The European Commission opened the way to financial aid talks for Hungary on Wednesday, ending a five-month dispute over the independence of its central bank that has undermined investor confidence in the indebted country.
The Commission said it was satisfied with the assurances it had received from Budapest that its central bank law would be brought back in line with that European Union.
Guarantees have been provided by the Hungarian authorities vis-a-vis the independence of the central bank... which means that the Commission is today prepared to discuss financial assistance as requested by Hungary from the EU and the IMF last November, Commission spokesman Olivier Bailly told reporters.
The breakthrough ends months of acrimony between Brussels and Budapest over the freeze in talks for aid, which is designed to stabilise Hungary's economy.
Even up to the last moment during a visit to Brussels this week, Hungarian Prime Minister Viktor Orban accused the EU of setting unfair preconditions for talks, while the Commission has questioned the quality of democracy in Hungary.
The Commission said there was no date for restarting talks, and some analysts sounded a cautious note.
The risk is still there that after stepping into the next stage, the market pressure will ease and the Hungarian government's commitment to reaching a deal could loosen and the whole process could slow down, said Eszter Gargyan at Citigroup in Budapest.
Orban's government has enough currency reserves to service its foreign debt until about the end of the year, analysts say.
(Reporting by Robin Emmott and Jan Strupczewski; editing by Rex Merrifield)