Hungary will abandon a planned merger of the central bank and its financial markets regulator, Prime Minister Viktor Orban said on Friday, January 20 backing down on one of the key points of conflict with the EU that threatens to block a deal on aid.The move is the first concrete commitment since Mr Orban made a broad pledge to the European Parliament earlier this week to back down on laws that have prompted charges he was seeking to take control of the country's major independent institutions, The Telegraph reported.

The forint rose around 1pc and prices of Hungarian bonds surged on Wednesday and Thursday on hopes the government was ready to reach a compromise that would open the way to a deal with the IMF and European Union.

But analysts worried that Mr Orban, who has based his domestic political appeal on taking Hungary on an independent course that would not bow to pressure from external parties like the IMF, might still be unwilling to deliver in practice.

"The government's position must be formed at a government meeting, this happened yesterday," Mr Orban told Hungarian radio. "Naturally, several laws may have to be modified, but the government cannot do it, this can be done only by parliament, and we will make proposals to this end."

Mr Orban said he expected to strike a political agreement with European Commission President Jose Manuel Barroso on disputed legislation at a meeting next week.

He said it would have been beneficial for Hungary to have had a safety agreement with the International Monetary Fund and the European Union already "yesterday," even if the country had no plans to draw on any funding made available.

Mr Orban's Fidesz party has been criticised by the international community for introducing measures that threaten the independence of the media, the judiciary and the central bank since sweeping to power in 2010.