"We'll use all our powers to make sure that Hungary complies with the rules of the EU," said European Commission president Jose Manuel Barroso.
Mr Orbán said his country was the victim of "international leftists" in Brussels. A zealous anti-Communist, he insists that Hungary's Stalinist past must be ripped out at the roots.
The immediate dispute centres on three laws in Hungary's new constitution pushed through despite EU warnings. Commission officials say these are just the "tip of the iceberg". Over 300 laws have been passed since Fidesz took power in 2010, giving the party sweeping control over the country's institutional system. Amnesty International said last week that Hungary's media clamp-down breaches human rights.
The Commission is taking aim at a law forcing retirement of judges at age 62 instead of 70, widely viewed as a ploy to stack the courts with political loyalists. The new head of the judicial office has overweening powers to manage the courts, appoint judges, and allocate cases.
The central bank law allows ministers to vet the agenda of Monetary Council and take part in meetings. The governor has to swear an oath of loyalty and lacks secure tenure.
"Governments must refrain from seeking to influence their central bank," said EU economics commissioner Olli Rehn. "Certain provisions in the new constitution are in breach of these principles. This needs to be addressed before we can start formal negotiations on the requested EU/IMF financial system."
The warning is clear. Hungary will be left at the mercy of hostile markets until it bows to EU pressure.
Deputy premier Tibor Navracsics played down concerns yesterday, saying a solution could be found to concerns about the central bank and data protection. He yielded no ground on treatment on the judiciary.
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