By Robin Emmott
BRUSSELS (Reuters) - EU finance ministers will lift financial sanctions on Hungary on Friday, two EU diplomats said, restoring Budapest's access to half a billion euros of frozen funds and rewarding Prime Minister Viktor Orban for dealing with budget shortfalls.
Finance chiefs in March blocked 495 million euros ($625 million) in EU funds from 2013, to send a message to Budapest and other fiscally profligate nations that consistently high budget deficits were unacceptable in the European Union.
But in a sign of better ties between Brussels and Orban's centre-right government in recent months, the European Commission said last month that Hungary had shown genuine progress in bringing down its deficit in a sustainable manner.
EU finance ministers are now set to back that decision in their monthly meeting in Luxembourg on Friday, two EU diplomats said on Monday.
"The blocking of those funds will be lifted, I expect that to happen," said a senior EU diplomat with knowledge of countries' positions on the issue ahead of the meeting. "There's no resistance to this, not when the Commission gives Hungary a clean bill of health."
Another diplomat briefed on member states' positions concurred. "It is guaranteed," the diplomat said.
Commission President Jose Manuel Barroso made his recommendation to lift sanctions after the EU executive improved its forecast for Hungary's fiscal deficit to 2.7 percent of economic output in 2013, below the EU's 3 percent ceiling.
Budapest had angered the Commission and other EU countries by failing to rein in its deficit in a sustainable manner since it joined the EU in 2004 and the Commission's new powers to police budget deficits across the bloc served to put more pressure on Orban's government.
The sanctions, used for the first time against an EU country on a budget issue, marked a low point between Brussels and Orban, whose centralising style prompted Barroso to raise concerns about authoritarianism in Hungary.
But relations have warmed in recent weeks as Budapest has also moved on bringing new central bank laws in line with EU norms.
(Reporting by Robin Emmott; editing by Rex Merrifield)
