HUNGARY AND financial markets are on tenterhooks for today’s decision from the European Commission on the legality of controversial reforms introduced by the Budapest government.
Brussels is expected to formally warn conservative Hungarian prime minister Viktor Orban that it will take Hungary to the European Court of Justice unless his government voluntarily changes new laws that critics say undermine the independence of the country’s central bank.
The EU and International Monetary Fund say they will not start talks with Hungary on an estimated €15 billion to €20 billion aid deal unless the laws are changed and the bank is protected from interference by a populist government whose reforms have sparked a storm of criticism.
If the EU makes the expected threat of legal action today, and Hungary fails to give a clear signal that it intends to change the disputed laws, then analysts expect another sharp drop in the forint currency and a spike in borrowing costs on bond markets.
Mr Orban insists the new constitution he introduced this year is vital to rid Hungary of the last vestiges of the communist era and help it recover from a deep economic crisis. Critics at home and abroad call it a crude power-grab intended to cement his party’s power for years to come.
Mr Orban has said he agrees with some of the commission’s criticisms of the new laws, but considers others to be unreasonable.
This spooked markets that had been somewhat reassured by earlier comments from officials that the government was ready to discuss any issue to secure urgently needed financial support.
“We’re waiting for the very concrete formulation of the concerns by the European Commission . . . and my government will react immediately,” Peter Gyorkos, Hungary’s ambassador to the EU, said yesterday.
