Through the media, budget discussions have already been kicked off. The Reform Party board said in mid‑June that the budget deficit should start shrinking. Next year the deficit would be four percent, which would mean about €400 million in cuts, followed by annual steps of 0.5 percent. But what happened next? Eesti 200 leader Kristina Kallas said that as long as the war in Ukraine continues, the deficit cannot be reduced ahead of schedule. For example, €90 million more is needed for teacher pay raises. Interior Minister Igor Taro said the budget strategy must include €250 million to buy five new helicopters and a new surveillance aircraft. Foreign Minister Margus Tsahkna said something along the lines that people expect life to continue alongside defense investments. Kristen Michal, what are your counterarguments to Eesti 200 politicians' positions?

I have been in several governments and worked on several state budgets in different roles. Budget drafting is always preceded by a large amount of what, as they say in theater, is stage fighting over different issues. Agencies come out with messages, and often these come from the agency level, saying how things are somewhere — this pipe is broken, and if we do not fix it, the whole house will be flooded. This is the usual summer background noise of budget talks. And everyone is politely told that at the end of August the Ministry of Finance will present its budget forecast, and then it will be decided what fits into next year's budget and what does not.

Government members are not people with firmer hearts than the rest of us. On the contrary — they are often even softer‑hearted. But the budget is limited in size, and only certain things fit into it. This means that if we want to limit the deficit — and defense spending has significantly increased it, we have taken loans and they are needed for defense, and everyone ultimately agrees with that — then we must try to make the budget with a smaller deficit every year, and we must do that this time as well. I simply remind you that in 2024 we managed to operate much more frugally, in 2025 we managed to operate much more frugally, and we will manage this year as well. So this government has managed, despite what is said, to put a lot of money into defense, turn the economy toward growth, and we will also manage to fix the budget.

Last week Eesti Ekspress published a very thorough story about Finance Minister Jürgen Ligi, and it showed that he has not yet received authorization for budget cuts and for reducing the deficit below four percent, and that the Reform Party board's decision is not binding on the finance minister. How is that possible — should preparations not already be underway at the Ministry of Finance? How do you see it — should Ligi be given guidance so he can pass guidance on to officials to start calculating how to reach a four‑percent deficit? 

All of this is part of the budget process in late August, September and, if needed, October. That is what the budget process is for. In that sense, it is true that party boards do not draft the budget — the government does. The government submits the budget to the Riigikogu, and that is how it has always been. 

I remember different people with different arguments who have thought that one thing or another is wrong in the budget. At least that part deserves praise — that people speak up, describe issues and propose ideas. Yes, not all ideas are approved. Some ideas have already been considered, such as shortening officials' vacation days, which the Ministry of Finance itself said last year did not add up and would not produce such savings, and they rejected it themselves. 

Likewise, projects already underway cannot be stopped.

I would not call this a false start — this summer "filling the airwaves" with lists of different needs. It is good when balanced cut proposals also come from the other side. 

And they did — from your influential party colleagues, former finance ministers Mart Võrklaev and Aivar Sõerd, who proposed cuts of about €100 million. In their view, the construction of the Tartu city cultural center, Siuru, could be postponed, funding for wealthy cities and municipalities could be cut, state employees' vacations shortened and perhaps the doctor visit fee raised. Are any of these proposals appealing to you? 

We must continue making cuts in any case. For context, since the governments of Kaja Kallas and mine, we have cut about €1.4–1.5 billion, and as Andrus Ansip once said, in the end you mostly have to cut dreams and plans. We have significantly tightened spending in various agencies. A symbolic example was the Unemployment Insurance Fund, where nearly one‑fifth of employees had to register themselves as unemployed because we tightened operations. Statistics Estonia is being packed up and moved to another building. The Land and Space Board — one‑fifth fewer employees. So we are constantly tightening. Cuts are often popular as an idea, but not in specific places.

Regarding Siuru, Tartu Mayor Urmas Klaas himself said that the people making that proposal probably do not know the process is already under contract and work is underway. Once again — cutting investments is often not as effective as cutting operating costs. 

Second, regarding officials' vacation days, I already said that the Ministry of Finance said the expected €50 million in savings will not materialize. I also remind you that I carried out the public service reform, and at that time the agreement was simple — officials in public service do not get the right to strike. That was the balance for agreeing on 35 and 28 vacation days. If we now say we will change that, then we must also give public servants the right to strike, and then we must ask ourselves whether we want to change that agreement in society. But that is a different debate. 

