The funding would in part have come from the EU's recovery plan, funding which had been revised downwards since the project was tabled, while the exit of the Center Party from the national coalition at the start of June removed the component of the administration which strongly backed the plans.

Speaking at the regular Thursday cabinet press conference, finance minister Keit Pentus-Rosimannus said of the development that: "We had to re-evaluate the content of the rehabilitation plan, the objects of the investment."

"Look at the substantive side of the objects and staying within the time frames. Today's decision was that we have to exclude those objects where the preparation has been poor or where there are substantive deficiencies, from the reconstruction financing," she went on.

"We have had the desire to move forward quickly with the Tallinn hospital. And we have known that there are risks associated with the preparation. In the meantime, the risks have not gone away, rather the risks have increased," the finance minister added.

While initially Estonia was supposed to receive €1.1 billion in recovery funding, but this was subsequently revised to €862 million, due to a better than forecast performance on the part of the domestic economy, the finance minister said, while at the same time a rapid increase in construction prices made the hospital and two other projects more expensive by up to €345 million, than had been projected.

The projects cut would have cost €360.3 million: €280 million for the Tallinn hospita along with €34 million earmarked for the Turba-Risti rail link planned for western Estonia, and a multi-purpose medical helicopter capability for the Police and Border Guard Board (PPA), which would have cost €46.3 million. The projects were in the preparatory phase.

The rail link had also been a primary policy goal for the Center Party.

Minister of Social Protection Signe Riisalo (Reform), also attending Thursday's press conference, added that staying on schedule, set by the EU as finalization by summer 2026, also presented risk.

The Tallinn City Government will reportedly waive its component of the funding, set at at least €140 million, if the hospital does not see at least €280 million in support from the recovery fund.

Pentus-Rosimannus said that a city government plan to add an extra, subterranean storey to the planned hospital would have pushed the project beyond the schedule set.

The hospital would altogether have cost €550-585 million.

The city had only on Wednesday granted its approval for the use of the EU funding and for signing a contract between the mayor and the social affairs ministry.

The changes made must now be renegotiated with the European Commission, the finance minister added.

Social Democratic Party (SDE) Tallinn city council chair Jevgeni Ossinovski called the move an act of "gross piggery", no less, telling ERR that the sudden removal of the funding without negotiation was unacceptable, and a move which would damage negotiations between Reform and his party to enter coalition at the national level.

Until now, the two parties had seemingly been on the same page in the talks, which started over two weeks ago.

Reform has been in office alone since Prime Minister Kaja Kallas, the party's leader, dismissed the Center Party's ministers, on June 3.

One of those ministers was Tanel Kiik, who had held the health and labor portfolio and called the move one of the most hostile made in respect of the healthcare sector in decades.

"It's depressing when nothing has been learned from the latest crises and the single government of the Reform Party calls time on the well-being of Estonian patients and healthcare workers," Kiik said in a written comment sent to ERR.

The move would negatively impact the healthcare system far beyond the capital itself, given its proposed catchment area covers close to half the population of Estonia, at 600,000 people.

Tallinn is currently served by the two central hospitals, west (LTKH), east (ITKH) plus the North Estonian Medical Center (PERH), and associated facilities.

Given the government is ruling as a minority, one-party administration, it does not have the authority to write off major projects backed by the administration when it included his party (January 2021-June 2022), Center, Kiik added.

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