One major topic you aim to tackle is state finances. Do you believe Estonia should raise taxes or do you feel like Minister of Finance Mart Võrklaev (Reform) when he said last December that the people are tired of tax hikes?

There are two sides to this matter. Everyone in Estonia probably feels that tax hikes are not a positive phenomenon in themselves. Tax hikes and tax revenue are necessary to ger things done.

Looking at Estonia as a whole – where we are, we find ourselves next to a despot who does not care about his own people and wants to test neighboring countries. There is a full-scale war in Ukraine, and it is clear that the situation is quite critical in national defense and security.

The other area where we need to restore order is the economy. Perhaps restore order is not the right expression, but we need to pay a lot of attention to activities that can help our companies grow, achieve more value added, talking about competitiveness as a whole. There is a long list of things that we and entrepreneurs feel Estonia could do. Starting with planning processes and ending with clean, renewable energy.

Speaking of fixing finances – there are several stages involved, one of which is having a tax debate.

It is my personal goal, and hopefully the goal of the entire coalition, to phrase the new taxes we will have and for how long in the process of updating the coalition agreement. So that we can have clarity for longer, instead of this weekly festival of proposing new taxes.

I am in favor of introducing a national defense tax. I believe that all incoming coalition forces and even the opposition support it. Newspaper editorials have also endorsed it, as have entrepreneurs in opinion articles. It would meet the expectation of covering ballooning defense spending.

Another keyword to mention is budgetary clarity.

So we would understand what we're deciding. It is not entirely normal when, in digital Estonia, even financial wizards like Aivar Sõerd or Jürgen Ligi struggle to make sense of public expenses. We need to address all that.

What will the latter entail? Will Estonia return to expenses-based budgets and discard the current budgeting system?

Things will change. Some countries have at least complemented the current system with a parallel one that helps them stay on top of exactly how much is spent on what. That is the first step. How to put it together will be up to the Ministry of Finance to figure out.

But things will definitely change. The situation today is not good.

A situation where we suddenly find €100 million just sitting in accounts while everyone is scrambling to facilitate austerity is not acceptable for Estonia. The budget must become legible.

What could be the object of taxation when talking about a national defense tax? Will we be taxing property or income, or will there be higher consumption taxes?

That debate is only starting today. A general principle which I believe we should have is for it to be maximally broad-based. This would allow everyone to bear the burden together. But it will be combination of difference choices.

I think we'll have to wait until the end of the month to have both the big picture and the details locked down, which will be followed by government-level decisions. Next, it will fall to the parliament to pass the laws.

There is likely not enough time for the new tax to enter into force from January 1. But I take it you want to lay it down as soon as possible?

We will try to make swift progress. There are two things here. One, as I've said, is the need to contribute more to national defense. The war in Ukraine is very much our business as they are also fighting for our freedom and that of Europe. That is why we need to contribute to a Ukrainian victory. We also need to reinforce ourselves.

The other is fiscal balance, meaning that financial matters need to be sorted out so we would at least start moving toward improvement.

The Reform Party has been critical of both tax hikes and growing public debt for years. Do you rule out increasing the debt burden or are you not afraid to borrow for the right things?

The Reform Party's anti-loans stance is a victim of one-sided coverage.

Neither the Reform Party nor yours truly have ever endorsed borrowing for the sake of borrowing.

I doubt we'd find otherwise sensible people in Estonia who would suggest first borrowing and only then trying to figure out what to do with the money. That would be an upside-down world.

But if we need to borrow to meet financial obligations or get things done, Estonia has borrowed money in the past and will in the future. It's quite as simple as that.

Would you be willing to take a loan to finish Rail Baltica?

I know more about Rail Baltica as it crosses my desk almost weekly, working as the climate minister. There is €1.3-1.4 billion coming for Rail Baltica from Europe this financing cycle, and we're expecting no less from the next period. The shortfall is €500-600 million and it is possible for the company to borrow that amount against future revenue. There are different ways to finance the project.

Rail Baltica as a project is in the green, as every €10 million in European funds we put in will yield €3 million on the plus side. We do not need to borrow for Rail Baltica, at least not now. Should the need arise in the future, it can be discussed then.

But we need a high-speed transport link to Europe, both for economic certainty, the people's needs, also to show affiliation, as suggested back in the day by Lennart Meri.

You've said on numerous occasions during your career that the main highways should be constructed to have four lanes. We are also talking about an obligation we have to the European Union. Could we borrow to do that?

