Speaking about next year's budget on Thursday evening's "Aktuaalne kaamera", Kallas said, despite the forecast of 10 percent economic growth next year, Estonia will only reduce its budget deficit rather than balance it completely.

This is because salaries for public sector workers, such as health care workers, teachers and emergency service workers and police officers, need to rise.

"And we need investment to be sustainable," Kallas added.

Kallas said she believes in better times the state should invest less, but some plans must be implemented.

"We have tried to take this into account so as not to give a boost to price rises. But we will definitely make some big investments, Rail Baltic and infrastructure investments that cannot be postponed," she said.

The prime minister said the state does not have an infinite number of levers that it can pull against inflation, but the biggest one - the postponement of excise duty increases - has already been agreed upon by the government.

Speaking later the same evening on ETV's interview show "Esimene stuudio", she said the postponement of excise duty was a compromise between the two coalition parties as a rise had previously been agreed in the coalition agreement.

However, rapid inflation forced the government parties to change their position, she said. Estonia currently has the fastest rising inflation in the Eurozone.

The law must now be changed to postpone excised duty before the budget can be passed.

Discussing the record high price of electricity, Kallas said the state can help people who are hardest hit by the increase. "We need to do an analysis of who still needs help, to what extent and what mechanisms we can use," she said.

She said as there are no reliable forecasts about electricity prices it is not sensible to exhaust temporary solutions as they could end up becoming permanent.

Kallas added it is not possible to withdraw from the quota mechanism, which has been proposed by the opposition to reduce the price of electricity.

New school buildings may be delayed

Educators' demands for higher salaries rises are giving the Ministry of Education a headache as the ministry must find an additional €9 million to pay for them, Kallas said.

The Union of Educators is threatening to strike if a minimum wage of €1,400 is not introduced.

Kallas said the increase could mean the cancellation of other education investments.

"When it comes to investing in concrete, we can turn it into an investment in people. If it means we have to postpone or stop building schools, we are ready to make an effort so the money can be given to people," Kallas said.

Regarding hobby education cuts, Kallas said the budget directs money away from Tallinn and Harju County to where the money is most needed. 

Municipalities should receive more than €3 million of extra money compared to what was planned in spring, she said.

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