Defiant Orban leaves Hungary central bank law intact

(BUDAPEST) - Hungarian Prime Minister Viktor Orban said Friday Hungary would not change its contested central bank law, despite European and IMF pressure and the forint hitting record lows this week.

"We have adopted 13 and a half of 15 recommendations by the European Central Bank, which could easily be a European record, and we continue to be cooperative," Orban said, according to Hungarian news agency MTI.

Orban said that Hungary intended to settle the ongoing debate over the law "in the manner usual in the European Union".

In December, the ECB called on Budapest to bring the legislation -- which the central bank saw as undermining the independence of the rate-setting monetary council -- in line with European norms.

International Monetary Fund and European Union officials broke off negotiations last month about a possible credit line of 15-20 billion euros ($20-25 billion) due to worries about the reforms.

"The central bank act itself declared the independence of the institution," Orban insisted on Friday.

Orban also denied that the government intends to tap the central bank's 35-billion-euro foreign reserves to avoid bankruptcy, a fear that prompted investors to dodge Hungarian assets in recent days, traders said.

"The National Bank of Hungary has exclusive disposition over the foreign currency reserves managed there," Orban said.

Orban was speaking after a meeting with the embattled governor of the central bank Andras Simor, as well as economy minister Gyorgy Matolcsy and the head of Hungary's IMF delegation Tamas Fellegi.

Foreign press were denied access to a doorstep press conference.

The forint, which ended Thursday at 319.71 against the euro having hit a new historic low of 324 forints earlier in the day, strengthened to 315.85 forints on the news of a meeting between Orban and Simor.

By 1130 GMT, it eased back to 317.8 against the euro.

The central bank reform, passed in the last days of 2011 in the parliament where Orban has two-thirds majority, is part of a raft of laws that came into effect under a controversial new constitution on January 1.

The constitution also removes vital checks and balances on the power of Orban's government, increases its influence on the judiciary and skews the voting system in his favour, critics at home and abroad say.

It prompted tens of thousands of people to demonstrate in Budapest on Monday.