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Hungarian central bank chief says independence vital

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(VIENNA) - Hungary's government has no choice but to ensure central bank independence, the head of the country's central bank said Wednesday, after the EU launched legal action over reforms to the lender.

"Our job is to provide price and financial stability in Hungary," Hungarian central bank chief Andras Simor told reporters at a conference in Vienna on central and eastern Europe.

"Obviously we cannot be anything else (but independent). We are a member of the European Union. That provides for the independence of the central bank. Hungarian legislation also provides for the independence of the central bank."

He added: "There have been active discussions between the government and the EU and a number of people from the government, including the prime minister, declaring that the Hungarian government will respect central bank independence.

"So I have nothing else than to believe what the prime minister says."

The European Union executive on Tuesday launched legal proceedings against Hungary, demanding it scrap disputed reforms that breach "the letter and spirit" of EU law or face court action.

Brussels, backed by the European Central Bank and the International Monetary Fund, fears that Prime Minister Viktor Orban's reforms of Hungary's central bank will cross a line in the sand by increasing political influence over the bank.

Efforts by Hungary to secure a badly needed 15-20-billion-euro ($20-25 billion) credit line from the EU and IMF are snagging on the changes, with officials from both bodies walking away from preliminary talks last month.

The revamp is part of a wide-ranging body of new legislation that critics at home and abroad say undermines democracy in the EU member state and which have sparked large public protests in Hungary.

Orban, dubbed "Viktator" by opponents because of the disputed reforms, was expected to defend his government during a European parliamentary debate on Wednesday.

He is scheduled to travel to Brussels next Tuesday to meet European Commission chief Jose Manuel Barroso.

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