Estonian Prime Minister Andrus Ansip is set to extend his record term after his austerity measures helped country adopt the euro this year and as the economy grows at the European Union’s second-fastest pace.

Ansip’s Reform party and its main ally Isamaa ja Res Publica Liit lead the two largest opposition parties by 17 percentage points, Aivar Voog, the head of research at TNS Emor, said by phone yesterday.

The premier, who came to power in 2005, steered Estonia through the EU’s second-deepest recession behind Latvia in 2008 and 2009, rejecting calls to abandon the currency peg and directing austerity measures equivalent to 9 percent of economic output.

“The economic recovery has been good and there is a fairly widespread idea among Estonians that this recovery is going to continue as long as they are not going to make serious mistakes with policy,” Fredrik Erixon, the director of the Brussels- based European Centre for International Political Economy, said by phone.

Ansip’s re-election would mirror results across the Baltic countries, where administrations avoided a collapse of public support after budget cuts. Latvians in October re-elected Prime Minister Valdis Dombrovskis, while Lithuanian Premier Andrius Kubilius’ governing party garnered twice as many votes as polls predicted in municipal elections last week.

‘Fairly Widespread Idea’

Estonia’s economy expanded an annual 6.6 percent in the fourth quarter, the second-fastest pace in the EU behind Sweden, following a peak-to-trough GDP contraction of almost 20 percent during the crisis. Unemployment fell the most in the 27-member bloc, to 14.3 percent in the fourth quarter, from 16.1 percent a year earlier, according to Eurostat. The euro-area average was 9.9 percent in January.

The Nasdaq OMX Tallinn index has risen 37 percent over the past 12 months, the seventh-best performance among 90 benchmark indexes tracked by Bloomberg. It was the third-biggest gainer last year, with a 73 percent rise. AS Tallink Grupp, the largest Baltic ferry company, has gained 51 percent in a year.

The longest-serving prime minister since Estonia regained independence in 1991, Ansip faced his biggest challenge after he ousted the Social Democrats from the governing coalition in May 2009 over jobless support and budget measures, which left him with a minority Cabinet for several months. For a next term, Ansip has pledged to lower taxes and keep the budget under control. He has also promised more investment in education.

‘Well Placed’

“The Reform Party looks well placed to continue in government, either alone or in a continued coalition with IRL,” John Andrew, a London-based analyst with the Economist Intelligence Unit, said in an e-mail.

The Social Democrats, along with the opposition Center Party, now pledge to abandon Estonia’s flat income tax to increase levies on the rich, cut the value-added tax on essential goods and boost social spending.

Ansip’s Reform received backing from 29 percent of respondents, followed by Isamaa of former Prime Minister Mart Laar with 25 percent and Center Party with 23 percent, TNS Emor’s Voog said.

TNS Emor polled 792 eligible voters during February, followed by phone survey this week. Support for the Social Democrats of former Defense Minister Sven Mikser was at 14 percent, he said. No margin of error was given.

‘Very Surprised’

“I would be very surprised if the opposition would manage to win the majority,” said Erixon. “I’m not putting my money on that side.”

The economic crisis “sobered up” election promises compared with the 2007 campaign, said Annika Uudelepp, the chairman of the Tallinn-based Praxis research institute in an e- mailed response to questions. The biggest parties are almost unanimous in pledging to protect Estonia’s business and investment climate to boost competitiveness, she said.

Sweden’s Ericsson AB, the world’s largest maker of wireless networks, in June 2009 bought the Estonian operations of the Finnish electronics subcontractor Elcoteq SE for 30 million euros. Ericsson’s local unit contributes 10 percent of Estonia’s exports and a quarter of the group’s output, Swedish Foreign Minister Carl Bildt said in January.

The Finance Ministry expects the $19 billion economy to expand 4 percent this year, following a preliminary 3.1 percent growth last year. The European Bank for Reconstruction and Development forecast 2011 GDP growth of 3.6 percent in a statement on March 1.

“While the adoption of the euro and greater stability in asset prices are likely to boost consumer confidence, important risks remain,” the EBRD said. “Prospects for exports may falter should external demand from the EU weaken, while domestic demand continues to suffer from a severe shortage of credit.”

To contact the reporter on this story: Ott Ummelas in Tallinn at

To contact the editor responsible for this story: Willy Morris at

Source: Ansip Set for Re-Election in Estonia on Euro Entry, GDP Growth, Bloomberg