"We have no right to ask people to contribute more to national defense in taxes if we fail to cut costs on our side," Michal said.

Michal said that a 10 percent cut across all ministries has been agreed, with state capabilities, such as national defense, internal and broad-based security and, for example, teachers, the exceptions. "Talks also focused on not cutting the things that can help the economy grow, or investments in other words. We will be going over everything else with the intention to cut back," the prime minister said, adding that the austerity will be "real."

Michal said there will be no other exceptions and that ministries should focus on the things they will not be doing. "The state should engage in real cost-cutting and dial back activities which are not necessary."

Asked by host Mirko Ojakivi whether the government plans to return to accrual-based budgeting in the 2025 state budget process, Michal said the goal is to first complement the activities-based approach with the kind of budget that agencies can follow based on expenses. "We'll be making things a little simpler this year, while the whole budget should be traceable in the coming years," the premier noted.

Michal confirmed that the government will launch budget and economic forecast deliberations on August 27, adding that ministry officials are already working with austerity plans and will soon make their proposals. "We'll have the Ministry of Finance's economic forecast on August 27, which is when we can move on to concrete budgetary deliberations," Michal said.

The PM added that this year, the 2025 budget and Estonia's state budget strategy (RES) will be discussed in the government's offices. The deliberations have in previous years been held at the Vihula Manor.

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