UPDATE 1-Estonian Reform Party to hold coalition talks with Fatherland, Soc Dems

Estonia's Reform party, the biggest in parliament after the March 3 election, will hold talks with the conservative Fatherland Party and the Social Democrats on a new cabinet, its leader said on Friday. Together, the three parties - which formed a coalition in 2015-2017 - would have 56 seats in the 101-seat-parliament.

The Reform party's move follows the Centre party's rejection of an overture from Reform leader Kaja Kallas because of disagreements over tax reform plans. "Our board decided to propose to start coalition talks with Fatherland and Social Democrats," Kallas told reporters. "Just like I proposed to (Centre leader) Juri Ratas, this would be on an equal basis, between equal partners."

The Fatherland and Social Democrat parties won 12 and 10 seats in the election respectively. Reform has championed a business-friendly outlook and a return to a flat tax that was long the hallmark of the Estonian economy. The Centre Party has been seeking to make the Baltic country's tax system more progressive along the lines of more affluent neighbours such as Finland.

Since 2017, the Centre party has governed in a coalition with the Social Democrats and Fatherland. (Reporting by Tarmo Virki Editing by Mark Heinrich)