YEREVAN, March 14. /ARKA/. Prime Minister Viktor Orban plans to curb foreign banks’ presence in Hungary, risking a deepening clash with the European Union and lifting the cost of insuring the country’s bonds against default to a five-month high, Bloomberg reported on March 12.

Hungary seeks to lift local bank-industry ownership to at least 50 percent, Orban said today in Budapest. Intesa Sanpaolo SpA (ISP) may cut its presence, CEO Enrico Tommaso Cuchicani said today, calling Hungary a “nightmare,” while Danske Bank (DANSKE) A/S said the move is “in effect threatening to nationalize” part of the industry. Erste Group Bank AG (EBS), KBC Groep NV (KBC), Raiffeisen Bank International AG (RBI), UniCredit SpA (UNIP), Bayerische Landesbank and Citigroup Inc. (C) are among those also active in Hungary.

The proposal threatens to widen the rift between the EU’s most-indebted eastern state and the rest of the 27-nation bloc over changes to the constitution Hungarian lawmakers passed yesterday that limit court independence. Investors have sold the forint this month on concern the central bank will lower interest rates more after Orban appointed Gyorgy Matolcsy to lead the institution in a push to overhaul policy making amid a deepening recession.

“If the Hungarian government and the new central bank leadership continue to pursue such a highly unorthodox policy, there is a serious risk of a major market meltdown,” analysts at Danske Bank led by Lars Christensen said in the note. “We find it difficult to see how the Hungarian government will fund itself on international capital markets if the government and the central bank don’t move very soon to calm market fears.”—0-