The parties convened again at 6 p.m. to try and reach an agreement before Midsummer Eve but failed to make progress by 8 p.m.

Social Democratic Party (SDE) leader Lauri Läänemets said no progress was made since earlier in the day. He added that he does not have mandate from the party to sign a poor deal.

Läänemets said the extent of the basic exemption hike, nursing home places and switch to Estonian education saw no developments.

The parties will take a break from talks for the holidays and convene again during the weekend.

Prime Minister and Reform Party chair Kaja Kallas, and the leader of SDE Lauri Läänemets, said earlier on Wednesday that an agreement between their two parties, along with Isamaa, could be ready as early as Wednesday evening.

Kallas has also said that she has not yet decided whether the agreement would be followed by her resignation as prime minister, in order to obtain a fresh mandate from the Riigikogu – who would vote on the Reform/SDE/Isamaa coalition, should a coalition agreement be struck.

Kallas added that she had been warned by constitutional experts not to do so on the grounds that it might endanger the likelihood of any minority government – with fewer than 51 seats among its MPs at the Riigikogu – in future.

Reform has ruled alone and as a minority administration since June 3.

As to the likelihood of a deal with SDE and Isamaa, Kallas told ERR Wednesday that she was: "Moderately optimistic; we have a lot in common, and we have moved a lot closer to each other. We are looking for compromises; as a negotiator, everything has been as hard as nails."

"We came very close to each other on certain aspects, and in some places we took some more time to talk to our teams. Then we will be returning to those things tonight," she added.

As to what topics were being referred to, Kallas said that common ground with Isamaa as well as with SDE has been found on the topic of the family benefits bill, which would raise payments to lower income families, whereas education was one of the thornier issues.

Nonetheless, Kallas said she hoped an agreement would be struck Wednesday evening and ahead of the Jaanipäev holiday proper, and also rejected rumors that her party had offered a budget of €150 million as a sweetener.

SDE leader: Broad agreement reached

SDE leader Lauri Läänemets reiterated that common ground had been reached on most major matters while the outstanding issues should be sorted by the Wednesday evening.

He said: "There are still some issues left. I think we could get them agreed in the evening," Läänemets said, adding that all parties were making compromises, while the actual text of an agreement has also been drafted, pending those outstanding issues.

Seeder: Will take more than a couple hours' discussion to reach agreement

Later on on Wednesday, Isamaa's leader, Helir-Valdor Seeder, told ERR that he was skeptical about the likelihood of reaching an agreement on Wednesday evening, as there are still issues where the parties have not converged fast enough and where it is still very difficult to reach a common position, he says.

"I think it will take more time than a couple of hours of conversation today," Seeder told ERR, adding the same topics - Estonian-language education and the question of family benefits as those still needing discussion, as well as "various financial issues".

Of some possible points of agreement, Seeder mentioned the income tax-free allowance and the reform of the electricity as being resolvable as of Wednesday evening.

The talks started on Monday, June 13, after over a week of deliberation by Isamaa, who had also received an offer from the Center Party and the Conservative People's Party of Estonia (EKRE), to enter coalition negotiations.

Isamaa, like Reform, supports education from kindergarten level upwards to be in Estonian-only; both Isamaa and SDE voted against Reform on a bill to hike family benefits and with the Center Party – part of a crisis which resulted in Kallas dismissing the seven Center Party minsters nearly three weeks ago.

SDE took up Kallas' offer of talks within 24 hours of this.

A Reform/Isamaa/SDE coalition, or "power union" (Võimuliit) as it is called in Estonian, would have 56 seats at the 101-seat Riigikogu.

This article was updated with recent developments

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