By Krisztina Than and Marton Dunai
BUDAPEST (Reuters) - Hungary defied the European Union on Monday and changed its constitution to limit the powers of its constitutional court, one of the few institutions that has stood up to Viktor Orban, the combative prime minister.
Parliament, dominated by Orban's party, voted for a set of government-backed constitutional amendments, despite warnings from the European Union, the U.S. government and human rights groups that the changes could undermine Hungary's democracy.
"There are no longer any doubts whether there is a constitutional democracy in Hungary - there isn't one," said Marta Pardavi, co-chair of the Hungarian Helsinki Committee, a human rights organisation.
European Commission President Jose Manuel Barroso's office said the amendments "raise concerns with respect to the rule of law", which Hungary needs to address with Brussels.
Brussels sees the vote as the latest move to assert power over other branches of the state by Orban, a charismatic former youth democracy activist who took power in 2010 with a super-majority that lets him amend the constitution.
In the past three years he has pushed through changes that opponents say undermine the independence of the media, central bank, judiciary and other institutions.
Orban's supporters deny infringing on democracy. They say criticism of the constitutional changes has been whipped up by international businesses angry that Orban's government has made foreign electricity firms cut charges to Hungarian households.
"Hungary won't just let this happen," Antal Rogan, head of the parliamentary faction of Orban's Fidesz party, said in a speech in the chamber on Monday.
"We won't allow either any international business lobby or the political forces that speak on their behalf to interfere with the decisions of the Hungarian parliament."
The dispute underscores the limited ability of the European Union to rein in its members, even when Brussels believes they risk breaching the EU's founding principles of rule of law and respect for human rights.
Barroso telephoned Orban on Friday to voice his concerns, but Hungarian lawmakers ignored his request to delay the vote.
German Foreign Minister Guido Westerwelle also expressed concern, saying the independence of constitutional courts was one of the values shared by EU members.
"This is very important for us and I do not have to deny that I am concerned about these latest developments in Hungary," he told reporters in Brussels shortly before the vote.
The constitutional amendments were backed by 265 lawmakers in the 386-seat chamber, with 11 votes against and 33 abstentions.
OPPOSITION PROTEST
About 1,500 Orban opponents protested against the amendments on Monday evening in a square near the office of the Hungarian president, an Orban ally. The opposition though is too weak and divided to mount a serious challenge.
"Obviously, we can't achieve much," said Benjamin Markus, 23, one of the protesters. "But we are here because it's better than staying at home and doing nothing."
Earlier, the forint currency fell more than one percent against the euro to new 9-month lows because of concerns about the vote in parliament and steps by Orban to cement his control over the central bank. It later recovered some ground.
The package of changes has revived suspicions among Orban's opponents, and some foreign states, that the 49-year-old prime minister is eroding Hungary's system of checks and balances so he can rule without challenge.
A powerfully built, football-playing father of five who came to prominence as a handsome activist in the last days of Communist rule, Orban is charismatic, very intelligent and forceful, say people who have met him.
He has already been accused of risking economic stability after imposing hefty "crisis taxes" on foreign-owned businesses, of stacking institutions with his loyalists, and of stoking nationalist sentiment to win votes.
The outside world's levers of influence on Hungary are limited. Its biggest vulnerability has been its status as central Europe's most indebted nation. But earlier this month the government sold $3.25 billion (2.1 billion pounds) worth of bonds, removing any need to call on Brussels or the International Monetary Fund for financial help in the near term.
Orban's government says it has the right to use its parliamentary mandate to reform a constitution it calls a hangover from Communist rule.
Monday's changes include allowing the constitutional court to challenge laws only on procedural grounds, not on their substance, and scrapping all decisions made by the court before 2012, discarding a body of case law often used as reference.
The focus on the court is significant because earlier this year it blocked a Fidesz proposal to change voter registration rules. That was one of the few occasions when Orban has been forced to drop one of his initiatives.
The government said another measure adopted on Monday showed it was listening to European concerns about the rule of law. That measure watered down earlier legislation on the early retirement of judges that critics said would allow the government to stack courts with its loyalists.
(Additional reporting by Luke Baker in Brussels; Writing by Christian Lowe; Editing by Peter Graff)
