Hungary sees EU aid talks approval for end-April

BUDAPEST (Reuters) - Hungary said on Sunday it expects the EU to give the green light to vital credit talks by the end of April after Prime Minister Viktor Orban meets with European Commission head Jose Manuel Barroso this week.

“There will be a very important meeting on Tuesday between the Commission President Barroso and the Hungarian Prime Minister,” Foreign Minister Janos Martonyi said in a televised interview.

“We expect ... as this is what we are hearing from the Commission, that the decision about this, that the start of the talks with the European Commission and the International Monetary Fund will be made by the end of April,” he told HirTv.

Investors have become increasingly worried as a legal dispute has delayed the talks for months, maintaining the risk of a sell-off in Hungarian markets if the euro zone debt crisis deepens.

The dispute between Hungary and the EU focuses on a central bank law, which the Commission and the European Central Bank say impinges on the independence of Hungary’s central bank, and other laws on data protection and the retirement age of judges.

Hungary is the most vulnerable to risk aversion among the European Union’s emerging market countries due to its debt relative to economic output, which is the highest in central Europe at around 80 percent, and its unorthodox economic policies.

Hopes for a deal on a financial backstop with the IMF and EU have propped up markets since sharp falls in January, after rating agencies downgraded Hungary’s debt to “junk” status.

Foreigners’ forint-denominated government bond holdings are near a record 4.24 trillion forints, but only high yields approaching 9 percent keep the market stable.

Most analysts in a Reuters poll on Thursday said that an agreement was only likely in the second half of 2012, and possibly only around the end of the year.

Hungary has not yet resolved all differences with the EU over the central bank law which also was criticized by the European Central Bank.

($1 = 224.6820 Hungarian forints)

Reporting by Sandor Peto; Editing by Michael Roddy