* Hungary sends proposed cbank law changes to ECB
* EU Commission to take new steps on judiciary, data
* Welcomes move on central bank independence, remains
* Commission doubts cloud start date for EU/IMF aid talks
By Robin Emmott and Krisztina Than
BRUSSELS/BUDAPEST, March 7 Hungary offered
concessions to the European Central Bank on Wednesday,
addressing some but not all of the objections from European
institutions that have blocked the country's bid for
international aid to keep it solvent.
The government sent the ECB a draft amendment to a law that
European institutions say would undermine the independence of
Hungary's central bank.
The EU launched legal action against Hungary in January over
this and other legislation that Brussels says conflicts with EU
law and also hurts the independence of the judiciary and the
data protection authority.
Prime Minister Viktor Orban has backed down in his standoff
with Brussels and the EU's top economic official Olli Rehn said
in a statement earlier he saw a willingness by Hungary to meet
the demands of the European Union's executive Commission.
But while the Commission will take no further legal action
on the central bank impasse, it was still cautious and said it
would move forward with legal proceedings on data protection and
the retirement age of judges.
"I welcome that Hungary is ready to correct its central bank
legislation. However, we need clear commitments," said Rehn, the
EU's Economic and Monetary Affairs Commissioner.
The draft law sent to the ECB would withdraw rules about the
dismissal of Monetary Council members and the right of the
government to receive the agenda of the panel's meetings and
send a representative to the meetings, the Economy Ministry
But the Commission has also objected to the text of the oath
which the central bank's leaders take, and cuts in their
salaries. The ECB has criticised an expansion of the bank's
Monetary Council and the appointment of a third deputy governor.
Orban needs an International Monetary Fund deal to rebuild
investor confidence in his unorthodox economic policies, after
two years of measures that included Europe's biggest bank tax
and a renationalisation of private pension fund assets.
Budapest is also being pressed by the Commission to cut its
deficit - or face losing access to 495 million euros in EU
The Commission declined to comment on recent statements by
senior Hungarian officials that talks could soon start on a
precautionary standby loan from the Washington-based lender.
Hungary's forint, which plunged to a record low versus the
euro in the first week of January, has firmed sharply in the
past few weeks on hopes for a quick agreement with the IMF.
But the currency weakened against the euro on Wednesday on
concerns that the timetable for talks had slipped further back,
before coming off a session low on news of the letter to the
Initially markets expected a deal by April; now analysts
project an agreement could be sealed by the end of June.
The Commission has said both it and the European Central
Bank needed to see the draft legislation that Hungary is
proposing, as well as confirming its plans to stop issuing
official press releases criticising monetary policy decisions of
the Hungarian central bank.
The Commission said it wanted more assurances that the
central bank governor's wages would no longer be used "as a tool
to exercise pressure and a breach of independence of the central
In a sign of the pressure on Budapest, the Commission
escalated its legal proceedings on the issues of retirement ages
for judges - which it said would force more than 270 judges and
prosecutors to retire - and the independence of the country's
data protection supervisor.
"We still have serious questions regarding potential
violations of EU laws," said the EU's Justice Commissioner
Viviane Reding, referring to the two issues.
A failure to meet the concerns of Brussels could end up in
the European Court of Justice, which could in turn order
Budapest to act and impose fines and withhold more EU funds.
With the forint firmer and yields on government bonds back
at about 8 percent, down from peaks of 11 percent in early
January, the Hungarian government is no longer under immediate
pressure to sign a quick deal with lenders.
In February, Hungary said it could push the dispute on
judges' retirement ages all the way to court.
"My nagging suspicion all along has been that the Orban
administration would only do an IMF deal if forced by the market
to do so," said Timothy Ash at RBS.
"Arguably the forint at current levels is not at a level
that the government thinks that it has to cut a deal with the
European Commission/IMF at all or any cost - it still thinks
that it has wiggle room to negotiate a little more with the
Commission, prior to getting agreement to begin talks on a
formal IMF programme."
Given Hungary's high debt and foreign currency debt
exposure, such a strategy may not be viable if investor