Speaking to ETV politics head-to-head show "Esimene stuudio" Tuesday, the prime minister said: "This government is making decisions that reach until 2027: broad-based security taxes, cuts."

"And regarding various ceilings—wages have risen quite quickly, but at the same time, when it comes to parental benefits, which I still believe is one of the best decisions which governments and the Reform Party have ever made, this also gives the possibility to people to continue working in the future, for instance removing some restrictions. So, my belief is that this is a quite balanced decision," Michal went on.

Host Andres Kuusk had referenced the government's plan to impose a cap on both sickness and parental benefits starting in 2026 and asked if this constituted a bad day for Reform Party voters.

"I think that Reform Party voters really want what this government represents— such clear, effective policies. This is really the expectation of a Reform Party voter," the prime minister went on.

Michal suggested that some decisions had been delayed by the uncertainty towards the end of former prime minister Kaja Kallas' time in office. These "fairly objective reasons" had "somewhat hampered everything."

On pension support cuts, Michal said the logic here was "to support those living alone. If someone no longer lives alone, then there is no basis for the support."

"It's not targeting the vulnerable. This only affects a small portion of pensioners living alone," he added.

As for the proposed wage tax, Michal said this wasn't solely the initiative of Finance Minister Jürgen Ligi (Reform). "This idea actually derived from the Chamber of Commerce and business representatives. Jürgen simply outlined the situation. There are more proposals on the table," he added.

The finance minister's role in any case is to introduce various options for implementing a broad-based security tax, be they through taxes on profits or on payroll funds, he said, adding that decision would likely be made in the next couple of weeks, after which a draft bill would be sent to stakeholders for approval rounds.

"Esimene stuudio" host Andres Kuusk also referenced a piece written by academic Jaak Aaviksoo and economist Raul Eamets, which argued that balancing the budget, for long a Reform Party dogma, cannot be a strategic goal for the Estonian state as things stand.

In response, the prime minister said: "A budget deficit cannot be a goal either, particularly for a small country."

The prime minister acknowledged that while Estonia's finances are in order, the national debt has grown rapidly, a trajectory which he dated back to 2017 and when Sven Sester (Isamaa) was finance minister, "when the fiscal rules were relaxed," and when "things started slipping."

These relaxed rules did not take into account the need for reserves in times of crisis, Michal said, while a wave of crises indeed followed in the ensuing years.

"Now we're in a situation where we have to patch everything up cumulatively, and during a difficult time," the prime minister added.

The rest of the interview dealt with an ongoing visit to China by half-a-dozen Riigikogu MPs, including one from the Reform party, and controversy over their trip being part funded by Beijing.

Michal said that the MPs and delegation members should cover their own costs, to avoid "misunderstandings."

Arising from the early stages of the government's 2025 state budget talks, starting in 2026, a cap is to be introduced on sickness benefits and the parental benefits ceiling lowered.

This is being done to avoid an unsustainable burden on the state and means that by 2026, the maximum rate for parental benefits will be reduced from its current rate of three times the average income taxed with social tax. to two times, or €3,670 based on 2024 averages.

The government says it can save €13 million in 2026, and €27 million per year by 2027.

Parental benefits cost a reported €349 million to state coffers last year.

The change is estimated to affect affect approximately 3,500 people annually, or about 12 percent of those receiving parental benefits.

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