Bloomberg News

Orban Says Hungary’s Bailout Talks With EU Moving Closer

April 24, 2012

The European Commission and Hungary have moved “a lot closer” to proceeding with bailout talks even as several issues are unresolved and will end up in court, Prime Minister Viktor Orban said.

Hungary hopes the EU’s executive arm will decide tomorrow to allow discussions on a credit to move forward as “the obstacles to starting talks with the IMF have essentially been surmounted,” Orban told reporters after meeting commission President Jose Manuel Barroso today in Brussels.

“This is exclusively the commission’s decision,” Orban said. The start of talks “is a lot closer than most people think.”

The commission has blocked Hungary’s request for an International Monetary Fund loan over concern that Orban’s concentration of power in the past two years undermined the independence of state institutions including the central bank. Orban asked for IMF aid in November as the forint plunged to a record and the country’s credit grade was cut to junk.

Barroso “welcomed” Orban’s pledges for “the prompt and full implementation” of the measures regarding the independence of the central bank, the commission said in an e-mailed statement today. Barroso also acknowledged Orban’s commitments on the other outstanding issues of the judiciary overhaul, the data protection authority and the retirement age of judges, according to the statement.

The two politicians discussed Hungary’s request for financial assistance, it said.

Issues such as new Hungarian regulations on the central bank and the judiciary should be settled outside of the framework of bailout talks, Orban said.

Separate Issues

“Disputes within the EU need to be separated from financing packages,” he said. “Linking the two may be justified in peace time but only makes things more difficult in hard times.”

The forint rose 1.1 percent to 296.39 per euro at 4:33 p.m. in Budapest after falling to a three-month low yesterday. The currency dropped 3.4 percent since rising to a five-month high on Feb. 21 as investor faith wanes in Orban’s willingness to cut a deal with the EU.

The currency plunged 15 percent in the second half of last year, the most in the world, before paring losses after the Cabinet pledged Jan. 5 to reach a quick deal on an IMF loan.

Orban’s government submitted amendments to the central-bank law on April 17, heeding some of the commission’s concerns while ignoring a European Central Bank opinion on what the government needs to do to ensure monetary-policy independence. The ECB on April 5 said “serious concerns” remained about Hungary’s central-bank law.

ECB Objections

The government agreed to scrap an option to demote the central bank president if the monetary authority is combined with the financial regulator. The amendments don’t address the EU’s concern for a 75 percent cut in the Magyar Nemzeti Bank president’s salary or ECB objections to the planned enlargement of the rate-setting Monetary Council.

The government also submitted amendments to Parliament on the judiciary, reducing the power of the new head of the court system. Council of Europe Secretary-General Thorbjoern Jagland on March 21 said further changes were needed to allay criticism by the Venice Commission, which said the right to a fair trial is at risk under the new regulation.

On the data-protection authority, parliament, where Orban’s lawmakers have a two-thirds majority, has approved changes limiting the prime minister’s influence over the firing of the independent commissioner. The change failed to address EU objections over the removal of the country’s data-protection commissioner last year.

To contact the reporter on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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