Hungary's Orban notes distance with EU on bank law

BUDAPEST, Hungary (AP) -- Hungary's prime minister said Friday large differences remain with the European Union over parts of the country's central bank legislation.

While planning to keep financing itself from bond sales, Hungary is also seeking backup support from the EU and the International Monetary Fund. In 2008, Hungary became the first EU country to get a bailout and has returned for more aid as the effects of the eurozone debt crisis have helped dent investor confidence and pushed it to the edge of a recession this year.

Prime Minister Viktor Orban said that while he expected agreement on some issues concerning the National Bank of Hungary, in others "our positions are distant."

"The EU is lining up legal arguments supporting its position," Orban said in an interview on state radio. "There are some with which we agree and I see no obstacles to their acceptance and there those in which our positions are distant."

Orban did not specify what the issues were, but the most disputed points include a plan to merge the central bank and the financial regulator, a de facto demotion for the central bank president.

The EU and the International Monetary Fund want Hungary to make the changes as a condition for talks about financial assistance for Hungary.

On Friday, Hungary's currency, the forint, was slightly weaker, falling to 310.65 against the euro, while the yield on 10-year bonds was up 20 percentage points to 9.48 percent.

Tamas Fellegi, the country's chief negotiator, held preliminary talks Thursday in Washington with IMF Managing Director Christine Lagarde, who underlined the expectations Hungary is facing.

"Before the Fund can determine when and whether to start negotiations for a standby arrangement, it will need to see tangible steps that show the authorities' strong commitment to engage on all the policy issues that are relevant to macroeconomic stability," Lagarde said in statement. "Support of the European authorities and institutions would also be critical for successful discussions of a new program."

The EU has threatened to take legal action against Hungary because of some of the laws passed by Orban's Fidesz party, which has an unassailable majority in Parliament.

Beside the central bank law, which gives the government as much larger role than before in naming top bank officials, the EU has objected to the forced, early retirement of hundreds of judges and has concerns about the independence of the new data protection authority.

"It is the EU which likes clear, transparent pension laws and that is what happened in Hungary," Orban said about the decision on the judges while calling the data protection issue "a speck of dust in the machine."