Hungary may back down in EU dispute

Hungarian prime minister Viktor Orban gave the first concrete evidence today that he is backing down in a dispute with the European Union, aiming to free up talks on aid needed to prop up its battered financial markets.

Mr Orban's conservative Fidesz party has been criticised by the international community for introducing a swathe of measures that threaten the independence of the media, the judiciary and the central bank since sweeping to power in 2010.

Domestic financial markets have taken a hammering as a result, and while some analysts remain suspicious that Mr Orban may try to hold out to impress his domestic political audience, they say the government now looks ready to give in.

Today's move to abandon plans to merge the central bank and markets regulator was the first specific commitment since the prime minister made a broad pledge to the European Parliament earlier this week to compromise.

His chief negotiator in talks with the IMF and EU also said the government's flagship flat tax policy was on the table.

Mr Orban said he expected to secure a political agreement with European Commission President Jose Manuel Barroso on the disputed laws next week and said he was ready to modify nearly all contested legislation to meet the EU's demands.

"If we take stock of the issues that have emerged, I do not see any particularly difficult issues," Orban told Hungarian Kossuth radio. "Naturally, several laws may have to be modified, but the government cannot do it, this can be done only by parliament, and we will make proposals to this end."

The planned merger of the central bank and financial regulator had been a key point of contention. Mr Orban later added that Budapest also no longer insisted on a government member being present at the bank's Monetary Council meetings as an observer.

Austrian Vice Chancellor Michael Spindelegger, who visited Budapest for talks today, told a joint news conference with Mr Orban that the prime minister planned "a very clear timetable and very clear solutions regarding legal issues" for next week's meeting with Mr Barroso.

EU Economic and Monetary Affairs Commissioner Olli Rehn, who had a meeting today with Tamas Fellegi, Hungary's minister in charge for aid egotiations, said the government would need to take concrete steps to ensure central bank independence as a condition for formal talks to start on a financing deal.

"He reiterated that before we can start formal negotiations on this EU-IMF financing programme, certain preconditions must be met," Mr Rehn's spokesman Amadeu Altafaj said.

"In particular, he stressed that Hungary must take concrete steps to ensure full independence of its central bank."

Reuters