ESTONIA-Parliament Approves New Kallas Gov't; PM Promises More Def Spending

The Estonian Parliament (Riigikogu) has approved the new coalition gov't of PM Kaja Kallas, which is set to continue the strongly hawkish stance towards Russia of the previous coalition led by Kallas. A coalition statement says that "The ongoing war in Ukraine and Russia's desire to destroy the existing European security principles will for the next few years put Estonia in the most difficult security situation since WWII," The coalition stated that defence spending will rise to 3% of GDP by 2027 from 2.85% at present, funded by a two percentage points increase to the rate of VAT and income tax.

• The new coalition continues to be led by Kallas' centre-right liberal Reform Party (37 seats) and has the centre-left Social Democrats (9 seats) as the most junior partner. The conservative Fatherland (Isamaa) has been replaced in coalition by the centrist Estonia 200 (14 seats). It remains to be seen how Estonia 200 fares in gov't having never held even seats in parliament before March 5.
• While Estonia is a small eurozone economy, the country has played an outsized role in European politics since the Russian invasion of Ukraine. Kallas has been one of the loudest voices in seeking greater military support for Ukraine and placing hard-line sanctions on Russia. With her new gov't holding a comfortable majority this rhetoric is likely to continue.