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UPDATE 2-ECB okays Hungary central bank law changes
* Latest cbank law changes address key remaining concerns -ECB
* Parliament expected to pass amendments next week -minister
* Hungary expects loan talks with IMF/EU to start in mid-July
BUDAPEST, June 29 (Reuters) - The European Central Bank signed off on Hungary's latest changes to its disputed central bank law on Friday, removing another hurdle from talks on a financial safety net, days after the International Monetary Fund gave its blessing for negotiations.
Central Europe's most indebted nation, which has spooked markets with unconventional policies including Europe's highest bank tax, first signalled its plan to seek outside help to stabilise its slowing economy in November.
A dispute over the bank law, which the IMF and the European Union saw as threatening the independence of the National Bank of Hungary, has kept borrowing costs high and prevented the central bank from reducing the EU's highest interest rate.
The ECB's approval comes after the IMF cleared Hungary's proposed changes to the legislation on Wednesday, ending a seven-month dispute and opening the door for talks on a multi billion-euro financing backstop.
"The draft amendments, alongside a commitment not to increase the size of the Monetary Council during the term of the current MNB Governor, are an indication that the Hungarian Government is now ready to respect the MNB's institutional independence," the ECB said in a legal opinion published on its website.
The ECB said it would monitor closely the observance in practice of central bank independence and continue to liaise with the Hungarian government to address remaining issues.
Mihaly Varga, Hungary's minister in charge of talks with the IMF, was cited by national news agency MTI as saying parliament was expected to approve the required legal changes next week.
"The start of official talks is now only a matter of arranging schedules and flights," he was quoted as saying.
Varga told Reuters in an interview earlier this week that Hungary expected to sign a deal for a financing backstop close to market estimates of 15 billion euros ($18.7 billion) by the end of October at the latest.
Hungary needs a financial safety net to rein in borrowing costs and prevent further cuts in its credit rating, already in "junk" status due to weak growth, high debt and a two-year string of unorthodox policies.
Analysts have said however that negotiations on a funding deal could be difficult as the government is adamant about its flagship flat tax and is only seeking an "insurance" against market and economic risks from the euro zone crisis.
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