one of their key points in last year's coalition agreement doesn't show a lot of promise. The Social Democrats are unlikely to go along, especially as IRL is abandoning them concerning the planned alcohol excise hike.
Though a debate about the state's public transport subsidies is inevitable. They will increase by €13 million next year, and by another €21 million per year after that. As a keen observer of Estonian society recently suggested, a good beginning would be to look into how, when, by what means, and how often the 1.3 million people in Estonia move around the country. This would need to go beyond the question of people's preferences, but instead to be based on hard data: which bus lines are superfluous? Where do we need more? Do all of the buses moving about the countryside need to be as big as they are? Perhaps small buses on more lines would make sense? Would a ride-share scheme help?
In any case, Prime Minister Ratas will have to put his foot down and get the partners in the coalition to settle their disagreements. If this doesn't succeed, then a principal question needs to be answered: how will IRL vote in the Riigikogu when the budget bill is up? If both the alcohol excise hike as well as free public transport in the countryside remain part of the 2018 budget bill, will IRL's parliamentary group follow Seeder and vote against the budget of its own coalition?
For the time being at least I don't think so.
The papers may recommend here and there to get rid of this government and get Andrus Ansip (Reform) back to lead a new right-wing coalition. In early November last year, Jüri Ratas was very clear on the fact that coalitions always crumble from within, not because of external factors. But for anything like this to happen, there would have to be a plan how to form a government after ruining the current one. And IRL don't have such a plan. Nobody has one.
Toomas Sildam (*1961) is an experienced journalist and contributing editor at ERR, and among other things provides political analysis. Before his return to journalism, Sildam was President Toomas Hendrik Ilves's press advisor.
Editor: Dario Cavegn