Hungary promises change after EU flags legal action

BUDAPEST: Hungary offered concessions on authoritarian legislation on Wednesday in a effort to stave off legal action by the European Union and win an aid package from international lenders.

Prime Minister Viktor Orban’s conservative Fidesz party has faced widespread criticism for tightening control of several public bodies including the judiciary, central bank and data protection agency.

He has also lost support in Hungary after sweeping to power in 2010 but analysts say it may be politically difficult for him to offer the full retreat that is needed to convince lenders and secure financial support needed to avert a market meltdown.

Some Hungarians, who have lived through several crises and waves of austerity since communism collapsed in 1989, feel the EU is overstepping its authority.

Orban has repeatedly signalled the government will back away from the controversial laws but still did not make changes in time to stop the European Union starting legal proceedings on Tuesday, raising questions about his commitment to change.

“We are open and ready to discuss all problems the EU Commission brings to us on the basis of serious arguments,” Orban told Wednesday’s edition of Germany’s Bild newspaper.

He will address the European Parliament later on Wednesday to defend the government’s position.

Economy Ministry State Secretary Zoltan Csefalvay told Reuters in Vienna that the government would aim to settle the legal disputes with the EU as soon as possible and hoped the country could reach a deal with its lenders in the first quarter of the year.

RESPECT

The EU gave Hungary one month to makes changes to new laws on the judiciary, the data protection agency and the central bank, which were the main reasons for the collapse in aid talks with the International Monetary Fund last year.

Central Bank Governor Andras Simor said on Wednesday he expected Orban to live up to his promises to respect the institution’s independence.

“Now it is just a matter of whether the financial (monetary) council should be increased. If the EU has problems with that, we will willingly accommodate the demands. Even if it is to the detriment of the central bank,” Bild quoted Orban as saying.

But Orban’s reluctance to immediately acquiesce to the demands of the international community may have helped him with voters in Hungary.

“They are threatening the sovereignty of the country (the EU action) and we should protest against this in all forums,” said Zoltan Solymosi, 72, a dentist in Budapest.

Orban is addressing the European Parliament at his own request and his spokesman has said he would deliver a “defense of Hungary” against what the spokesman said was attacks from the political left wing in Europe.

If Hungary fails to satisfy the EU’s demands, it could face a legal procedure with the prospect of ending up at the EU’s highest court. It would also derail its plan to secure aid since the IMF has said Hungary’s first needs the EU’s blessing.

Analysts say Hungary, whose economy has come to a standstill, needs the outside help to restore investor confidence ruined by the government’s unpredictable policies.

The budget deficit is targeted below the EU’s 3 percent limit of economic output this year, but Hungary’s debt is rated in “junk” category by all three main rating agencies.

Even though the government has some cash reserves which could allow it to roll over debt for a few months, it needs the financing backstop from lenders to retain access to markets. AGENCIES