Estonia’s largest parties have serious money troubles

Photo: Zdeněk Malý / Panthermedia / Scanpix

The Center and Reform parties owe hundreds of thousands of euros to campaign organizers following the Riigikogu and European parliament elections. The same predicament with the largest parties is shared by the Social Democrats, who have to deal with a half a million euro bank loan in addition to unpaid campaign bills.

The prime ministers’ party – the Center Party – is in the deepest trouble. According to the latest indicators of this financial year, i.e. as of the third quarter, the party’s net assets are negative at 813,000 euros, including the more than six-month debt of 508,000 euros.

The situation is further complicated by the fact that the Center Party has been cash-strapped for a longer time: its loss was 240,000 euros in 2017 and 540,000 in 2018. The end of current financial year is likely to see loss as well.

If a party’s net assets are negative for three years running, the party should appeal to the Political Parties Financing Surveillance Committee (ERJK) for recommendations for overcoming economic difficulties and ensuring sustainable operation. “There is no need to worry about the Center Party’s financial situation,” the party’s secretary Mihail Korb remained optimistic.

Korb explained that the party’s large expenses were related to the election campaigns since the local election of 2017. “It is well-known fact that the cost of advertising is significantly higher during the campaign period. We also had to pay considerable sums to lawyers defending the Center Party in court due to the errors of the previous party leadership,” Korb explained.

Payment according to timetable

He emphasized that a timetable had been agreed upon with the enterprises and that the agreements are working. Korb declined from revealing details about the agreements. According to ERJK, the Center Party’s largest creditor is the Initiative OÜ media agency.

A certain amount the party can rely on during the last three months of the financial year is the state support amounting to almost 350,000. As for the rest, they have to count on generous sponsors and membership fees.

The latest financial report of the largest opposition party, the Reform Party, shows more than 612,000 euros worth of negative assets. The more than six-month debt to the Kontuur LB OÜ advertising agency amounts to nearly 570,000 euros, ERJK reports.

“It is true that the Reform Party has obligations to our cooperation partners   since the latest two elections,” said Erkki Keldo, secretary general of the party. The elections meant for the party large expenses during a brief period as well as long-term financial planning. “All obligations shall be met according to a timetable we have agreed upon with our partners,” Keldo promised. The Reform Party representative did not reveal either what kind of agreements he was talking about.

According to Keldo, ERJK pointed out its negative net assets last year already and the party, according to recommendations, returned to black by the end of 2018 financial year. The Reform Party was also the only one of the three parties currently monitored by ERJK to end past financial year with a positive outcome.

The Social Democrats were in the red with slightly more than 3,000 euros in the end of the 2018 financial year, but it was complemented by a 550,000 loan this year, which they are gradually paying back.

“The financial situation of the party is nothing to boast about due to the obligations incurred during the two elections, but we shall manage,” explained Rannar Vassiljev, secretary general of SDE. In his words, out of the 175,000 euros mentioned in the ERJK report as of end of September, 49,000 euros still have to be paid at present. The sum is expected to be met by the end of the year at the latest. The Social Democrats hope to pay back the bank loan before the next local election in 2021.

Transparent loan

On the other hand, ERJK has pointed out the Social Democrats’ bank credit in a positive light, since this form of financing is highly transparent, unlike the agreements between political parties and enterprises. The latter cases may pose some questions. “For instance, to what extent corruptive situations may occur,” explained Liisa Oviir, chairperson of ERJK.

According to the Political Parties Act, a long-term debt of significant amount to an enterprise can be viewed as extending credit to the party or granting a loan, which the law does not permit.

In ERJK opinion, the large debts indicate inadequate financial planning on part of the parties. Weak financial situation may also lead to payment problems. “Such long-term indebtedness cannot be considered a regular feature of economic activities either since it harms the business interests of the creditor,” Oviir emphasized.