Estonia's three-term Prime Minister Andrus Ansip submitted his resignation on Tuesday in a long-planned move to pave the way for his successor to lead a new government into a general election next year, Reuters reported.
Ansip announced last month he would resign, along with his cabinet, and his Reform Party has picked Siim Kallis, a vice-president of the European Commission, to form a new coalition if he is nominated by the country's president.
A spokesman for Estonian PresidentToomas Hendrik Ilves told Reuters that Ansip had submitted his resignation. The president has 14 days to formally nominate a new candidate for prime minister who will then nominate a cabinet.
Under Ansip, Estonia's longest-serving prime minister who has held office since 2005, the small Baltic country has been praised by analysts as a model of northern European austerity pitted against crisis-hit southern Europe.
Ansip's government stayed in place in 2011 elections even after the country's economic output had fallen by 14 percent in 2009 due to the global financial crisis and the collapse of a real estate price bubble fueled by cheap and easy credit from Nordic banks.
But Ansip's center-right coalition has been struggling in polls amid signs of voter fatigue at years of a government focused on fiscal austerity as well as several high profile party funding scandals. The center-left opposition has been gaining popularity.
A key policy difference between the current ruling coalition and the center-left opposition is over Estonia's flat 21 percent personal income tax, to be reduced to 20 percent in 2015.
The opposition parties would like to move towards a progressive tax policy with higher rates for higher earners, as applied by most developed countries.