The European Commission may tell Hungary it still has concerns over disputed laws, potentially further delaying new talks on an aid deal needed to keep the country solvent.
The EU launched legal action against Hungary in January over three pieces of legislation which Brussels says conflicts with EU law, and hurts the independence of the central bank, the data protection authority and the judiciary. EU diplomats expect the Commission to move forward with a second letter later on Wednesday with stronger wording and more points reflecting concern on the retirement age of judges and on the data protection authority.
In February, Hungary said it could push the dispute on judges' retirement ages all the way to the European Court of Justice. A letter would be one step closer to a possible EU court case, although many steps would remain in a lengthy procedure.
The legal dispute has so far blocked Hungary's efforts to start formal talks with the EU and the International Monetary Fund (IMF) over a financing backstop which the country needs to cut its borrowing costs and retain access to markets. A spokesman for Hungarian Prime Minister, Viktor Orban, also held out the prospect of further questions from the EU. "It's conceivable that the Commission will not be satisfied with the government's answers on some issues, we hope this will not be the case", spokesman Peter Szijjarto said.
As for the planned IMF/EU standby loan, an EU diplomat close to the issue said on Tuesday he was not aware of any formal preconditions but the issue of central bank independence was important regarding when talks could start. "If the Commission doesn't say strongly negative things about the central bank issue tomorrow, if they say they are making progress with the Hungarians, then there should be no obstacle for a deal. If they come out with harsh wording on the central bank, then that could change the picture."
Government spokesman Szijjarto said the legal dispute should not be linked to the planned aid talks as those were separate issues. Hungary's forint, which plunged to a record low versus the euro in the first week of January, has firmed sharply in the past few weeks on hopes for a quick agreement with the IMF, but the timetable for talks has been pushed back gradually. Initially, markets expected a deal by April; now analysts project the agreement could be sealed by the end of June.
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