EU Steps Up Pressure on Hungary as Cabinet Seeks Aid Talks - by Zoltan Simon and Jones Hayden

The European Union escalated its standoff with Hungary, keeping bailout talks on hold and threatening to cut subsidies as punishment for flouting the bloc’s rules on central-bank independence and deficit overruns.

The European Commission may take Hungary to court for possibly violating EU laws on the independence of the central bank, the judiciary and the data protection authority, the EU’s executive said today in separate statements. The commission will decide on Jan. 17 whether to start legal proceedings.

Hungary is trying to revive bailout talks with the EU and the International Monetary Fund after the organizations suspended them last month on concern a new central bank regulation violates monetary policy independence. Fitch Ratings on Jan. 6 followed Moody’s Investors Service and Standard & Poor’s in downgrading Hungary’s sovereign-credit grade to junk.

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