In what appears as an escalation of tensions between Brussels and Budapest, the European Commission has opened the second stage of two infringement procedures against Hungary for government interference in the judiciary and in the data protection authority. The next step could be a referral to the European Court of Justice.

The decision, taken by the College of Commissioners yesterday (7 March), appears as another blow to Hungarian Prime Minister Viktor Orbán, who was slammed two weeks ago with the threat to lose part of his country's regional funding for failing to correct its excessive deficit.

Although the EU executive sees the issues as unrelated, Commission spokesperson Pia Ahrenkilde Hansen admitted that the questions relating to the independence of Hungary's central bank may put in jeopardy the 'precautionary aid' which Budapest seeks from the EU and the International Monetary Fund as insurance against possible financing difficulties.

"The conditions for any talks on financial assistance are not yet met, that it's very clear also from the points I listed," Hansen told a news conference. "We need clarification and settlement of those issues before any such talks could start."

The Commission sought clarifications and translation into law of the commitments Hungary made over the independence of the central bank, and also a calendar that indicates when these laws would enter into force, Hansen said.

Also, more explanations were needed regarding the remuneration of the central bank president and "indications that the central bank would be consulted on these measures".

Quick procedure

The Commission was quick to react after the explanations it received on 17 February by Budapest, one month after it started legal action over legislation and constitutional changes that came into force on 1 January. The EU executive regards the matter as an urgency, as the laws in question are already in force.

The Hungarian government was also prompt to issue a statement, saying that "90% percent" of its explanations, provided on 17 February, had been accepted by the Commission.

"As regards the remaining unresolved questions, the Government is ready to continue the dialogue with the European Commission," the statement ends.

In January, the EU executive sent three "Letters of Formal Notice" to Hungary – the first stage in the EU's infringement procedure. This time, it issued two "reasoned opinions" – the second stage under EU infringement proceedings, after which the matter may be referred to European Court of Justice. It also sent two "administrative letters".

The Commission opinions concern the independence of the data protection authority and the retirement age for judges. The two administrative letters are seeking further clarifications regarding the independence of the judiciary and central bank.

More infringements possible

Commission sources said the only apparent outstanding issue over the central bank's independence concerns the salary of its governor, which the government wants capped. The Hungarian government has responded that the measure applies to all the civil servants.

But more important appears to be the "permanent dispute" between the central bank and the government, which is being played out by the news media, a source said.

Regarding the early retirement of judges, the Commission is reportedly unconvinced that the measure to lower the retirement age from 70 to 62 years was a measure applying for the entire administration, as Budapest had explained. The Commission sees this measure as discriminatory.

On the data protection authority, the outstanding issue appears to be the abrupt termination of the mandate of the former holder of this office, and the request of the EU executive to be informed of the changes in the statute and procedures of the authority.

On a controversial media law, which is not a subject of infringement procedure, the Hungarian government reportedly was consulting with the Constitutional Court and the Commission was waiting for the development.

More infringements were possible on "crisis laws" introduced by Orbán's government that affect foreign firms and banks, a source said. In December 2010 15 large European firms filed a complaint to the European Commission about hastily-adopted taxes in Hungary which they say threatens their activities.

On other issues being examined by the Council of Europe and the European Parliament - with the option of possibly triggering Article 7 of the Lisbon Treaty - the Commission would follow the work of these institutions and provide them the information they would need.

Under Article 7 of the Lisbon Treaty, serious breaches to the values of human dignity, freedom, democracy, equality, the rule of law and respect for human rights by a member state can result in a suspension or loss of voting rights in the EU Council of Ministers.

This would mean Hungary would temporarily lose its EU membership rights. But before such a decision can be taken, the Council shall hear the member state in question and may address recommendations.