LEAD: Additional EU proceedings loom for Hungary as forint falls

Jan 4, 2012, 16:10 GMT

Budapest/Brussels/Vienna - Hungary faced increased pressure from the European Union over its political reforms Wednesday, as the country's currency fell to a record low against the euro.

At one point, financial markets were trading one euro for as many as 320 forints, compared to a recent high of 263 forints for a euro in July. Analysts blamed the tumble on uncertainty surrounding a request for assistance Hungary has made to the EU and the International Monetary Fund (IMF).

An Austrian Green EU parliamentarian told dpa that her faction was moving to initiate formal proceedings against Hungary for violation of fundamental EU values.

'The independence of the judicial system and the media have been abolished, and parliament has been effectively stripped of its powers,' representative Ulrike Lunacek said in Vienna.

If there is a majority for such a decision in the European Parliament, the case would be taken up by EU member states, which could suspend Hungary's voting rights in their council.

Lunacek said the Greens would seek the support of social democrats, liberals and leftists.

A day earlier, the EU's executive had announced that it had launched its own probe into the legality of newly adopted Hungarian constitutional reforms.

The controversy surrounding the new laws has led the EU and the IMF to delay a decision on whether to launch formal talks this month, as planned, with Hungary over its request for financial assistance.

'The European Commission fully respects member states' right to make changes to their national constitutions,' spokesman Olivier Bailly said Wednesday. 'At the same time, the legislation ... has to reflect and to be fully in consistence with basic European values.'

If the commission finds that the reforms are illegal and Hungary fails to change them, it could drag the country before the European Court of Justice and demand the imposition of fines.

Before the Hungarian parliament adopted the laws on Sunday, the EU and the European Central Bank had sounded the alarm about one bill that could reduce the independence of the Hungarian National Bank.

On Tuesday, reports had circulated in Budapest that the Hungarian government actually wanted to use the bank's currency reserves to pay off its national debt instead of resorting to the international rescue package, which would come with strict conditions.

A government spokesman denied this.

Brussels has also criticized Hungary's new 'financial stability' law, which has cemented key parts of government tax policy so they can only be amended by a two-thirds parliamentary vote.

Like the Greens, the EU's justice commissioner has additionally raised concerns about new laws that could affect the independence of Hungary's judiciary and data protection authority.