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Hungary ready to resume talks on IMF-EU loan: minister

Update: February, 22/2012 - 10:58

PRAGUE – Hungary has said it was ready to resume talks with the International Monetary Fund and the EU on a massive loan after it responded to EU legal challenges that held up negotiations last year.

"The political will and determination ... on our side is to start negotiations as soon as possible, ... hopefully before the end of March," Foreign Minister Janos Martonyi told reporters in Prague on Tuesday.

Hungary, an EU member since 2004, asked the IMF and the EU for a 20 billion euro (US$25 billion) loan last November as the forint dropped to record lows against the euro and borrowing costs rose to record highs.

But the two institutions halted preliminary talks in December when Hungary's conservative government adopted laws seen as threatening the independence of the central bank and freedom of the press.

Hungary and its Prime Minister Viktor Orban have come under international criticism over the new laws, which are seen as a possible slide towards authoritarianism.

The EU executive launched legal proceedings on January 17 against the laws and gave Budapest one month to modify the reforms.

Last Friday, Hungary sent a letter responding to the European Commission, which said it would carry out a "full legal analysis" to assess whether Hungary has taken steps to ensure its laws are in line with European treaties.

"All the points that were raised have now been answered. If there are further questions raised, of course we will answer them in the same way, trying to find an acceptable solution for each point concerned," Martonyi said.

"Once we start formal and official negotiations, these can be conducted and hopefully terminated in a relatively short period of time," he said after meeting his Czech counterpart, Karel Schwarzenberg.

Separately, sources in Brussels said the European Commission was considering freezing some funding for Hungary in 2013 because the country is in violation of EU budget rules which limit the deficits a member state can run.

The sources said the issue would be taken up on Wednesday and a "substantial part" of the 1.7 billion euros due to Hungary in "cohesion funds" – money to be spent on infrastructure and other capital investment – could be held back.

"The Hungarian government can avoid this sanction if it presents a supplementary budget for 2012 and a budget for 2013 which reduce the deficit to less than the 3 per cent of gross domestic product limit," one source said.

"The ball is in Hungary's court. It is up to them to show that they respect EU rules," the source added. - AFP

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