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George Osborne is considering cutting the 50p top rate of income tax in next week's Budget, the BBC understands.
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Eurozone finance ministers have agreed a second bailout for Greece after marathon talks in Brussels.
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Prime Minister David Cameron will discuss the Budget with the chancellor and other senior ministers on Friday.
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Greece is to receive loans worth more than 130bn euros (�110bn; $170bn).
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There is speculation the tax on earnings over �150,000 could be reduced to a 45p rate or scrapped entirely in return for tax cuts for low earners.
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In return, Greece will undertake to reduce its debts to 120.5% of its GDP by 2020 and accept an "enhanced and permanent" presence of EU monitors to oversee economic management.
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Labour leader Ed Miliband said it was the "wrong priority" and money should be spent on jobs for young people.
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Greece needs the funds to avoid bankruptcy on 20 March, when maturing loans must be repaid.
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The coalition's "quad" of top ministers, Conservatives Mr Cameron and Mr Osborne and Lib Dems Nick Clegg and Danny Alexander are discussing the Budget by telephone on Friday.
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After five straight years of recession, Greece's debt currently amounts to more than 160% of its Gross Domestic Product.
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Temporary tax
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All budget decisions will have been made by the end of Friday so that the details can be sent to the Office for Budget Responsibility.
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The euro immediately rose on reports of the deal, which was announced early on Tuesday, after 13 hours of talks.
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Repayment takes priority
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The government-appointed body will use these tax and spending decisions to make its economic forecasts.
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The deal also means that private holders of Greek debt will take losses of 53.5% on the value of their bonds.
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When all the elements of the exchange are accounted for, the loss to investors is expected to be as much as 70%.
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Eurozone leaders and the IMF said in October that Greek debt should be reduced to a more sustainable level of 120% of GDP by 2020.
Continue reading the main story
Continue reading the main story
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�Start Quote
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Analysis
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image of Mark Lowen Mark Lowen BBC News, Athens
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    For a chancellor sometimes likened to a submarine - George Osborne has never been timid about deploying a torpedo�
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This is in effect uncharted territory for the eurozone - a managed Greek default, with over 50% of the country's private debt being written off. This was not even being considered as an option several months ago.
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image of Ben Wright Ben Wright Political correspondent, BBC News
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But the Greek people will be sceptical about this bailout. The deal that has been agreed will mean more austerity and spending cuts, and even more pain for Greeks. Many will be concerned that the new measures will kill off prospects of growth and lock the country into a spiral of recession.
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    Is Osborne planning a 50p tax surprise?
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Greeks say that the country's middle classes who have worked hard and pay their taxes are, unfairly, bearing the brunt of a crisis they did not create. They feel Greece's notorious corrupt politicans and wealthy Greeks who evaded tax are to blame.
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The 50% income tax rate was introduced by the previous Labour government in 2010, to help pay for declining government revenues during the recession.
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The deal provides for the presence of EU monitors of Greece's economic management as some members doubt Greece's commitment to its spending pledges.
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Mr Osborne has always said it was a temporary measure and has asked officials to assess how much extra it is raising.
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Within the next two months, Greece will also have to pass legislation giving priority to debt repayments over the funding of government services.

Revision as of 23:21, 16 January 2013

Eurozone finance ministers have agreed a second bailout for Greece after marathon talks in Brussels.

Greece is to receive loans worth more than 130bn euros (�110bn; $170bn).

In return, Greece will undertake to reduce its debts to 120.5% of its GDP by 2020 and accept an "enhanced and permanent" presence of EU monitors to oversee economic management.

Greece needs the funds to avoid bankruptcy on 20 March, when maturing loans must be repaid.

After five straight years of recession, Greece's debt currently amounts to more than 160% of its Gross Domestic Product.

The euro immediately rose on reports of the deal, which was announced early on Tuesday, after 13 hours of talks. Repayment takes priority

The deal also means that private holders of Greek debt will take losses of 53.5% on the value of their bonds.

When all the elements of the exchange are accounted for, the loss to investors is expected to be as much as 70%.

Eurozone leaders and the IMF said in October that Greek debt should be reduced to a more sustainable level of 120% of GDP by 2020. Continue reading the main story Analysis image of Mark Lowen Mark Lowen BBC News, Athens

This is in effect uncharted territory for the eurozone - a managed Greek default, with over 50% of the country's private debt being written off. This was not even being considered as an option several months ago.

But the Greek people will be sceptical about this bailout. The deal that has been agreed will mean more austerity and spending cuts, and even more pain for Greeks. Many will be concerned that the new measures will kill off prospects of growth and lock the country into a spiral of recession.

Greeks say that the country's middle classes who have worked hard and pay their taxes are, unfairly, bearing the brunt of a crisis they did not create. They feel Greece's notorious corrupt politicans and wealthy Greeks who evaded tax are to blame.

The deal provides for the presence of EU monitors of Greece's economic management as some members doubt Greece's commitment to its spending pledges.

Within the next two months, Greece will also have to pass legislation giving priority to debt repayments over the funding of government services.

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