(Bloomberg) -- Estonia’s president approved a new government that includes a hard-line nationalist party, giving euroskeptic forces sway in another European Union country in a setback for the bloc’s mainstream parties that are trying to beat back challenges from populists.
Battle lines are hardening between forces seeking deeper EU integration and those who want less oversight from Brussels, with populist leaders from Italy to Finland vowing to shake up the status quo in next month’s European Parliament elections. In the second group is Estonia’s EKRE, an anti-immigrant party that has embraced the approach of governments in Poland and Hungary who’ve clashed with the EU over the rule of law.
President Kersti Kaljulaid said Tuesday that she’ll appoint a new three-party cabinet led by Prime Minister Juri Ratas -- who surprised voters by reneging on a pledge to shun EKRE after he came in second in March elections. While the coalition has vowed no change in the Baltic nation’s attitudes toward its memberships in the EU and NATO, EKRE will control state finances and the country’s police and influence immigration policy.
“If they can shut their mouths and be constructive, I don’t necessarily see a massive hit in Estonia’s image -- that’s a big question mark,” said Matthew Crandall, associate professor of international relations at Tallinn University. “In terms of relations with the EU, maybe where you’ll see a little bit more of a change is that you’ll probably see harsher negotiation tactics, harsher rhetoric toward the EU.”
Comparing the EU to the Soviet Union and vowing to claw back "sovereignty," EKRE Chairman Mart Helme will take over as interior minister. His son and deputy chairman, Martin, will become finance minister. The party, whose members have publicly used racial epithets, is seeking to clamp down on migrant labor and pushed for a planned referendum on designating marriage as a union between a man and woman in the new government’s program.
Among the new government’s controversial plans, are a revamp of the pension system, which the central bank has warned could “wreck” it, while a long-delayed Baltic rail project opposed by EKRE will depend on how much EU funding Estonia can get. Martin Helme has also said he plans to contest EU budget rules that could limit potential borrowing for highway projects, despite Estonia enjoying the lowest public debt in the bloc.
With one of the highest living standards of states from the Soviet Union, Estonia embraced austerity as it clawed its way out of a record recession a decade ago. While Ratas increased social spending, boosted benefits and helped reverse emigration after he came to power in 2016, relative poverty remains high, especially among the elderly, feeding EKRE’s base.
“I understand people’s worries and fears, both among those that fear current freedoms and values could be threatened, as well as among those who feel that Estonia has reached a dead end and who’re worried about the preservation of our country, nation and language, and about the uneven development,” Kaljulaid said as she approved the cabinet.
Ratas must also perform a delicate balancing act because his Center Party relies on support from Estonia’s Russian speakers, who make up about a quarter of Estonia’s 1.3 million population and have questioned cooperation with the nationalists.
(Updates with president’s comment in eighth paragraph.)
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