Estonia's chief state prosecutor is investigating allegations of corruption against two of the ruling parties over Tallinn's controversial Porto Franco real estate development project.

Chief State Prosecutor Taavi Pern said that five persons have been declared as suspects in the case and an investigation will determine which suspicions are founded. The suspects include the Centre Party's secretary general Mihhail Korb, Kersti Kracht, an adviser to the Conservative People's Party (EKRE) minister of finance, and businessman Hillar Teder.

The prosecutor said that Teder and Korb are suspected of having agreed that Teder would donate up to €1 million to the Centre Party before the local government elections later this year, and, in return, a company with links to Teder was to receive the loan it had requested.

The investigation showed that Teder, whose son Rauno Teder leads the Porto Franco project, a real estate development in Tallinn’s city centre next to the Baltic sea, donated €30,000 to the Centre Party in July last year, and made two more donations in the sums of €30,000 and €60,000 in September and in the final quarter of 2020, respectively. As reported by bne Intellinews, the Estonian government approved on September 3 a loan of €39mn for Porto Franco.

The developer was compelled to apply for the loan in the wake of the coronavirus (COVID-19) pandemic. The loan has stirred controversy, as it utilises state credit agency KredEx and funds intended for businesses demonstrably hit by the coronavirus pandemic.

The scandal adds to the Centre Party's problems in its first try at leading a national government. It threatens to refocus public attention on the left populist party's chequered history under former leader and longtime Tallinn mayor Edgar Savisaar and further damage its already diminished popularity — and could also land it with huge fines.

In autumn 2019, the Centre Party was ordered by the Harju County Court to pay the state €25,000 in a corruption case concerning Savisaar. The court ruled that the party, which pleaded guilty to accepting forbidden donations, would also have a fine of €250,000 suspended, so long as it did not commit another crime over a probationary period of 18 months. It was only health reasons that stopped Savisaar himself being put on trial on charges of accepting bribes, money laundering, embezzlement on a large scale, and accepting prohibited donations.

In autumn 2016, Savisaar, who had long been treated as a pariah by other Estonian parties, was ousted as Centre Party patriarch and replaced by Jüri Ratas, representing a younger, more moderate generation. Ratas has tried to turn a page on the Savissar era and extend the Centre party's appeal beyond its ethnic Russian base, but the party's opinion poll ratings have been hit by the scandals and his decision to form a governing coalition in March 2019 with the far-right EKRE party and the national conservative Isamaa party.  Many of its voters appear to have shifted to EKRE.