IMF head says Hungary cental bank bill is key issue: CNN

BUDAPEST (Reuters) - Hungary's legislation on its central bank will be a key issue at the country's talks next week with the International Monetary Fund, the Fund's Managing Director Christine Lagarde said.

A new bill affecting the Hungarian central bank has been criticized by the European Union and the European Central Bank for possibly hurting the bank's independence.

The bill adds two members to the seven-seat central bank monetary council, including a new deputy governor.

Lagarde said in an interview published on CNN's website at the weekend that she was looking forward to meeting Hungarian officials who will arrive at the IMF in the coming days.

"We are obviously very concerned that whatever Hungarian legislation is voted by the Hungarian authorities is in compliance with the European requirements," she added.

"We are looking into it, I know that the European Commission is looking into it, and I certainly hope that the Hungarian authorities will be very keen to have their legislation in compliance with European regulation as well, particularly when it concerns the independence of their central bank," she said.

The debt rating of EU member Hungary was cut to BB+ by Fitch on Friday, the third downgrade to "junk" by international rating agencies since November.

The country will have to roll over debt worth 3.95 trillion forints ($3.82 billion) this year.

A financial backstop from the IMF and the European Union could help the forint and Hungarian government bonds recover from sharp falls suffered in the past weeks, which also spilled over into other markets in Central Europe.

The market falls forced the government to pledge flexibility at the upcoming credit talks.

But investors fear that the country is still unwilling to give up some of its unorthodox policy measures criticized by the rating agencies and the European Union, including the bill passed late last month which the EU has said could threaten central bank independence.

Earlier informal talks with the IMF and the EU were cut short late last year.

A Hungarian government delegation is expected to meet IMF officials on Wednesday to discuss possible future debt talks.

When asked whether the IMF would be willing to compromise or whether the central bank independence issue was particularly critical, Lagarde said:

"We are not complacent, we don't compromise but equally we never leave the table." ($1 = 248.9775 Hungarian forints)

(Reporting by Sandor Peto. Editing by Jane Merriman)