Theoretically, you can borrow to do anything.

I do believe that the main highways should be developed. The record for Estonia's largest infrastructure project – the Kose-Mäo intersection [of the Tallinn-Tartu highway] – is still mine from my days as economic affairs and infrastructure minister. It would be good if this record was broken in time and for Estonia to have four-lane highways.

But we need to keep in mind that Estonia already puts quite a lot of public revenues toward investments. While the EU average is around 3 percent, it is 5.7 percent for Estonia. Looking at infrastructure, a lot of money is going into Rail Baltica but also renovation of buildings. Another renovation funding round worth €160 million will open this autumn. So we'll have to aim for a sensible balance.

But we should definitely put more money toward road construction – that is my personal opinion which needs to be reconciled with financial possibilities.

A national defense loan – a possibility or have we borrowed enough?

A loan is simply a way to finance various activities. Rather, the purpose of the loan is what matters. The state can always finance its activities using loan money. Estonia is perfectly capable and has favorable conditions.

When it comes to national defense, two options have been weighed. One is a national defense tax, which we need to cover growing national defense and internal security spending. The other is fiscal balance.

A national defense bond issue has also been discussed, as proposed by Eesti 200. We'll debate what we need during the coalition consultations. To have a tidy budget and financial plan, clarity in terms of where this country is headed.

We covered roads, let's also talk about cars. Where are we with the car tax? Should the Riigikogu amend the part of the law that deals with people with disabilities for the president to promulgate the law? Or should the entire plan be revisited, because thinking of what you've said as climate minister, one gets the feeling you wanted a different kind of tax?

It is a fact of life that not every opinion is heeded, despite the myth according to which the Ministry of Climate is omnipotent.

You're about to be prime minister!

I'm not prime minister yet. But in all seriousness, the coalition partners will amend the car tax law and find ways to solve what the president finds problematic. Looking to the future, the car tax will need to be overhauled and shortcomings therein addressed a few years down the line.

But what the parliament has passed, sent to the president and had returned will be amended and sent back to the president in the short term. The president can then evaluate the law again and decide how he wants to proceed.

In your opinion, do we need the car tax in its current form or should it do more to address environmental aspects?

Let us be honest, the vehicle tax is essentially a property tax in its current form. And I believe that most people in Estonia have realized that it is being used to satisfy our need for more revenue to cover ballooning costs in social welfare, pensions and benefits, education or internal security. So it is primarily a property tax. But whether to try and rework it as an environmental tax at this time... I believe that will be a task for future years or [election] cycles. The parliament has passed a law, we've had a debate and to return to square one... I do not consider it realistic, at least there is no such agreement in the coalition today.

You've said that the coalition should move on with recent partners. Will the Social Democrats still have a place in your government if they refuse to go along with austerity?

I believe the Social Democrats understand the need to cut costs well enough. I've met with Lauri Läänemets (SDE) and Margus Tsahkna (Eesti 200). We've debated this at the level of delegation heads, and I'm sure they understand the situation.

What is certain is that I will not be throwing around ultimatums in the media. On the contrary, we will try and find solutions together. The Social Democrats also want a well-run and protected Estonia.

This is not your first day in politics, and I'm sure you've seen [Lauri] Läänemets during government press conferences. Do you believe he is willing and capable of change?

Unlike your phrasing of the question, I do not think that Lauri Läänemets should change. It will be a coalition of three different partners all of whom have the right to their own worldview. The Social Democrats see Estonia's future in a progressive income tax system, while we believe it should be flat.

There are more than a few areas where we'll disagree, but that does not mean we won't be looking for the best solution for Estonia. The need for austerity is a matter of facing reality. If we want clarity in terms of the future and the economy, if we want to avoid discussing which taxes to introduce on a daily basis, want Estonia to appear trustworthy internationally and to have enough to spend on defense, there are decisions we'll need to take. And it is better to take these decisions together and sooner rather than later.

Läänemets also wants to go over ministerial postings. Should he calculate within the limits of SDE's current ministries or are you prepared to shuffle portfolios between parties? For example, could the next climate minister be a Social Democrat?

Lauri Läänemets has informed me and Margus Tsahkna of this, and we have agreed that all matters of partners' relative weight so to speak, choices of person will follow the meat of the talks.

It is an old tradition to leave matters of persons and portfolios last. Otherwise, some might take too great a shine to a field or portfolio only for it to grow too big and overshadow others. Therefore, all of that will come last. Until then, everyone will be free to speculate on what the others think, and I believe we'll have a plan in two or three weeks.

