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Estonian coalition parties win elections, 2nd chance at euro

Estonia's main coalition parties, which won parliamentary elections, will need to smooth over policy rifts that emerged in the run-up to elections before they can form a government that will usher in the euro.

With all votes counted in yesterday's general elections, Prime Minister Andrus Ansip's Reform Party won 27.8% of the vote, giving it 31 lawmakers in the 101-seat parliament, the National Electoral Committee said, with 656 of 657 polling stations counted. The Center Party, led by Economy Minister Edgar Savisaar, placed second with 26.1% and 29 seats, while the third partner, the People's Union, took 7.1% and six seats. Reform and Center, which failed to usher in the euro on January 1 because inflation was too fast, took office in 2005 when the previous administration collapsed. After a campaign that raised tensions about the nation's direction, the two parties now must agree on tax policy and public-sector wage increases before making a second attempt at the euro switchover or one will end up in opposition. Ansip said talks should take no more than a month. „It is too early to talk about coalition partners right now because it will depend on those negotiations,” said Ansip in a telephone interview yesterday in the capital Tallinn. „Also „it is not so that some partners are better than others. We can see good and bad sides.”

Although partners in government, the Reform and Center parties have opposing platforms, with Ansip promising not to abandon the flat income tax, a measure proposed by the Center Party. He wants to lower it further to 12% by 2015 from 22% now to make it the lowest rate among the European Union's 10 eastern members, attracting more foreign investment and keeping the economy expanding at current levels. Savisaar wants to raise state pay an average 23% annually over four years, a plan that the Reform Party opposes because it would raise spending and inflation. Reform says it may also damage competitiveness and erode state finances. „We will argue and defend our position,” Savisaar said in an interview with state-owned Eesti Television on Saturday. He would not speculate which parties could go into coalition or who President Toomas Ilves will invite to form the next coalition. Ansip wants to make the country one of the five wealthiest in the EU by 2015. Wages rose an annual 17.5% in the Q4 and unemployment fell to a 14-year low, increasing spending and borrowing power and pushing the inflation rate, at 5.1% in January, higher.

To join the euro region, countries must keep inflation within 1.5 percentage points of the 12-month average rate of the three EU nations with the slowest consumer-price growth. In December, the EU limit was 2.9%, compared with Estonia's 12-month rate of 4.4%, which was driven by the EU's second-fastest economic growth. If the two parties cannot find common ground, Reform may find agreement with other parties, such as the Fatherland and Res Publica Union party, which came in third place with 17.9%. A linkup of Reform and Fatherland and Res Union would control 50 seats, one shy of a majority. Fatherland's prime ministerial candidate Mart Laar said he is „realistically hopeful” his party can play a part in the next administration. „We prefer a coalition partner nearer to our ideology and views to move Estonia forward,” Laar said in an interview on Saturday. Asked if that meant Reform he replied „probably.” Among the other parties that could be courted are the Social Democrats, which took 10.6% for fourth place and 10 lawmakers, and the Green Party, formed only last November, with 7.1% and six seats. Smaller parties benefited from voter disillusion after Cabinet ministers weathered scandals and charges of corruption that alienated some voters and prompted them to back smaller parties. That has led people to back smaller parties in protest, including the Green Party that formed only in November.

Environment Minister and People's Union Chairman Villu Reiljan resigned on Oct. 6 amid a police investigation into allegations of corruption during property transactions. The Reform Party in January denied accusations that it asked Baltic Rail Services for €1 million ($1.32 million) to aid the state's repurchase of state freight rail firm Eesti Raudtee. „They are weak persons,” Kristi Joeaeaer, a brand manager at the country's largest fixed-line telephone operator Elion said in an interview on Feb. 28. „They do what they want to do, for their own good and not for the good of the Estonian people.” They do „things that will make themselves rich.” Estonians were able to vote through the Internet, the first time in the world the method has been used for parliamentary elections. (Bloomberg)