Speaking at a meeting of EU leaders in Brussels Friday, Kallas said: "Containing inflation is a major challenge for the whole of Europe. Recovery from the COVID pandemic led to a strong increase in demand and the Russian war against Ukraine led to higher energy prices. After years of steady income growth, we are faced with a temporary drop in the standard of living, which inevitably creates difficulties for many people."

"The central banks and governments must react jointly to this perfect storm," Kallas added, according to a government office press release.

Inflation cannot be mitigated by significant increases in expenditure, she added. "We must help those who are struggling. But the general increase in benefits and the increase in public expenditure only turns inflation into a cycle. If our goal is to fight inflation and save people from falling below the poverty line, the budget deficit must be contained, not increased."

Europe is facing major economic challenges which require reforms, especially in the energy and digital economy sectors, Kallas went on.

"The care-free time for financial sustainability is over, we are moving back to a time when balance is important," she added.

The challenges facing Ukraine and Moldova, whose official candidate statuses for EU membership were recognized at the summit, along with that of Georgia, were also on the table, as was further integration of the western Balkans region into the EU alignment, and the future of Europe more broadly.

1/ #EUCO concluded with discussions about economy. High and rising inflation is a challenge EU governments must address together with central banks. We are in a difficult situation that requires careful steps.

— Kaja Kallas (@kajakallas) June 24, 2022

Balanced budgets are a central policy of Kallas' party, Reform, while the issue of how to combat inflation and its effects, particularly in the energy sector, has been a major topic for Kallas on the domestic front.

A recent squabble over a bill which would increase spend on family benefits was, at least on the surface, at the heart of a government split which resulted in Kallas' dismissal of the junior coalition partner, the Center Party, at the start of this month. Reform is currently in talks with Isamaa and SDE to form a coalition, though no deal has yet been struck.

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