Estonian Prime Minister Kaja Kallas has been nominated as the next foreign policy chief of the EU, succeeding Josep Borrell of Spain. The widely expected decision will create a power vacuum at time when the country remains mired in recession and the government is divided over austerity measures.

As reported by bne IntelliNews, Kallas had previously mulled competing for the job as the next Nato Secretary General, but eventually backed Dutch Prime Minister Mark Rutte, who was officially appointed to the position on June 26.

Kallas' international profile has seen a boost since the beginning of Russia's full-scale invasion of Ukraine, as she has been one of the most vehement proponents of Western support. Her hawkishness on Russia had previously been held against her but the Russian invasion validated her stance. She was the top candidate of the liberal Renew Europe European parliamentary group, which was entitled to the post – seen as the EU's third most important – in the carve-up between the EP's leading factions.

Domestically, Kallas has struggled as prime minister, with the country having been in a prolonged recession for over two years now.

Her expected departure also comes as the coaliton has to agree on how to overcome  President Alar Karis' veto of the Vehicle Tax Act earlier this week

While the Social Democratic Party (SDE) and Eesti 200, the minority partners of Estonia’s ruling coalition wanted this week to resubmit the act,  Kallas, who is also chairwoman of the ruling Reform party, was silent on the issue all this week, stoking rumours that her departure to Europe is perhaps imminent.

Prime Minister Kaja Kallas was on a visit to Luxembourg on June 27, while Minister of Finance Mart Vorklaev and Minister of Defence Hanno Pevkur are on holiday.

Estonian Parliament (Riigikogu) Vice President Toomas Kivimagi said after the veto that the parliament will need to be convened for an extraordinary sitting.

"We are talking about planned revenue of €230-240mn for the 2025 state budget. While we'd perhaps like to disagree with the president both in principle and from a legal point of view, that would very likely end in a Supreme Court dispute. Because we do not have the time and the window of opportunity is closing, I believe we should amend the law. In that case, we could pass the law in July and have it enter into force on time," Kivimagi noted, ERR.ee said.

Fiscal decisions are held up by the Reform Party's power vacuum.

"There is a lot of political chaos here. The next two days will tell whether our prime minister will be sent to Europe. If she ends up going, Reform will have to elect a new chairman, which will be followed by a new government, and all of it will take time," Margus Tsahkna, the Minister of Foreign Affairs, said, ERR.ee reported.

"The parliament can make decisions if there is a coalition. And it cannot decide for an outgoing one. So, it all depends on what the proposal will be and what is the premier's plan. The sooner Reform makes its in-house decisions, the sooner we can move on with all of these questions," said Lauri Laanemets, Minister of the Interior and chairman of SDE, ERR.ee reported.