Kristina Kallas: accelerated deficit cuts would mean slashing Estonia's defence spending

Eesti 200 leader Kristina Kallas says Estonia cannot pursue rapid budget deficit reduction while the war in Ukraine continues, warning that doing so would effectively mean cutting defence expenditure. In a wide-ranging interview on Vikerraadio, Kallas also addressed her party's plans for the upcoming Riigikogu elections, the presidential race, and the fiscal challenge of raising public sector salaries.

Kristina Kallas, chair of Eesti 200, has said that rushing to reduce Estonia's budget deficit while war continues in Europe would be a fundamental mistake, one that would inevitably force cuts to defence spending. Speaking on Vikerraadio's "Uudis+" programme, Kallas drew a clear line between her party's position and that of the Reform Party, which has proposed an accelerated path back to fiscal rules.

«While we must protect the Estonian state, protect Europe and support Ukraine in this war, I see no possibility of reducing the budget deficit at an accelerated pace,» Kallas said. «In essence, that would mean having to cut defence expenditure, since it is precisely defence spending that is the main driver of the deficit growth.»

Defence before deficit

Kallas pointed out that raising defence spending from 2% to 5% of GDP over five years has been an enormous fiscal step, one that has not been matched by equivalent growth in tax or other revenues. Borrowing has therefore inevitably increased. With defence commitments at 5% of GDP, she argued, aggressively cutting the deficit is simply not feasible without either gutting defence or introducing new tax rises, the latter of which she believes would be economically harmful.

She said the picture would change once the war ends. «When the war in Europe is over, I think we will find ourselves in a new reality, and then it will be possible to revisit priorities at the level of Estonian state governance,» she said, suggesting that the current period of elevated defence spending could last a decade.

On the question of teacher salaries, a politically charged promise from the last election cycle, Kallas confirmed that bringing teachers' pay to 120% of the Estonian average wage would cost €90 million next year, representing a 14% rise. She has already submitted these calculations to the Ministry of Finance, but acknowledged that actual room for increases depends on budget execution figures and economic forecasts due in August.

Eesti 200's electoral future

Despite polling at just 1.5% in a Norstat survey from June 25, Kallas insisted Eesti 200 will stand in the next Riigikogu elections with its own candidate list. She dismissed earlier suggestions, made by party member Ando Kiviberg in spring, that the party might reconsider if its ratings did not improve by autumn.

«Estonia needs a liberal progressive party. Voters who share that worldview exist in Estonia, and we intend to fulfil that political demand,» she said. Of the party's 13 current MPs, she confirmed that 12 have stated they will stand again, while one is still deciding whether to continue in politics or return to their professional career. Kallas declined to name the individual, saying it was for that person to announce themselves, though speculation has centred on Irja Lutsar.

Kallas also rejected persistent rumours that some Eesti 200 MPs might defect to the Social Democrats or to Isamaa, calling such a shift a «rather large turn in worldview» that she does not see materialising.

Sharp words for political rivals

Kallas was sharply critical of what she called political dishonesty, particularly targeting Isamaa leader Urmas Reinsalu. She accused him of knowingly promising voters simultaneous tax cuts and significantly higher family benefits, a combination she said is arithmetically impossible. «He knows it. But he still goes courting the voter with a lie,» she said, warning that the resulting disappointment would be severe.

She also signalled concern about reported Isamaa plans to dismantle the second pillar of Estonia's pension system by halting state contributions. «That is simply criminal towards my generation and those younger than me,» Kallas said, arguing it would eliminate any guaranteed growth in long-term savings.

Presidential election in focus

On the upcoming presidential election, Kallas said there is no single agreed candidate despite media speculation to the contrary. Journalist Aivar Hundimägi had claimed on a radio programme that politicians privately know who the next president will be, but Kallas pushed back. «There is no such one name,» she said. «There are several candidates about whom we know they would likely receive majority support in the Riigikogu.»

She emphasised that any candidate must also be willing to stand, and that much depends on whether Isamaa is prepared to cooperate rather than play political games. «I would like to address this question to Isamaa directly: does the party want to elect a president for Estonia?»