April 24 (Bloomberg) -- Hungarian Premier Viktor Orban will meet European Commission President Jose Manuel Barroso after hardening his rhetoric on disputes with the European Union that have stalled bailout talks.
Orban will indicate to Barroso the issues that Hungary won’t compromise on and is ready to defend in court, the premier told reporters in Brussels yesterday. Orban meets Barroso at 11:30 a.m. today in the Belgian capital.
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.
“Markets probably got too optimistic about the EU/IMF deal,” Win Thin, global head of emerging-markets strategy at Brown Brothers Harriman & Co., said in an e-mailed note yesterday. “If the euro zone deteriorates, we can easily see the forint back up to 305 or 310” per euro.
The forint pared this week’s losses today, rising 0.4 percent against the euro to 298.3 at 8:42 a.m. in Budapest after falling to a three-month low yesterday. The currency dropped 4.1 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 said he and Barroso will make a list of contested issues and divide them into three groups: ones that Hungary has addressed, others where the government may still compromise, and a last one on which the Cabinet won’t bend.
Asked whether he can convince the commission to allow bailout talks to proceed amid lawsuits against the country, Orban said yesterday: “I can’t tell you, we’ll try.”
The commission on March 7 threatened to sue Hungary to force it to change regulations on the judiciary and the data-protection agency, while asking for more information related to the central-bank law. The EU executive is reviewing Hungary’s response, which the Cabinet sent on March 30.
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.
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 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.
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