Thousands of Hungarians demonstrated in Budapest on Monday against a government plan to wrest control of theatres, a move that protestors, including leading directors and the city's mayor, said would curb artistic freedom.

The draft bill, which was posted on the parliament website Monday and could be adopted Wednesday, proposes an overhaul of the financing and management of state-funded theatres.

The move came after a scandal involving a high-profile director rocked one of Budapest's most popular theatres.

A senior official in Prime Minister Viktor Orban's ruling Fidesz party later hit out at theatres who "demand money from the government while denying them access to their internal affairs and hiding crimes for years".

If the bill is adopted funding could be conditional on a state appointee having a say in selecting theatre directors, said a government spokesperson Istvan Hollik Monday.

The legislation text said the bill was submitted as "suspicions have emerged recently of abuses of a non-financial nature...in performing arts institutions".

But critics have accused the government of using the harassment affair to restrict the artistic independence of theatres, who sometimes stage government-critical productions.

Demonstrators protest against a government cultural policy they say will curb artistic freedom
Demonstrators protest against a government cultural policy they say will curb artistic freedom AFP / Attila KISBENEDEK

The move is the latest squeeze on independent institutions since Orban came to power in 2010 and launched a centralisation drive that has transformed the judiciary, media, and education system among other sectors.

Several theatre directors and leading actors posted videos with statements of protests on social media.

One actor's message said the proposal is reminiscent of state censorship during Hungary's post-World War II communist era that ended in 1989.

"After thirty years of democracy, I didn't think I would ever feel the same way as I did then," said Judit Pogany, whose career began in the 1960s.

Over 45,000 people have signed a petition condemning the proposal.

A crowd estimated at more than 5,000 according to an AFP photographer attended a protest rally in Budapest late Monday that was addressed by top directors and actors.

"When we defend the freedom of theatre we defend the freedom of the city," the recently elected liberal mayor of Budapest Gergely Karacsony also told the crowd.