You'll need to negotiate with partners, while considering who could succeed you as climate minister should Reform hold on to the portfolio. The press has been speculating with the name of Secretary General Keit Kasemets for some time. Are there grounds?

Media speculation is always rooted in something. But that does not mean it is a done deal. As I said, matters of persons and proportions will come last.

If you asked me whether Keit Kasemets was instrumental to running the Ministry of Climate, I would say I'd endorse him for any office. He is very capable, and at least half if not two-thirds of what we've achieved has been because of him and other officials. I'm very happy with our cooperation.

Even though financial matters are at the heart of talks, Estonia's Minister of Finance Mart Võrklaev will not be participating in Reform's official delegation. Will Estonia be getting a new finance minister?

It is not quite accurate to say that Mart Võrklaev will not be participating.

The delegation can only have so many members. We picked people largely based on their official position and tried to keep the delegation size sensible.

Võrklaev will be participating in preparing the talks. We will be discussing financial matters later today. He will be a daily help. He'll participate in the talks as finance minister, just not as an official delegation member.

What about his future in the incoming cabinet...

... we're going in circles now. I maintain that matters of personalia will come up at the end of talks. I'm sure I will get to say it again and again for the next few weeks.

I suppose the answer would be the same if I asked about Hanno Pevkur and the defense portfolio. But what about the tax hump (Estonia's gradual basic exemption reduction scheme – ed.)? Is it a sacred cow and needs to be abolished or would it be sensible to postpone it for a few years, considering how much this would improve the fiscal position?

Some humps can only be cured by the grave, as the Estonian saying goes. It's the same with the tax hump as it doesn't even amount to what would be the European idea of a progressive income tax. Those who feel they'd miss the tax hump should discuss a proper progressive tax instead.

Second, as we've already pointed out here, there is the principle of having six months between decisions and tax changes taking effect. The decision to abolish the tax hump has been made. If we wanted to reintroduce the tax hump by law this autumn, it would take another six months to make things even more difficult for taxpayers. It would amount to a new tax hike or progressive income tax in the fall. So, I would say the tax hump ship has sailed. We've crossed that line.

Your former fellow Reform Party member, now Center Party's Andrei Korobeinik says that you will not be going along with Kaja Kallas' economic policy agenda. I suppose Korobeinik knows you well. But what is the plan?

Korobeinik knows me well? Allow me to doubt that. But perhaps he knows me better than I think he does. He has found happiness in the Center Party and I wish both of them all the best.

In terms of what I would like to see in economic policy? First, general competitiveness. What should the Estonian economy be like in the future? It should sport clean value added, meaning room for growth for new industries, including the defense sector. But not just that. Everyone adding value to local resources will be given an advantage, as will those who use renewable energy.

One bottleneck we need to address is proceedings and planning deadlines. Let us be honest, many brilliant ideas get stuck behind the fact we are too slow. We also need to remember our digital strengths, where the public side of things has lost its shine recently. Bureaucracy, simplicity of administration, competitiveness and growth from higher value added and cleaner export capacity should be what brings us prosperity and keeps Estonia beautiful and clean.

You said in interviews on Saturday, after the board of the Reform Party had endorsed you, that Estonia should be a good place to raise kids. Why highlight this particular value?

The Reform Party has been among the most family-friendly forces for years. Times have been difficult, and we've had a benefits versus services debate. But I believe that introducing the parental benefit has been one of the best decisions Reform has ever made.

And looking to the future, my story is one of certainty. That we'll create certainty in defense and finances, create clarity and certainty for the economy. Estonia already is one of the best places in the world to raise kids. We need to make sure people have access to services.

Because let us be honest and face the truth – you can get practically anything you want in the world, but Estonian kids still come from Estonia.

And finally, when do you believe your government will take office?

That depends on much more than just my own plans. We will be meeting for preparatory consultations this week, which entails a lot of technical aspects. We'll move on to the consultations proper from July 8, which will take two weeks, maybe three.

By the end of the month, after the prime minister resigns and the president will meet with parties to discuss a potential new government, we'll have to count 14 days from then. So, we could have a new government by late July or early August. We should have a picture in terms of the state budget and public finances in September.

What might be the new coalition's motto or working title? Past examples have included the "Sunrise Government" and the "Onion Coalition" but what might yours be called?

I haven't considered it to be honest. I'm sure we'll be called something. But to ask me, I might call it "Confidence for Growth."

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