March 23, 2018 / 4:08 PM / a year ago

Two Czech parties move towards coalition, differ on taxes

PRAGUE, March 23 (Reuters) - The Czech ruling ANO party and centre-left Social Democrats concluded expert-level negotiations on a programme for a possible coalition government on Friday, moving closer to a deal that may end months of political uncertainty since an election last October.

Prime Minister Andrej Babis’s ANO won the election by a large margin but fell short of an overall majority and has not convinced any other party to support its minority government, which lost a confidence vote in January and has since ruled in a caretaker capacity.

The main reason why other parties have so far rejected to join Babis is a criminal charge he faces over an alleged fraud of European Union subsidies worth 2 million euros a decade ago. He denies any wrongdoing.

But the Social Democrats (CSSD) have shown a softer attitude and have entered talks on a coalition with ANO, which would still need the backing of a third partner, probably the former totalitarian Communist Party.

Social Democrats chairman Jan Hamacek said on Friday the talks with ANO have left unresolved differences on issues like taxes and those would now be discussed on the political level starting next Tuesday.

“You may guess that it is mainly the question of taxes,” Hamacek said.

He said his party still insisted on having a sector tax, without giving further details. In the past, the CSSD wanted to introduce an extra tax on banks or energy producers.

Although such a tax was included in the coalition agreement of the previous government, where the two parties sat together, it never came to fruition, mainly due to Babis’s resistance.

A coalition combining ANO’s 78 lawmakers with 15 from CSSD and backed by 15 Communists would hold a majority in the 200-seat lower house of parliament.

It would also mean the first time the Communists had a direct influence on a government since their authoritarian regime fell in the Velvet Revolution of 1989.

Hamacek has earlier said any coalition deal would have to be approved by his fellow Social Democrats in a referendum, which could take place after the party concludes its general meeting on April 7.

The Communists want the Czech Republic out of NATO and have often deviated from the country’s official foreign policy. Their inclusion has been strongly supported by the pro-Russian President Milos Zeman.

Babis has said he could work with the Communists but he has also repeatedly professed a pro-EU and pro-NATO stance which the cabinet would maintain.

On Friday, Babis said the Czechs may kick out Russian diplomats in solidarity with the United Kingdom in wake of the nerve toxin attack against a former Russian spy and his daughter. (Reporting by Robert Muller; Editing by Toby Chopra)

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