URMAS REINSALU ⟩ Why is Estonia's new government underwhelming?

Urmas Reinsalu Photo: Konstantin Sednev

• The climate bill initiative has failed.
• There was talk of zero-based budgeting – that turned out to be a failure and is no longer mentioned.
• It would only be fair for Estonian citizens to have their say in new elections.

The same men and women who have made countless false starts over the past two years are now declaring that after two years in power, they will sit down for two months to figure out how to govern (ironically, Michal's government, formed in July, only managed to approve its work plan in January – and now they are heading for another lap on the same track), Isamaa leader Urmas Reinsalu writes.

Kristen Michal said that the current government differs from the previous one as night differs from day. A nice phrase – but what exactly are the differences? Let us briefly look back, including at the first political decisions made by the new two-party government at last week's Cabinet meeting.

Let us recall what Prime Minister Kristen Michal promised eight months ago when he took office: confidence, competitiveness, and bold decision-making. In reality, all three ruling parties have admitted, through their own politicians, that what we had was leadership chaos, an economy-hostile policy, and delays in security-related decisions.

Firstly, the chaos in energy policy

After the elections, the people who are currently in power announced to the people of Estonia that a green revolution would begin (in the words of Kaja Kallas when taking office).

Under Michal's leadership, the Ministry of Climate was established (a name they now want to change, though not its competencies), and work began on a climate bill that has now hit a dead end. The new plan is to break it up and insert parts of it into other laws. In essence, this initiative has failed.

Based on the draft climate law, Kristen Michal also drafted a national energy development plan, which has likewise been harshly criticized.

A mere month ago, the prime minister was still talking about a major offshore wind farm subsidy agreement, which collapsed under public pressure. Now, ministries are quietly preparing to try again.

Last week, under Michal's leadership, the government discussed Isamaa's proposal to abandon the goal of reaching one hundred percent renewable energy by 2030, an ambition energy experts consider unrealistic and unreasonable. The government rejected the proposal, stating: «The Ministry of Climate proposes that the government not support the bill. Estonia's electricity production must be clean, reliable, and affordable. Relying on fossil fuels does not support this goal.»

On public finances

For two years now, there has been a rush to «fix» Estonia's public finances. Despite Michal's promises of fiscal responsibility, Estonia now has one of the fastest-growing public debts in Europe, and the prime minister has been noticeably quiet on the issue. We were told there would be zero-based budgeting – that turned out to be a failure and is no longer mentioned.

Kristen Michal promised to cut government operating expenses by five percent this year. In reality, according to the National Audit Office, they will increase by 155 million euros. The prime minister also promised a transparent budget – a promise that has likewise gone unfulfilled.

Last week, the government discussed Isamaa's proposal to switch to an expenditure-based state budget law. Michal rejected the idea with the following explanation: «This year too, in accordance with the government's action plan, we intend to amend the State Budget Act. The focus is on transposing changes to the EU fiscal framework directive, and work continues on further improving the clarity and transparency of the state budget.»

Prime Minister Michal promised to involve entrepreneurs – but in reality, the consultations once more amounted to just a few days of formalities, which ultimately led to protest letters from business organizations. A month ago, all major business groups jointly requested that Estonia not rush into the EU's more ambitious target of cutting emissions by 90 percent by 2040. The government simply ignored the plea and declared its support for the target.

On bureaucracy and taxes

In his speech eight months ago, the prime minister promised that for every new regulation, an existing one would be scrapped – but this has proven unworkable. He also promised tax stability – yet taxes pushed through by the same leadership have increased by over a billion euros this year, with another wave of tax hikes looming next year.

Two of the new tax hikes (corporate profit tax and the two percent on tax-free income) are now being rolled back under public pressure, proving Kristen Michal's earlier claim – that there is no alternative to tax increases – to be false.

In passing, we were told that the 24 percent VAT rate will remain permanent. This means that one of the highest effective consumption tax levels in Europe will stay in place under the current leadership's vision.

2025 is the year of the Reform Party's tax hikes

Last week, we gave the current leaders a chance to revise the steep land tax increase planned for this year and the next – something all business organizations protested last year.

Michal's government responded with the following: «Practical implementation does not show that the changes have caused an excessive tax burden across Estonia that would significantly undermine residents' economic security or the business environment.»

According to Swedbank, however, rising taxes and inflation will unfortunately lower people's standard of living this year.

On national security

There is broad consensus in Estonian society on the need to strengthen national defense – and we expect our leaders to be capable of delivering on that.

This week, the Estonian Defense Industry Association issued a scathing assessment of the government's ability to implement the agreed defense industry initiatives.

The recommendations made by the commander of the defense forces were not fully followed in 2023 (which partly explains the current delays in ammunition procurement), and the recommendation from September 2024 only began to be implemented through political decisions half a year later.

This is not sufficient leadership capability.

In summary

The same group that has failed in leadership and policy choices over the past two years continues to govern.

Now, they do so under a new banner: a better government. Better than what? Their own past failures? Kallas' government? Michal's own time as prime minister – which he now compares to night?

Let us be honest: Estonia does not have a better or a right-wing government – it has an underwhelming one. It is the same political agenda by the Reform Party that has been implemented for the past two years, but that agenda has now reached a dead end. With constant shifts in rhetoric and erratic actions, they are effectively admitting it themselves.

It would be fair for Estonian citizens to have the chance to evaluate the government's record through new elections and decide how to move forward.

Kristina Kallas admitted last week that the current political leadership is implementing policies for which they do not have a mandate. That is the root of Estonia's political crisis of trust.

Estonia cannot afford to waste time or be a test lab for endless political false starts.