UPDATE 2-Hungary seeks to curb court power over state finances

* Govt moves to strip court of jurisdiction in budget issues

* Weakening top court is dangerous precedent – analyst
* Pension funds: plan to suspend transfers unconstitutional

* Association ask president to refer law to top court

(Recasts, adds legislation, analysts)

By Marton Dunai and Krisztina Than

BUDAPEST, Oct 26 (BestGrowthStock) – Hungary’s ruling Fidesz party
on Tuesday proposed stripping the Constitutional Court of
jurisdiction over matters relating to state finances, such as a
planned major change to the pension system.

Analysts said the proposal, which could become law within
days due to the ruling party’s dominance in parliament, would
weaken the system of democratic checks and balances in the
country.

“Unscrupulous as Fidesz has been so far, this is a level of
power demonstration that is unprecedented,” Political Capital
analyst Peter Kreko said.

“It is politically understandable, but it is a very
dangerous exercise in a democracy.”

In legislation submitted to parliament, Fidesz proposed that
the country’s highest court should no longer rule on matters of
the state budget, its execution, central taxes, fees, social
security contributions, and tariffs.

Such a change would help the government head off a legal
challenge from private pension funds, which earlier on Tuesday
said they would ask the court to annul a new law that suspends
transfers of members’ contributions to the funds they run.

The new law would leave a total of 420 billion forints
($2.14 billion) in the state budget this year and next, helping
the government meet its deficit targets. But it has prompted
criticism from the European Union, the IMF and the central bank.

Fidesz said that its planned legal change would prevent a
review of the pension bill and that the top court no longer
needed such powers 20 years after the fall of Communism.

“The Constitutional court has wide-ranging rights to review
laws, which had been justified in the first period of the regime
change,” Fidesz parliament group leader Janos Lazar wrote in the
justification filed with the legislation.

“As the legal system has solidified, such a wide
jurisdiction for the Constitutional Court has become
unjustified.”

Fidesz can change any laws thanks to its two-thirds majority
in parliament.

A spokesman for the court, Andras Sereg, declined to comment
on the Fidesz proposal. Earlier in the day the court annulled a
law which would tax severance payments in the public sector at
98 percent above 2 million forints. [ID:nBUD005566]

Gabor Torok, analyst at think tank Vision Consulting, said
the government would have to create an alternative ultimate
appellate level in economic issues.

“This reduces the importance of the Constitutional Court, no
doubt,” he added.

FUNDS SEEK REVIEW

The private pension funds association Stabilitas said on
Tuesday it had asked President Pal Schmitt to send the law on
suspending transfers to private pension funds — passed on
Monday — for review to the Constitutional Court.

The Stabilitas Association, which groups private funds in
Hungary, said it would ask the top court to annul the law with
immediate effect as it believed the legislation goes against
Hungary’s constitution on several points.

The laws passed late on Monday suspend state transfers into
private pension funds for the next 14 months and allow taxpayers
to return to the state system by the end of 2011.[ID:nLDE69P05S]

Private pension funds, created after Hungary reformed its
pension system in 1997 to introduce a second, mandatory pillar
to complement the state pension scheme, manage 2.7 trillion
forints worth of assets on behalf of about 3 million fund
members.

Analysis on the pension changes: [ID:nLDE69P1OQ]

Scenarios for the government plans: [ID:nLDE69K1UV]
(Editing by Hugh Lawson)

UPDATE 2-Hungary seeks to curb court power over state finances