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UPDATE - Govt says informal talks with IMF, EU end; formal talks to start in Jan

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Hungary’s informal talks with the International Monetary Fund (IMF) and the European Commission on a financial assistance package have ended, and formal talks will start in January, the Office of the Government Spokesman told MTI on Friday.

The office responded to a question by MTI after a spokesman for Vice President of the European Commission Olli Rehn said the talks had been broken off because of a proposed amendment affecting the National Bank of Hungary. Amadeu Altafaj Tardio said the decision to break off the talks was personally made by Mr Rehn.

Hungary said in November it was seeking financial assistance from the IMF and EC as a precautionary measure.

Tamas Fellegi, minister without portfolio in charge of the Hungarian delegation at the talks with the IMF and EC, said in a statement on Friday that the goal of the meeting between the parties on Thursday was to establish contact and reach a preliminary agreement on the agenda and topics of the main talks.

He said the talks were of "heightened significance" because they "made clear" the stands to the sides and allow the Hungarian government to prepare for future negotiations taking these into consideration.

"As informal talks, and not a formal round of negotiations, took place, this has nothing to do with a break in the formal negotiating procedure," he said. "The Hungarian delegation is ready for negotiations without pre-conditions, offering the experts of the IMF and EU discussions of substance about the elements of cooperation and the financial, macroeconomic and political consequences of the future agreement," he added.

He said an agreement could be reached in the course of the talks on the form, scale and conditions of a "safety net" from the IMF and the EU.

Janos Lazar, who heads the parliamentary group of governing Fidesz, said that, until now, the meetings with the IMF and EC representatives were social and for introductions. Whether these are successful or unsuccessful is another question, he added, speaking after an extraordinary meeting of the Fidesz-KDNP parliamentary group.

He said the formal talks will start in January.

Hungary’s parliament is scheduled to debate a bill on the new Central Bank Act in an accelerated procedure on Friday. The act is necessary because of the country’s new constitution, which comes into force on January 1, 2012.

The bill would give the central bank more rate-setters and a third deputy governor as well as require the board of directors to submit their agenda to the government.

The European Central Bank said in an opinion issued on Thursday that the bill could be detrimental to the MNB’s independence.

Mr Fellegi said on Friday that the government had received the ECB’s opinion on the bill and was in the process of building the bank’s proposals into the proposed legislation.

An IMF spokeswoman said late Friday that that the informal talks with Hungary were suspended because the government did not show a willingness to delay the bill on the new Central Bank Act.

"The IMF and the EC raised concerns about possible limitations to Hungary’s central bank independence in the new central bank law," the IMF spokeswoman said in a statement. "Given that the government did not indicate a willingness to delay passage of the law to allow for further discussions, it was decided to interrupt the joint EC-IMF preparatory mission," she added.

"The IMF, in close coordination with the EC, remains in touch with the authorities to determine the next steps," the IMF spokeswoman said.

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