Hungary faces EU deadline to change laws, unlock aid talks

EU maverick Hungary will offer to tweak most of the laws at the heart of a dispute with Brussels when it responds formally to demands for change this week in a bid to unlock talks on vital aid.

The government's proposals are unlikely to differ from what it has been saying publicly for the best part of a month, but they should represent an effort to compromise that will push forward the process of finding a deal.

Officials will probably refuse to modify legislation in two areas previously criticised by the European Union: a cap on central bankers' salaries and an oath which the bank's leaders must take under the country's new constitution.

The latter issue is widely regarded as being largely symbolic but how Brussels responds will decide whether talks can be launched on a multi-billion euro financing backstop which the eastern EU member state needs to avert a full-blown market crisis.

"I don't think it will be all that smooth from now on, but we will be one step forward," said Zoltan Torok, an analyst at Raiffeisen. "There will be some more punches here and there, but we will make progress gradually (towards a deal with IMF)."

One lawmaker from Prime Minister Viktor Orban's ruling Fidesz party said on Saturday talks on aid could start in early March and a deal could be agreed by May.

But for formal talks to start, Orban, at odds with Brussels over a range of laws which some critics have called a threat to democracy, needs to ressure Brussels that his conservative government would respect the central bank's independence.

Addressing a domestic audience on Friday, there was little sign of the more conciliatory language that the prime minister has used towards the international community in recent weeks.

"There are many people in Hungary who are committed to European values, most of us are like that," he was cited as saying to a regional television station Eger Tv on Friday.

"But what we are experiencing, this kind of behaviour, treatment ... this insulting, offensive tone how they talk with us and about us, does not make us friends of the EU...but rather its opponent."

Last month the Commission, the EU's executive, said new laws governing the central bank and the data protection authority threatened the two institutions' independence, and a third law which forced judges into retirement also violated EU rules.

On Jan. 17 the Commission gave one month to Budapest to formally respond to its concerns, or face legal action. That would make Friday the deadline for a response.

Orban gave ground publicly on the EU's demands only after the forint plunged to record lows versus the euro and bond yields hit a ruinous 11 percent in the first week of January.

Now he will have to reassure both the EU and investors, who finance Hungary's high debt, that he is truly willing to comply with lenders' demands and would take the concrete steps needed for talks about a new financing deal to start.