COPENHAGEN, Denmark (AP) — Estonia’s center-right Prime Minister Kaja Kallas is set to start power-sharing talks with two small center-leaning parties after her governing coalition broke up Friday due to a dispute over welfare policy amid soaring inflation.

The Baltic country’s President Alar Karis approved the move by Kallas — Estonia’s first female prime minister — to break up with the Center Party after more than a year in office together, clearing the way for possible coalition talks.

“More than ever, Estonia needs a functioning government based on common values,” Kallas said, according the Baltic News Agency. “The security situation in Europe does not give me any opportunity as prime minister to continue cooperation with the Center Party.”

Estonia is a former Soviet republic and borders with Russia.

Kallas’ Reform Party has 34 seats in the 101-seat parliament and could continue heading a minority government without the Center Party, which has 25. But she said she wanted to engage in talks with the center-right Christian Democrat Isamaa party, that has 12 lawmakers, and the SDE Social Democrats who have 10.

The rift with the Center Party came over its demand to increase child and family benefits — which Kallas’ Reform Party opposes.

In May, the Center Party presented a draft bill for extra family benefits totaling EUR300 million ($321 million) that, according to Estonian broadcaster ERR, would boost the monthly child allowance benefit.

Inflation stands at 19% — the highest in the Eurozone — and parties have been working to offset the rise in living and energy costs, ERR said.

Kallas, who has led her party since 2018, became prime minister in 2021.

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