Kallas reiterated the increase in spending cannot be funded by a loan. "An additional €300 million needs to be found annually to cover this cost," Prime Minister Kaja Kallas (Reform said at a press conference.

This will need to come from budget cuts or by raising taxes, she said.

Center is ready to open a debate on taxes, Kiik said, adding he is "absolutely not afraid to review" the existing system.

"In a situation where we want to provide free, accessible health care, education, internal security, extra money for national defense, higher education, then we must honestly look at what the state can afford with its current revenues and at how these can be increased," the minister added.

Expanding upon possible changes, he said: "I would introduce a graduated income tax, review the corporate income tax, review the tax base for paying health insurance, sources of income from which it [tax] is taken, and introduce a tax for long-term care."

Kiik said the tax system will be one of the main topics of the next parliamentary session, which runs from September to December. He said he would like to see the law adopted, for the current government to continue and believes it is possible to find a compromise with the Reform Party.

Kallas said the first step to resolving the issue is for the Center Party to scrap the current bill and to work with Reform to create a bill that corresponds with the budget strategy.

Background

A bill presented by the Center Party last Thursday (May 12) would boost the monthly child allowance benefit to €100 per child plus €700 a month for those raising three to six kids and €900 for people raising seven kids or more.

It aims to tackle the rapidly rising cost of living. Last month, Estonia's inflation was 19 percent, the highest in the Eurozone. 

The bill has cross-party support from four of the five parties in the Riigikogu, but not the biggest party and coalition leader Reform.

Center wants the bill to be passed before midsummer in June, Kallas has said the only way this will happen is if the government collapses and reforms. Last week, rumors swirled that Center was planning to pull out of the coalition but these have since been denied by senior members of the party.

Center and Reform have held discussions this week to reach a solution.

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