Brussels warns Hungary on constitutional reform

The constitutional reforms were adopted by Orban's two-thirds-strong parliamentary majority in December and the new constitution came into place at the beginning of this year.

Critics of the reforms - which have sparked street protests in Hungary, with demonstrators referring to "Victator" - say they remove checks and balances on the government. Socially conservative elements of the new constitution, such as the definition of marriage as a heterosexual union only, have also sparked concerns.

Orban has said that he is simply completing the country's transition from its Communist past to a genuine democracy and that the new rules are needed to ensure the economic growth he promised Hungarians.

The commission has given Hungary one week to back down. It said its legal analysis would be completed by 17 January. If Budapest continues to tough it out, Brussels "reserves the right to take any steps that it deems appropriate, namely the possibility of launching infringement procedures."

The potential procedure would begin next week with formal letters of complaint to the Hungarian authorities. After two months, the commission could then take the country to court.

"The swiftest way to lay to rest the concerns mentioned would of course be action by the Hungarian authorities themselves," the commission's statement said.

Brussels' worries have already had practical consequences - negotiations on a possible EU and International Monetary Fund aid package for Hungary were suspended in December due to concerns about the central bank's independence.

Hungary asked for credit after its borrowing rates shot up.

Wednesday also saw Hungary in the firing line for its budget deficit.

Economic affairs commissioner Olli Rehn said Budapest has taken "no effective action" to limit its deficit and noted that Brussels may eventually withhold cohesion funds if the government does not take react - warnings set to further increase investor unease about the country.

Speak no evil

This is not the first time that Hungary - a member state since 2004 - has had a run-in with the commission over Prime Minister Orban's reforms.

Last year, a media law seen as stifling journalists' independence was also strongly criticised. In the end, Brussels settled for small changes to the legislation. But recent moves to take away licences from an opposition radio station have once again raised concerns in the EU capital.

Despite strongly expressed concern by members of the European Parliament and by some civil society groups of what is seen as Orban's drift towards authoritarianism, there has been little outright criticism from his EU partners.

Orban's party Fidesz is a member of the centre-right European People's Party, a pan-European umbrella group to which the leaders of France and Germany also belong, as well as the heads of the EU's three main institutions.