This will mean the state budget situation cannot be improved next year by either austerity cuts or by tax hikes, the two measures on the table, Läänemets went on.

Speaking to ETV politics head-to-head who "Esimene stuudio," Läänemets said Wednesday evening that his party had not been inclined to spend long weeks dealing with this year's supplementary budget, and instead the years 2025 to 2027, the the budget shortfall of at least a billion euros, should have been addressed.

The minister said: "This is the real problem facing the Estonian state. We have now spent, in a way, a month looking at the wrong place, and this means that certain legislative changes to improve the budget by 2025 can no longer be made."

Regarding achieving a balanced budget, this is short by more like €2 billion, Läänemets said, adding that the government is not even dreaming about that at present.

The primary issue is to ensure that the budget deficit stays within the 3 percent limit required, which on its own would mean making up the billion-euro deficit noted above.

He said: "I have talked at length about the errors we have made simply because we did not want to argue the bigger picture at the end of last year or the start of this year, and have confined things to 2024."

"Consequently, it is not viable to get this money by making cuts in 2025, nor is it possible to hike taxes, meaning this deficit remains intact."

"We will certainly reach some kind of [European Commission] procedure. Since the financial rules in Europe are also changing somewhat, I do not know what the outcome will be," Läänemets went on, acknowledging that a very large deficit for 2025 is an inevitability.

"What we can do is agree this year on 2026, 2027, and 2028's levels, decide on that and make the necessary changes, because the European Commission will also take this into account.

In this respect at least, next year's deficit may not be such a major issue.

The government plans via this year's supplementary budget to cut approximately €100 million. The Ministry of the Interior, the Ministry of Defense, and the Ministry of Social Affairs, as crucial areas, are largely exempt from these cuts.

"Generally, €40 to €50 million will come from [cuts to] ministry operational costs," Läänemets went on.

"The funding on research and development will be recalibrated to 1 percent of GDP per annum. Since GDP has fallen, this amount is €19 million lower than before. Operational cost cuts will also affect institutions such as Enterprise Estonia (EISA), to an additional €5 million," he added.

"Some investments, at around €20 million, will naturally be deferred to subsequent years. There are dividends to consider. The total cuts will amount to over €100 million," Läänemets said.

Bureaucratic costs that could be reduced, for example, in the use of EU funds, are a potential cuts source too, the minister continued.

At the same time, Läänemets said, SDE as a party is finding it very difficult to agree with coalition partner Eesti 200's proposed across-the-board cuts. "This is relatively vision-less, and is harmful to society."

Ultimately the taxation system should be reviewed, to obtain additional funds as needed, Läänemets said.

"Generally, even in private business, when you up expenses, you can do so by also increasing revenues. Politicians should stop burying their heads in the sand, pretending that they can increase expenses without raising taxes and then make cuts every time. This is not logical because, at some point, you would have to completely bring certain state services to a halt."

The minister also put his finger on what seems to be something of a cuts-mania in Estonia.

"This enthusiasm for cuts in Estonia is very high. The magnitudes are such that it is not possible to cut a billion without harming tens or hundreds of thousands of people. Those same people who think they don't want to pay taxes will likely lose services, which amounts to a significantly greater strain on their wallets," Läänemets concluded.

The government nominally reached agreement earlier this week on the €175 million so-called negative supplementary budget, €100 million of which constitutes actual cuts plus €75 million in called-in dividends from state concerns.

The main annual state budget process starts in late summer, with a view to passing by year-end.

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