* Social Democrats strike deal with ANO, Christian Democrats
* Social Democrats back off push for higher company taxes
* Prague stocks boosted by deal, lender Komercni Banka leads
* Cabinet posts still must be agreed by end of year
By Jason Hovet and Robert Muller
PRAGUE, Dec 11 The Czech Social Democrats have
reached a coalition deal with two other parties, agreeing to
leave taxes on companies and high earners unchanged next year to
help clear the way for a centre-left government to take power.
Prague stocks were lifted by the agreement, announced
late on Tuesday night. The index was up more than 0.9 percent in
morning trade, with Komercni Banka as the top gainer.
Its shares climbed 2.1 percent on relief that banks would not be
hit with a special sector tax in 2014.
Policymaking in the central European country has been
stalled since June after a centre-right cabinet collapsed in a
spying and bribery scandal. A caretaker government took over,
but lacked the power to push through measures to help the
economy recover from the country's longest recession.
The new government will bring together the leftist Social
Democrats, who narrowly won an October parliamentary election,
with the centrist ANO movement and the Christian Democrats.
Taxes had been the toughest sticking point. The ANO, founded
two years ago by billionaire businessman Andrej Babis, was
against any increase, forcing the Social Democrats to back off
plans to raise taxes for utilities, banks and telecoms.
"It is definitely done. We have agreed on controversial
areas that have lingered until now," said Bohuslav Sobotka, the
Social Democratic party chairman and likely next prime minister.
The parties will unveil their programme on Friday.
Sobotka, who wants to lead his party back to government for
the first time since 2006, said some tax changes could come in
2015. He added that a so-called sector tax remained a
possibility in the future.
The parties have all said the economy needs recovery
measures after sales tax rises and reduced government spending
under a centre-right administration helped tip it into a
six-quarter contraction in 2011.
The Social Democrats had also pushed for higher taxes on
companies to boost budget revenue and meet pledges to keep the
state deficit below an EU-prescribed limit of 3 percent of
But ANO, an anti-corruption movement that soared to a
surprise second-place finish in the October vote, instead wants
the coalition to look at cutting government fat.
"For us it is important that we will create tax stability in
our country for the next four years and that we will begin to
function as the new government," ANO deputy leader Jaroslav
ANO had earlier won a big concession in the coalition talks
with the promise to nominate the country's next finance minister
- a post that Babis, who has built the country's biggest food
and agricultural group over the past two decades, could fill
The parties need to agree on cabinet posts in the coming
weeks and Sobotka wants to present his government to President
Milos Zeman by the end of the year. The pair are due to meet on
Thursday, a spokesman in the president's office said.
Zeman, a former Social Democrat prime minister who later
split with the party, has already clashed with political parties
over the appointment of caretaker Prime Minister Jiri Rusnok
earlier this year. He has said he wants a say in cabinet
appointments, which could delay the government's formation.