The majority of the text in the four most important areas has been agreed, he said at a press conference on Wednesday afternoon.

"We have a better idea of how to improve the competitiveness of the economy, what we are doing for economic growth, how to put public finances in order, what are the needs of national defense and how to meet them, and what steps could be taken in terms of livelihoods and housing," he listed.

On Thursday morning, the parties will review the text and various calculations, Michal said. Ministries will be allocated on Friday.

On Friday, the parties will gather to discuss the agreement. Next week, the coalition hopes to receive a mandate from the Riigikogu.

SDE Chairman Lauri Läänemets said changes may still be made tomorrow.

He added the negotiators understand the bigger picture in terms of finance and budget issues, and how to improve the situation.

"Not all the lines have been written out, and with some of the numbers there are questions about whether they are one or the other, whether they are bigger or smaller, and whether or not there are more lines to be added. This is today and tomorrow morning's job," said Läänemets.

Margus Tsahkna, head of Eesti 200, said that the parties have agreed on industrial policy and he wants to increase the pace of investments.

"We have gone through the digitization side in-depth, the regional dimension is also very important when we talk about jobs, the wider economy, and education. Fighting red tape too," he added.

Tsahkna said the agreement on the budget still needs to be fine-tuned, but the savings side will be huge.

Defense spending financed by tax rises, not pensions

To cover defense spending, the new government plans to raise sales, income taxes and business taxes. The chairmen promised to reveal the exact figures after the parties' boards had approved the coalition agreement on Thursday.

"We will not be able to fully implement this tax from January 1 next year, so full implementation from 2026," Tsahkna said.

Michal said the basic principle of the defense tax has always been "broad-based", affecting all of society not just small sections.

"It touches across society, through consumption, through income taxation, right down to business. In the same way, it is time-limited, so that the next government can ask for a mandate for its plans or changes to them," he said.

Läänemets said: "Basically it could have been something like four or five percent VAT or income tax – I imagine that would be a lot for the average working person. It will be significantly less and I think significantly more reasonable. We will win as a society if we can make these security investments and we know what lies ahead."

The SDE chairman said an agreement was also reached on pensions and the minimum wage. "I can tell you that no one will touch pensions. That's what we've agreed. The minimum wage and pensions will stay where they are agreed," he confirmed.

Riigikogu to hold extraordinary session on Monday

An extraordinary session will be held in the Riigikogu on Monday at 11 a.m. and the new coalition will be on the agenda.

Michal needs a majority in the 101-seat parliament to form a government. The three coalition parties Reform, SDE, and Eesti 200 already have enough votes between them to do so.

If Michal receives the mandate to form a government from the Riigikogu and the president appoints the government on Monday afternoon, then the new government can be sworn in on Tuesday morning at 10 a.m.

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