The proposal to cut operating expenses and tighten various activities is something the government is dealing with anyway. The direction to tighten is, in my view, a completely understandable public message. We must do that as a state, but we must carefully examine where it can be done and where it cannot. So these proposals should be treated as appropriate for summer — someone offered their thoughts. Thank you, but we will look at the whole picture as a whole.

But cutting funding directed from the state budget to wealthy municipalities — meaning Tallinn, Tartu and a few others? 

In my view, this is a bit of an old joke. I remember Mart [Võrklaev] and Aivar [Sõerd], who actually fought against this same Robin Hood scheme (redistributing municipal funding in favor of less affluent municipalities). I agree that Tallinn, my hometown, often uses this money in a very odd way and seems to have more than enough. But at the same time, these larger cities also have a heavier burden when it comes to public services. So all of this must be reviewed in a balanced way. Robin Hood was not necessarily very popular. And I remind you that larger regions contribute more to Estonia's economic development anyway. 

All these matters can be calmly discussed both in the budget process and in the broader context of regional balance. 

And the idea of raising the doctor visit fee? 

We have already done that. 

Presumably they meant raising it further. 

Maybe that is what they meant, but we just did it, and the goal was mainly to reduce pressure somewhere, not to increase budget revenue. The Health Insurance Fund has tightened its operations. I remember from the previous discussion that €70 million in various cuts have already been found, and more are being sought. 

One project that will definitely help us save health care money actually comes from the supplementary budget, which Aivar and Mart themselves opposed — the artificial intelligence project. In the future, when we go to a family doctor or nurse, the time the doctor or nurse spends on writing things down will be handled by machines. This means the doctor's time remains for us, allowing more patients to be seen and workload to be redistributed. So this may hold much greater savings than mechanically raising fees. 

But maybe it could turn out that no additional cuts are needed. The Ministry of Finance just reported that as of the end of May, the government sector deficit was 1.6 percent of GDP and tax revenues were growing strongly. Maybe by the end of the year the deficit will already fall below the projected 4.5 percent on its own? 

That is this year's budget. When we talk about reaching four percent, we are talking about next year's budget. In that sense, it is true that in 2024 we planned a deficit of about minus three percent and it came in at 1.7, if I recall correctly. Last year we also planned minus three percent and the initial estimate was 1.2, later minus two, meaning we operated €400–500 million more frugally. 

I think this year we will also manage to operate more frugally and spend less. Looking at the economic picture — unemployment is at its lowest in the past five to seven years, inflation is decreasing. The labor market is strong and in economic growth we are already among the fastest‑growing economies in our region. This gives hope that the picture is improving.

But we are ready to cut dreams again, as Andrus Ansip once said — there is no possibility to spend indiscriminately, and we must tighten somewhere again. That is why those experienced in politics can take the summer debate quite calmly — ideas are thrown out, people talk about broken pipes and missing things, and when autumn arrives and budget talks begin, things become quite detailed. 

And in reality those helicopters (requested by Taro for the Police and Border Guard Board) will not come? 

I think the helicopters will come, but more likely from funding in the next European Union budget period. But we will have that debate in autumn, because ultimately, if you want to buy something, you must give up something else. The alternative would be raising taxes, and I have said that we will not raise taxes — we just lowered them. It was the largest tax cut in Estonia's history. Thanks to that, the economy has started moving and growing, and life is easier for people. Maybe not for everyone all the time, but overall the economic picture already shows recovery. SEB also said that the economy is turning toward recovery.

President Alar Karis said that when you visited him last Friday, he asked the prime minister — meaning you — about the government's steps in conditions of low public support. How did you respond to the president — what steps are planned to improve the well‑being of Estonians and trust in the government? 

We mainly talked about the NATO summit in Ankara. I think there is hardly anyone in Estonia who has not expressed satisfaction with how the summit went. Beyond all the everyday concerns — whether there is a pothole in the road or something else troubling people — the number one issue is whether security is ensured. And the G7 meeting before that and the Ankara summit went, from our perspective, practically ten out of ten. It was stated that NATO works and Article 5 is rock solid. Defense spending increases were reaffirmed as a response to Russia's threats, and support for Ukraine was reaffirmed.

