Estonia's Prime Minister Kaja Kallas won a mandate from MPs at an extraordinary sitting of the country's parliament, the Riigikogu, on Friday.
MPs voted by a margin of 52-26 to give Kallas and her centre-right Reform Party the opportunity to form a new three-party coalition government with the Social Democrats and the small, conservative Isamaa, or Fatherland, party.
Kallas must now present her new government to Estonia's President Alar Karis.
"This parliament has turned out to be relatively difficult for forming a government," said Professor Leif Kalev from Tallinn University.
"We have five parties in parliament and now almost all coalition combinations have been tried. Basically, we have just eight months until the election so I think probably this government will survive until then," he told Euronews.
The three parties together muster a comfortable 56-seat majority at the 101-seat Riigikogu legislature. The coalition arrangement prevents Kallas, who became Estonia’s first female prime minister in January 2021, from having to govern with a one-party minority Cabinet.
What caused this government crisis?
Kaja Kallas handed in her government's resignation on Thursday, after a month of political stalemate in the nation of 1.3 million people.
The Reform Party had been running Estonia as a minority government since Kallas kicked out the left-leaning Centre Party from their two-party coalition in June. The parties had substantial differences over spending and welfare policies amid increasing Estonian household costs because of high inflation.
"The Centre Party was previously the minor partner and they proposed some measures to address the cost of living crisis and rising inflation, but the Reform Party didn't want to go forward with them and the government fell," explains Professor Kalev.
Now the two new parties that make up the government coalition with the Reform Party have made their own, similar, demands to address the problems and those have found their way into the coalition agreement.
Professor Kalev says the government's priorities over the coming months will be to focus on the problem of high inflation and the cost of living crisis, while the Reform Party in particular is looking at national security and the war in Ukraine; and Isamaa has turned their attention to promoting the Estonian language and education initiatives.
The inflation rate in Estonia, a member of the European Union and NATO, is now the highest in the 19-nation eurozone, with annual inflation hitting 22% in June, according to Eurostat, the EU statistics agency. High energy prices are one of the main causes of inflation in the Baltic nation.
Forty-five-year-old Kallas is the daughter of former Estonian Prime Minister and European Commissioner Siim Kallas, who was one of the founders of the Reform Party - a key political party in the Baltic country - in the 1990s. She has led the Reform Party since 2018.