* Government loyalist in key position near top news portal
* Index.hu swears independence but faces tough market
* EU chides Hungary on democracy, fears for media freedom (Recasts with EU Commission President, Index editor, analyst)
By Marton Dunai
BUDAPEST, March 31 (Reuters) - Pro-government businessman Miklos Vaszily has acquired significant control over the funding of Hungary’s largest independent news outlet, Index.hu, raising fears of interference with the web site to favour Prime Minister Viktor Orban.
Orban, a fierce nationalist who has gradually strengthened his power over a decade in office, has used legal levers, ownership changes and advertising money to create more loyal media coverage.
Vaszily said on Tuesday he had bought a 50% stake in Indamedia, which sells all of Index’s advertising, describing himself to business website Portfolio.hu as a strategic investor who expected the website to remain influential and independent.
Index Editor-in Chief Szabolcs Dull said he would not allow outside interference, recalling an online dial https://szabadindex.eu Index put in place to monitor its independence after another ownership change in 2018.
“This barometer has been in the ‘independent’ zone for a year and a half. I hope we won’t have to touch it,” he said, noting that the two companies were legally separate.
“Everything at Index should be independent of Vaszily and Indamedia,” Dull said.
Vaszily did not return a Reuters call seeking further comment.
On Monday parliament gave Orban an open-ended right to rule by decree to fight the coronavirus crisis and imposed jail terms of up to five years on anyone considered to be spreading false information that could hinder that effort.
European Commission President Ursula von der Leyen chided Hungary on Tuesday, highlighting the media issue.
“Democracy cannot work without free and independent media,” she said, without mentioning the newly announced deal.
Agnes Urban, director of the think tank Mertek Media Monitor, noted Vaszily, 47, had helped turn Index’s main rival Origo.hu into a pro-Orban outlet in 2014 and had headed up Hungarian state media, widely seen as a government mouthpiece.
“Index will not close,” she said. “Pro-government media will probably overtake it,” she said. “(Orban) is taking advantage of the situation and grabs market share.”
The economic impact of the coronavirus had already been expected to accelerate the shake-up of the media.
Independent titles like Index have had to reduce hours and pay or lay off staff to make up for lower advertising revenue, while pro-government media are better cushioned, partly due to taxpayer funding or public sector advertising. (Additional reporting by Krisztina Than; Editing by Louise Heavens, Jan Harvey and Philippa Fletcher)