Coalition seeks to heal splits over new tax bill

Income tax proposal splits coalition, likely forcing Stournaras to find alternative

As Greece briefed eurozone finance ministers on the details of its bond buyback scheme on Monday night, the government appeared ready to climb down on parts of its tax legislation that is causing friction in the three-party coalition.

Finance Minister Yannis Stournaras presented at Monday’s Eurogroup meeting in Brussels the plan for buying back Greek government bonds, which Athens had announced several hours earlier. The Finance Ministry said it would buy back the paper, paying from a minimum of 30.2 to 38.1 percent and a maximum of 32.2 to 40.1 percent of the principal amount, depending on the maturities. The aim is to reduce Greek debt by about 20 billion euros.

At the end of the meeting, Eurogroup chief Jean-Claude Juncker said no further decisions would be taken regarding the release of Greece's next loan tranche until the buyback has been completed. “I would not wish to go into details [of the buyback] at this time,” he said. “We will reconvene on December 13 to finalize our decision.”

However, Juncker said that he was confident Greece would receive approval for its next installment.

Back in Athens, Prime Minister Antonis Samaras summoned Stournaras’s deputy, Giorgos Mavraganis, to a meeting at Maximos Mansion to discuss the proposed new tax code, which the government needs to pass through Parliament in order to reach one of the “milestones” its lenders have demanded before approving the release of more funding early next year.

Coalition partners PASOK and Democratic Left oppose plans to tax annual incomes above 26,000 euros at a rate of 45 percent.

PASOK leader Evangelos Venizelos said this would turn society in its entirety against the government. “People cannot pay this. We need to find alternatives,” said Democratic Left spokesman Andreas Papadopoulos. “There is no way the tax bill will reach Parliament in its current form.”

Stournaras is due to meet representatives of the two parties on Wednesday to discuss the matter. Democratic Left is likely to propose higher taxes on property and deposits as a way of avoiding such high income tax on a relatively low wage bracket.