Nations in Transit 2009 - Estonia

by Vello Pettai and Martin Molder

Capital: Tallinn
Population: 1.3 million
GNI/capita: US$18,830

The data above was provided by The World Bank, World Bank Indicators 2009.

Nations in Transit Ratings and Averaged Scores

* Starting with the 2005 edition, Freedom House introduced separate analysis and ratings for national democratic governance and local democratic governance to provide readers with more detailed and nuanced analysis of these two important subjects.

NOTE: The ratings reflect the consensus of Freedom House, its academic advisers, and the author(s) of this report. The opinions expressed in this report are those of the author(s). The ratings are based on a scale of 1 to 7, with 1 representing the highest level of democratic progress and 7 the lowest. The Democracy Score is an average of ratings for the categories tracked in a given year.

Executive Summary

Estonia's development toward democracy and a market economy has been steady since reindependence in 1991. Under a new Constitution adopted in 1992, the country has consolidated its democratic political system, achieving relatively effective governance at the national level. After an initial economic downturn that lasted until 1995, Estonia enjoyed a roughly 13-year period of renewed prosperity, which undergirded its political progress. All of this allowed the country to enter both NATO and the European Union in 2004, and thus the Western economic and political world. Throughout this period, however, Estonia also struggled to create a strategy integrating its large Russian-speaking minority, left over from Soviet rule and totaling some 30 percent of the population. Controversies over citizenship, language rights, and minority education often flared. Frosty relations with Russia further complicated this issue, with Moscow frequently accusing Estonia of human rights violations, which Estonia denied. The youth riots surrounding the removal of a Soviet-built World War II monument in Tallinn in April 2007 lent renewed urgency to the problem. The government subsequently adopted a new integration program to ease the tension and develop more proactive policy measures.

In 2008, Estonia's major challenge involved reining in the effects of the world financial crisis and the collapse of a local real estate bubble. The center-right government elected in March 2007 was forced to suspend many elements of its policy agenda and instead work out a series of austerity measures, which at times proved difficult politically. The coalition, however, stuck together. Meanwhile, concerns continued to be raised about certain shadowy aspects of party finance. Estonia's chancellor of justice (or ombudsman) lost a case before the Supreme Court demanding a tougher oversight mechanism for party finance. At the same time, media investigations continued to reveal how parties often channeled contributions into their coffers circuitously, either through subsidiary foundations or by accepting services in kind. The media, in this respect, continued to play a watchdog role, although they also focused considerable attention on more populist issues such as campaigning for a salary freeze for top government officials in response to the recession.

National Democratic Governance. The swift downturn in Estonia's economy in 2008 challenged the governing center-right coalition to shift from an expansive policy agenda to a stark set of budgetary cutbacks and recovery measures. All three parties in the coalition were forced to abandon earlier campaign promises. In particular, Prime Minister Andrus Ansip and his market-liberal Reform Party agreed to forgo a plan to further reduce Estonia's flat-rate income tax. At the same time, the minister for social affairs (also from the Reform Party) tried to push through a major deregulation of labor laws, which she argued would provide more flexibility on the job market. The move, however, met strong resistance from trade unions, which forced the minister to engage in protracted negotiations over the reform. Given this mix of challenges, as well as the government's relative success in meeting them, Estonia's national democratic governance rating remained at 2.25.

Electoral Process. With no elections having taken place in Estonia during 2008, attention was focused instead on whether to change any existing electoral rules in advance of future polls. In particular, proposals were made to change the system for electing members of the European Parliament and to ease up on a tough ban on outdoor campaign advertising enacted in 2005. The latter was suggested in particular by Estonia's chancellor of justice, who argued that the ban was a violation of free speech. The chancellor of justice also contested the current system for monitoring party finance in the country's Supreme Court, maintaining that the laxity of the system bordered on being unconstitutional, but lost. Owing to the lack of any major changes in the electoral process, Estonia's rating stood at 1.50.

Civil Society. The Estonian government took some steps to enhance the country's civil society by approving the creation of the Civil Society Foundation, which would provide financial support for various projects sponsored by nongovernmental organizations. The measure was meant to bolster implementation of Estonia's nearly decade-old Civil Society Development Concept, which had languished in recent years because of a lack of complementary financing. At the same time, ethnic relations remained delicate following the April 2007 relocation of the Bronze Soldier statue in Tallinn and the riots that followed. While the government approved a new, large-scale minority integration program, a special study of integration showed that Russian speakers continued to feel uneasy about their place in Estonian society. Based on these trends, Estonia's rating for civil society remained at 1.75.

Independent Media. Estonia continued to have a free and vibrant mass media in all its forms. The main public broadcaster, Estonian Television, opened a second digital channel in August, focusing on children's programs, leaving more airtime on the primary channel for public affairs programming, which was partially filled with Russian language programs after the idea of opening a full-scale Russian-language channel was once again set aside. Meanwhile, questions continued to be raised about the political leanings of new media, Kalev Media, after the company secured a contract from the Tallinn city government to air a regular show about the city. In light of these events, Estonia's media rating of 1.50 did not change.

Local Democratic Governance. Estonia's long-standing need for local government reform remained unresolved in 2008 despite efforts by the minister for regional affairs to put together a plan to consolidate the number of rural municipalities. Local governments have been unsuccessfully encouraged with monetary incentives to merge voluntarily for several years. A new minister (appointed in January) posed the question of eventually forcing local governments to merge, but this was met with resistance not only from local government leaders, but also from members of the ruling coalition. By year's end, the plan had once again been shelved. The rating for local democratic governance remained at 2.50.

Judicial Framework and Independence. In another enduring debate, the Estonian government sought anew to find a better plan for financing the country's court system. While the budget of the Supreme Court is approved separately, the lower courts receive their funding via the Ministry of Justice. This has raised concerns about judicial autonomy. Ultimately, the Supreme Court pushed for an integrated financing system, which would include independent authority to determine salaries and organize judicial training. However, no final legislation was passed. Estonia's rating for judicial framework and independence remains at 1.50.

Corruption. Catching up on a weak spot from last year, the Estonian government approved a major action plan to combat corruption. Stretching all the way to 2012, the program will include renewed enforcement efforts, legislative changes, public awareness campaigns, and extensive survey research. At the same time, a number of high-profile trials and media investigations showed that corruption, particularly in the realm of party finance, continued to be an important problem. Estonia's corruption rating remains unchanged at 2.50.

Outlook. Estonia's first and foremost challenge for 2009 will be dealing with the escalating economic and financial crisis. These tasks will, in turn, require holding together the governing coalition as well as maintaining social stability. Although Estonia appeared to have less social tension building up than, for example, neighboring Latvia, the country still faces mounting unemployment and economic hardship. These political pressures threaten to derail other reforms like the proposed restructuring of Estonia's administrative system, and are also likely to overshadow the June 2009 European parliament elections, and municipal elections due in October, although parties will still jockey for these contests. Lastly, three important court rulings are expected: one from the Supreme Court on the freezing of salaries for MPs, one in the corruption case against Villu Reiljan and one in the espionage trial of Herman Simm.