Before that, we were able to conclude a broader defense cooperation agreement with Ukraine, known as the drone agreement. So hats off to both the Ministry of Defense and the Ministry of Foreign Affairs, as well as my team and the Defense Forces team. As head of the delegation, I can say that things went very well and preparations took a long time. Many people, including Ambassador Jüri Luik and many others, worked very hard. 

That was the main topic with Karis. Alongside that, we talked about how the security picture is better, we are investing in defense, we are top contributors in NATO, and the economic picture is also turning toward recovery, inflation is going down and so on. The overall picture is better — so should we not talk more about what is going right, because public debate is often dominated by those who talk about everything that is wrong. 

Overall, I appreciate a friendly pat on the shoulder. Of course we must talk more about things that are going well, but how can I change the logic of the media? Probably I cannot. As prime minister, I try to describe how life in Estonia is, what we can do to make things better for people and to ensure Estonia is protected. I have promised two things — that Estonia is protected and that the economy will grow, and we have done that. But we must talk about it more. That was my brief answer to the president, and I certainly appreciate the message that we must talk more about good things as well.

I will test one more topic that drew public attention last week. The discussion was sparked by an analysis commissioned by the Ministry of Social Affairs on reducing alcohol consumption, where shortening sales hours was suggested for consideration. The analysis also proposed paid sales licenses and a possible excise tax increase. The debate became very heated, but what is your view as prime minister? 

For a long time I have also been minister of economic affairs, and various social ministers tended to look at me as someone who stood more on the side of entrepreneurial freedom on such issues. I will still say that this is not a choice between health and entrepreneurial freedom. Everyone understands that alcohol must be consumed responsibly and that related harm must be reduced. Alcohol‑related harm is a reality in Estonia, so if we can do something together to reduce it, that is reasonable.

The best influence on alcohol consumption — and I do not believe this has changed much today — is still the price of alcohol. This means excise tax increases and other steps affect how much alcohol is purchased and how these measures work. 

Another factor is compliance with availability rules. We have also debated that for certain goods, delivery services and store couriers must check who receives them. 

It is worth having this debate in Estonia about how to reduce alcohol‑related harm, but we also have one rather bad experience — Jevgeni Ossinovski's plan to sharply raise alcohol prices, which led people to go to Latvia to buy alcohol both in protest and because of the price. We sent several hundred million — I do not know, maybe nearly €300 million — in taxes there, money we would have needed here, including in the health sector. The result was that people bought larger stocks and consumed them. 

Alcohol policy must be well thought out and such that society says yes, we understand that the price must be such that alcohol is not too accessible and does not become more accessible over time. Restrictions are reasonable and sensible when people understand why they exist. 

But why is it still the case that alcohol regulations have been eased, for example regarding the alcohol register, while at the same time the state together with the European Union adds bureaucracy for coastal fishermen? I visited Kihnu during vacation and fishermen complained that a new rule is coming — during weighing, there must be either an official, an independent third party or a camera installed at the harbor. Why is it that on one side you reduce regulations, but on the other side, where people do hard work, new ones seem to be added? 

As a recreational fisherman, I will say that in my view this is a silly rule. Such things should not be introduced — we should not create bureaucracy ourselves. We work extremely hard together with entrepreneurs to change various rules, and the alcohol register was actually a bureaucratic creation that no one needed and that did not help anything. We managed to eliminate it. We have managed to make planning simpler, we have managed to make obtaining use permits simpler, and we have managed to change many things. 

But why at the same time are absurd rules added for fishermen in another sector? 

I admit honestly that I have been traveling, but we must definitely review this to understand why it is happening. Maybe somewhere in Europe there is a problem — how many people get something when several dozen kilograms of fish are weighed somewhere. I have considered this absurd and in my view it is not a sensible way to handle things. Maybe because I like fishing, I am on the side of fishermen, but I also do not like bureaucracy. 

You mentioned that you have been traveling around Europe a lot recently, meeting other heads of government. The so‑called ETS (emissions trading system) friends' group — the Nordic countries, Spain and Portugal — believe things should continue as before. The European Commission will present its ETS proposal package on Friday. But these five member states have said no, we should continue as before and there should be no easing. They do not share your view or Estonia's view that ETS 2 should be completely scrapped. Now that you have been traveling, meeting people — have you spoken with the prime ministers of these five member states on this topic, tried to persuade them not to oppose us on this issue? 

