Under-fire Hungary faces threat of EU financial sanctions
Orban - Schulz - Photo EP
(BRUSSELS) - Europe piled pressure on Hungary on Tuesday, threatening financial sanctions against its bloated public deficit as premier Viktor Orban sought to defuse a row over his controversial new laws.
European Union finance ministers meeting in Brussels paved the way to unprecedented excessive deficit sanctions when they endorsed a report by the EU executive to punish Budapest for failing to check its public deficit.
"Hungary has not done what was needed," said Danish Economics Minister Margrethe Vestager, whose country holds the rotating EU presidency and who chaired the ministerial talks. "Hungary must take actions to meet its targets."
Budapest claims its deficit to be below the EU threshold of 3.0 percent of gross domestic product (GDP), but the European Commission disagrees on its method of calculation -- a view backed by the 27 EU finance ministers.
Hungary is a non-euro state currently in the eye of a political storm for breaching European values, and the EU could freeze payment of millions of euros of so-called cohesion funds aimed at reducing economic differences between European regions.
Economics commissioner Olli Rehn tempered Hungarian fears, however, saying Budapest had time to put its house in order with a possible decision set for next January.
The move nonetheless comes at a bad time, with the Hungarian economy in tatters but hotly-contested new legislation snarling a bid for much-needed international credit.
"There is a mood around the table to do something tangible on Hungary ... there are wide political concerns about the direction Hungary is going," an EU diplomat told AFP on condition of anonymity.
Orban meanwhile held talks in Brussels to head off EU legal action failing the reversal within a month of legislation which the Commission says threatens the independence of three key institutions -- the central bank, judiciary and data protection authority.
The laws adopted by Orban's large parliamentary majority last month sent tens of thousands of protestors onto the street and impeded a bid to secure a 20-billion-euro ($25-billion) credit from the International Monetary Fund and the European Union.
Brussels is also concerned over the fate of opposition radio station Klubradio, ordered off the air by the powerful pro-Orban media authority.
Orban has offered to row back on parts of the legislation and has said he expects a deal in talks Tuesday with both EU president Herman Van Rompuy and Commission president Jose Manuel Barroso.
Brussels has been under sharp pressure to take action against legislation that smacks of oldtime eastern European authoritarian regimes and is seen as violating EU laws and values.
At a fiery debate in the European parliament last week, angry centre-left MEPs accused his government of flouting basic democratic values and likened Orban to Cuba's Fidel Castro or Venezuela's Hugo Chavez.
Barroso pledged before the parliament that his executive commission would honour its role as guardian of EU values in talks with Hungary. "We have to be clear on values, firm on principles," he said.
"Hungary is a key member of the European family," Barroso also said. "We do not want the shadow of doubt on respect for democratic principles and values to remain over the country any longer.
On Friday, Orban backed down from plans to merge the central bank and the regulatory authority and demote the central bank head, a move strongly criticised by Brussels and seen as crucial to talks with the IMF and EU.
The two institutions "have been operating separately until now, they will be all right separately in the future," Orban said.
On Tuesday, Orban also met the newly-named president of the European parliament, Martin Schulz, who accused him of double-speak.
"He is an efficient man by taking on board in Brussels the European rhetoric, and to blame the same rhetoric when he is in Budapest as a kind of inadmissible approach," Schulz said.