2012 was supposed to be a boring year in Estonia. There were no elections and at the beginning of the year Reform Party was the most popular party, as it had been for years. It looked like the government would just spend the year quietly implementing its political agenda.
At the end of the year practically everything has changed. Opposition has become more popular than the coalition of the Reform Party and IRL. Estonia has seen unprecedented street protests and the once almighty Reform Party has been mired in scandals, with popularity falling like a stone.
Was internal devaluation in Estonia really a success?
In English-speaking media Estonian example is often used in disputes about austerity. For both, supporters and opponents of austerity, Estonia is often the poster-child of successful austerity-based economic recovery. Outsiders wondered, why were Estonians taking all those cuts and tax rises so patiently. Nevertheless, most of the malaise Estonian society is experiencing right now have its origins in less than successful recovery from the crisis of 2008-2010.
Due to high inflation (remember, Estonia was about to recover competitiveness with lower, not higher wages and prices) and mostly stagnant wages, purchasing power has been steadily diminishing. Real wages have started to grow again, but growth is slow and reaching pre-crisis levels will take years. Wage growth was stronger in some sectors, while others, like public sector, lagged behind. Unemployment has decreased fast, but declining purchasing power of a big part of the Estonian population is a considerable factor in the unrest described later.
A year of demonstrations
2012 saw some of the biggest street demonstrations in Estonia during the last 20 years. The year started with a big anti-ACTA demonstration that was fueled by derisive comments of prime minister Andrus Ansip. March saw a big demonstration of striking teachers, then came a big demonstration of trade unions and the year ended with several demonstrations against the Reform Party itself. All those demonstrations were large, considering Estonian population and previous history.
A year of strikes
In March most teachers in Estonia started striking. For 1-3 days most schools closed their doors. Teachers believed that before parliamentary elections in 2011 they were promised pay increases, but the budget of 2012 didn't include any. After the strike government compromised and promised them an 11% pay rise.
In October doctors started striking. Again, almost a month of striking ended with a pretty good deal for the doctors.
In 2011, government made a promise to freeze all public sector wages indefinitely, so any pay rises had to come from improved efficiency. This policy was unreasonable from the beginning and due to 4-5% inflation a year, protests about that policy forced the government to back down. Next year public sector workers across the board will get 4,4% pay rise.
These pay increases have had marginal impact on budget deficit. State budgets will stay tight for the foreseeable future. It's mostly because of decisions made during crisis that postponed some expenses up to 2017. This severely limits government's ability to spend money to keep people happy.
The Reform Party hasn't lately lived up to its name, because it has been very unwilling to risk with unpopular, but necessary reforms. There is a growing understanding in the society that the current government of Andrus Ansip is leading Estonia into a dead end. Social Democrats, now in opposition, were offering increasingly popular alternative policies to those of the Reform Party. Stage was set for a serious revolt against the Reform Party.
A horrible year for the Reform Party
This year has been very bad for the Reform Party. Uproar over Ansip's remarks about ACTA treaty and the upcoming strike of teachers forced Ansip to declare in February that he will not form the next government. It took pressure off for a few months.
In May Silver Meikar, a former member of the parliament from the Reform Party and a long-time critic of Ansip, admitted to taking part in an illegal party financing scheme. Meikar admitted that his large donations to the Reform Party in 2009-2010 were in fact a part of a larger illegal financing scheme, organized by Kristen Michal, who at that time was secretary general of the Reform Party. In May Michal was already minister of justice. Meikar said that the money was given to him in cash by current member of the Parliament and other member of the Reform Party, Kalev Lillo. Meikar was told to donate given money to the party as if it was his own.
The Reform Party has constantly denied that Meikar's story is correct. However, they admitted that there may have been unspecified cases of illegal financing. Most opinion leaders found it hard to believe, how can the Reform Party not know, whether or not they were illegally financed. Public opinion has therefore trusted Meikar's story more than Michal's story.
There was a criminal investigation about Meikar's statements. It ended in October, when the prosecutor decided not to take this case to court. Documents published after it threw new light on the inner life of the Reform Party and its financing. Although most interrogated members of the Reform Party denied all wrongdoing, their explanations to their big donations were ridiculous. Meikar was soon expelled from the Reform party and a pro-Meikar demonstration in front of the Reform Party's headquarters was avoided by using a trick borrowed from modern Russia - they registered a fictional demonstration in front of their own headquarters.
All this ended in several large demonstrations against the Reform Party. People were getting tired of a feeling that politicians are arrogantly lying to them. Actions of the Reform Party were increasingly compared to those of the Center Party - a political pariah due to its ties to Moscow and a penchant for corruption.
To finish a really bad year, minister of economy, Keit Pentus-Rosimannus and her husband, Rain Rosimannus, got involved in a scandal about a company called Autorollo, which was owned by Keit Pentus-Rosimannus' father Väino Pentus. There's a suspicion that the Rosimannus family used their influence in the Reform Party to get a state guarantee for a Swedbank loan to Autorollo. Due to several weird loans and bad investments Autorollo went under and there was almost nothing left to pay debts with. There's also a suspicion of forgery. It's unclear, how involved Pentus-Rosimannus and Rosimannus were at running the company, when suspicious activity took place, but published emails show us that they were at least somewhat involved in running the company. This scandal is still continuing.
End of an era?
The local elections next autumn are very important in this context. The Reform Party has a danger to lose power in Tartu, where Ansip once built up his political career as a popular mayor. The Center Party could also lose its absolute majority in Tallinn, which could mean a life in opposition. Social Democrats could get the mayor's seat in both towns.
The Reform Party has been in power since 1999, but it's likely that they will lose next parliamentary elections in 2015. This opens up the possibility of making some serious changes that the Reform Party has blocked. It also means a turn to the left - both the flat tax and 0% tax rate for reinvested profits may be scrapped.
It's also a change of generations. Ansip was born in 1956. Sven Mikser, leader of the Social Democrats and the likely prime minister after the next elections, was born in 1973. Policies during the last 20 years in Estonia were a reflection of what the Soviet occupation supposedly "told us" - opposite policies of supposed soviet policies. This soviet influence is disappearing. A new generation of people have role models in Scandinavia, Western Europe and the US, they don't care much about failings of the central planning in the Soviet Union and what we should "learn from it".