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Published: Monday February 24, 2014 MYT 2:12:10 AM
Updated: Monday February 24, 2014 MYT 2:12:10 AM

Estonia's PM to resign as parties prepare for 2015 vote

Estonia's Prime Minister Andrus Ansip arrives at a European Union leaders summit at the EU council headquarters in Brussels December 20, 2013. REUTERS/Yves Herman

Estonia's Prime Minister Andrus Ansip arrives at a European Union leaders summit at the EU council headquarters in Brussels December 20, 2013. REUTERS/Yves Herman

TALLINN (Reuters) - Estonia's Prime Minister Andrus Ansip said on Sunday he would submit his and his government's resignation to the country's president on March 4, with slightly more than a year to go before parliamentary elections.

The move is aimed at finding a new prime minister from his own party for the coming year who could contest the next regular elections due in March 2015.

"So today is the day that I can assure you: on Shrove Tuesday, I will hand my resignation application to the President of the Republic," Ansip said in his annual Independence Day eve speech on state-owned TV.

"The preparations for the next parliament elections in 2015 have begun."

Ansip, Estonia's longest-serving prime minister, has held office with three coalition governments since April 2005, and said two years ago he would not form another government.

The prime minister's centre-right Reform Party is betting the president will again nominate a leader from his party to form a new government as it still holds the largest number of seats in parliament, although is losing support in opinion polls.

"As the chairman of the Reform Party, I assure you that we have candidates who would do well in the role of prime minister," Ansip said.

On Friday, the party's management board gave authority to Siim Kallis, current Vice-President of the European Commission, to form a new coalition government if and when Ansip resigned.

The Reform Party still holds the largest block of seats in the 101-seat parliament with 33 seats while the junior party in the ruling coalition, the centre-right Pro Patria and Res Publica Union (IRL), holds 22.

The left-leaning opposition Centre Party and Social Democratic Party hold 21 and 19 seats respectively with six members in the parliament unaligned.

TAX POLICY A KEY DIFFERENCE

Estonia was an early adopter of tight fiscal policy and has maintained low levels of government debt. Ansip's government stayed in place in 2011 elections even after the country's economic output had fallen by 14 percent in 2009 due to the global financial crisis and the collapse of a real estate price bubble fuelled by cheap and easy credit from Nordic banks.

The country's governments have aimed for balanced budgets over the last 20 years and have not issued any treasury bills, and Estonia currently has no euro bonds.

The key policy difference between the current ruling coalition and the centre-left opposition is over Estonia's flat 21 percent personal income tax, to be reduced to 20 percent in 2015.

The opposition parties would like to move towards a progressive tax policy with higher rates for higher earners, as applied by most developed countries.

(Reporting by David Mardiste; editing by Andrew Roche)

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