History of Estonia (1920–1939)

The history of Estonia from 1920 to 1939 spans the period from the end of the Estonian War of Independence (1918–1920) until the outbreak of World War II (1939–1945).

Estonia won the Estonian War of Independence against Soviet Russia and the Independence was secured with the Tartu Peace Treaty, signed on 2 February 1920.

The first Constitution of Estonia was adopted by the Constituent Assembly on 15 April 1920. Established as a parliamentary democracy, legislative power was held by a 100-seat parliament or Riigikogu. Executive power was held by a government headed by a State Elder, separate from the office of Prime Minister, and both answerable to the parliament.

The Republic of Estonia was recognised (de jure) by Finland on 7 July 1920, Poland on 31 December 1920, Argentina on 12 January 1921, by the Western Allies on 26 January 1921 and by India on 22 September 1921. In 1921, Estonia became a full member of the League of Nations. In the following years, Estonia developed successful economic relations with many countries, including the Soviet Union. Agricultural exports became the backbone of the Estonian economy as tens of thousands of successful small farm holdings had been established during the recent land reforms. A new currency, the Estonian kroon, was introduced in 1928.

Estonian politics during the 1920s was dominated by unstable coalition governments, with a government lasting on average a period of 11 months. This was due to the large number of political parties holding seats in the Riigikogu, which often resulted in discord on specific issues. The 1920s saw not only further development of Estonian language, education and culture, but ethnic minorities were also granted cultural autonomy.

The Bolshevik regime in the neighbouring Soviet Union persisted as a threat to the internal stability in Estonia in the early 1920s, however it receded somewhat after a failed December 1924 Estonian coup d'état attempt.

Estonia's export oriented economy was severely affected by the Great Depression, with industry and agriculture declining 20% to 45% respectively. As a consequence incomes declined, unemployment rose and the standard of living declined. This led to political turmoil and a further fragmentation of parliament, with the government changing six times in the two years before 1933. Calls for changing the constitution, reducing the powers of the parliament and establishing a presidency with extended powers found a receptive audience. The Vaps movement grew in popularity and influence and a new constitution drafted by the movement was passed by a referendum in October 1933.

The consequences of the depression eased in 1934, with the devaluation of the kroon and improved terms of trade. The passing of the second constitution in 1933 and the planned elections for a new president eased political tensions. With the prospect of Vaps movement achieving electoral victory, the then prime minister Konstantin Päts conducted a self-coup on 12 March 1934 by extending the pre-existing state of emergency over the entire country, arresting hundreds of Vaps members, postponing the elections and banning political meetings. In 1935, Päts formed the Patriotic League, the only legal political organization in the country. Päts' goal was to organize the nation not by political views into parties, but by vocation into respective corporate chambers, in a way similar to in Fascist Italy, following the same line as Austria, Portugal and many other countries of Europe. In 1936, a referendum was held on the electtion of a National Assembly to draft a new constitution. The elected Assembly wrote a new constitution which came into force on 1 January 1938.

During the interwar period, Estonia had pursued a policy of neutrality, but the fate of Estonia in World War II was decided by the August 1939 Nazi–Soviet Pact and its secret additional protocol. In it, Hitler and Stalin agreed to divide up the countries situated between them (Poland, Lithuania, Latvia, Estonia, and Finland) with Estonia falling in the Soviet "sphere of influence".

In September 1939, after the outbreak of World War II, the Soviet Union forced a treaty on Estonia, according to which after October 1939 Soviet military bases were established in Estonia. Ultimately, this enabled the Soviet Union to occupy the entire country in June 1940.