AFP - Europe paved the way to freezing millions of euros of aid to under-fire Hungary on Tuesday as the nation's premier Viktor Orban flew into Brussels to seek to end a row over his controversial new laws.

European Union finance ministers meeting in Brussels opened the way to slashing EU aid to the financially-struggling country when they endorsed proposals to sanction Budapest for failing to check its public deficit.

Hungary was slammed by the European Commission last week for taking "no effective action" to get its deficit back within the EU threshold of 3.0 percent of gross domestic product (GDP).

A non-euro state that is currently in the eye of a political storm for breaching European values, its punishment is expected to be a freeze in so-called cohesion funds that are paid out to reduce economic differences between European regions.

"There is a mood around the table to do something tangible on Hungary ... there are wide political concerns about the direction Hungary is going in," an EU diplomat told AFP on condition of anonymity.

Orban meanwhile began talks to defuse a bitter row over hotly contested legislation that has also snarled Budapest's bid for much-needed credit and set off EU legal action.

His government is facing court action failing the reversal within a month of legislation that the European Commission says will threaten the independence of three key institutions -- the central bank, judiciary and data protection authority.

The laws adopted by Orban's large parliamentary majority last month sent tens of thousands of protestors onto the street and impeded a bid to secure a 20-billion-euro ($25-billion) credit from the International Monetary Fund and the European Union.

Brussels is also concerned over the fate of opposition radio station Klubradio, ordered off the air by the powerful pro-Orban media authority.

Orban, who faces a dire economic crisis, has offered to row back on parts of the legislation and has said he expects a deal Tuesday in talks with both EU president Herman Van Rompuy and Commission president Jose Manuel Barroso.

Hungary's currency strengthened to a seven-week high Monday on hopes of a breakthrough in talks between Orban and the EU officials. "I see no particularly difficult issues," Orban said last week.

Brussels has been under sharp pressure to take action against legislation that smacks of oldtime eastern European authoritarian regimes and is seen as violating EU laws and values.

At a fiery debate in the European parliament last week, angry centre-left MEPs accused his government of flouting basic democratic values and likened Orban to Cuba's Fidel Castro or Venezuela's Hugo Chavez.

Barroso pledged before the parliament that his executive commission would honour its role as guardian of EU values in talks with Hungary. "We have to be clear on values, firm on principles," he said.

"Hungary is a key member of the European family," Barroso also said. "We do not want the shadow of doubt on respect for democratic principles and values to remain over the country any longer.

"The quicker that this is resolved the better."

On Friday, Orban backed down from plans to merge the central bank and the regulatory authority and demote the central bank head, a move strongly criticised by Brussels.

The two institutions "have been operating separately until now, they will be all right separately in the future," Orban said.

Ensuring the central bank's independence is crucial to Hungary's bid to conclude talks with the EU and IMF for credit to stabilise its struggling economy.