We last debated this at the European Council when prime ministers and heads of state were together. In the meantime, the Ankara meeting took place, which was a security meeting, and the Paris meeting, which was a meeting of the coalition of will. These were primarily about military security, helping Ukraine and pressuring Russia, and ETS did not come up there. And in Berlin we talked about security, and in Vienna as well. 

Have you grabbed the supporters of ETS by the lapel in the corridors? 

There have been conversations. The European Commission will now present its proposals, and then everyone can evaluate them and the debate will continue. A few years ago we discussed among ourselves whether ETS 2 could be postponed, and it was indeed possible. I think we should wait for the Commission's proposals, see whether they are sufficient, good or bad, then evaluate them. And I think that in October, when the European Council meets, energy debates will likely continue there. 

What is your message to officials at the Ministry of Climate, who, as I understand, have been preparing for the transposition of ETS 2 into national law? There is no official draft, but I understand a draft exists somewhere. Should officials stop spending working hours preparing regulations for transposing ETS 2 into national law? 

The climate minister has stated the same position as the government's position, and we also have a mandate from the European Union Affairs Committee: our goal is to postpone and cancel ETS 2, because the problem is that the amount of bureaucracy does not match the climate goals. The desire to achieve the goals is understandable, and I am generally on the side of new technology and a cleaner environment, but this is simply too bureaucratic to succeed, or at least to succeed in a meaningful way. So this is also the official position of the government and the state. It has not changed.

You returned from the meeting of leaders of the Ukraine Coalition of the Willing in Paris. There was also discussion about how to counter ballistic missiles coming from Russia. But what will change in practice: will Patriots move from European stockpiles to Ukraine, will Germany finally give Ukraine the Taurus missiles? 

The Coalition of the Willing in Paris discussed many things, and not all of it is public information. But allies are indeed working to ensure Ukraine receives additional weaponry. Efforts have been made to acquire more, and there are certainly countries that have more of it and could provide additional antiballistic weapons. Some countries may be ready to share their stockpiles. All this work is not public in detail, because unfortunately the Russian embassy also has the ability to listen to radio broadcasts. 

The Coalition of the Willing is reaching the point where military planning — in which Estonia participates as one of the countries — will soon move to practical exercises and cooperation so that we are capable of taking steps when needed. Estonia has expressed readiness at the government level to participate with a company‑size unit if a ceasefire between Ukraine and Russia were to occur. These are professional defense forces personnel, as always on foreign missions, and we will request a mandate from parliament when the time comes. 

So right now the Coalition of the Willing is also taking real steps in military planning, and at some point we may reach exercises. 

When will additional news or messages come? 

That depends very much on developments in Ukraine and on what those exercises and steps will be. It may mean training at some point, it may mean something else. But when we begin sending professional defense forces personnel on a foreign mission, Estonian law requires requesting a mandate from parliament. 

Although Ukrainian President Volodymyr Zelenskyy has repeatedly offered Russia the chance to seek peace, in my view Russia's situation is getting worse. But I think it will take quite a long time before Putin realizes how bad things are and Russian people begin influencing him themselves. 

But the International Olympic Committee is moving in the opposite direction — it restored the membership of the Russian Olympic Committee and it appears Russian athletes will be able to compete at the 2028 Los Angeles Olympic Games. What is your position — should Estonia boycott the Olympics if athletes from Russia, which is waging a war of aggression, compete there? 

On Thursday this topic will also be discussed in the government cabinet, led by the minister of culture. Our initiative — eight European countries — called on the European Commission to stop funding the International Olympic Committee from European Union support measures. The Estonian Olympic Committee, and its president Erich Teigamägi, took a clear position that international sport must stand for values, not convenient compromises. 

I do not consider allowing Russia back to the Olympics reasonable in any way. Any sensible person understands that many of those athletes are, for example, connected to the Russian army and so on. They are not ordinary civilians — they all bear responsibility for Russia's actions, and Russia certainly should not be allowed back into so‑called civilian life and the arena. 

But decisions about steps in Europe, forming coalitions with other countries to influence this, will be made on Thursday. Our position is that everything must be done to ensure the International Olympic Committee receives a signal — and as strong a signal as possible — that the return of Russian athletes is definitely not something to support. 

And Estonian athletes? 

Estonian athletes and their participation will be decided by the Olympic Committee, but as I understand it, their initial stance and message was that Estonian athletes should not be punished because the International Olympic Committee makes extremely irresponsible, strange decisions, saying that Russian army personnel could come to the Olympic Games as independent athletes. That does not align with Olympic values in any way.

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