The European Union is grappling with a right-wing government in Hungary in a test of its will to prevent former Communist states from sliding into authoritarianism.

Hungarian Prime Minister Viktor Orban is under attack for ramming through laws and a new constitution that critics say strengthen his party's grip on the economy, pack the judiciary with yes-men and gag the media.

Following mass protests in Hungary, the EU's executive commission is on the warpath. Last week it slapped Budapest with three counts of infringement of commitments to liberal democracy.

Orban is accused of scrapping the independence of the central bank and data protection agency and forcing out around 200 judges through early retirement, with the suspicion that their replacements would be picked by a crony.

Hungary has a month, instead of the usual two months for treaty violations, in which to respond.

In the event of a refusal, the commission could haul the country before the European Court of Justice - and, ultimately, could even recommend it be suspended from the EU. Suspension has never happened in EU history and analysts say it is unlikely, as it would need unanimous approval by the 26 other members of the 27-nation bloc.

Authoritarianism is rife in Russia, Belarus and Ukraine and Kazakhstan. But this is the first time that serious concern has emerged of such a threat among former Soviet bloc countries that joined the EU in 2004.

"Hungary is a key member of the European family," European Commission President Jose Manuel Barroso said last week. "We do not want the shadow of doubt on respect for democratic principles and values to remain over the country any longer."

Orban then came in for a savaging on Friday at the European Parliament in Strasbourg.

"We say you are taking the road of Chavez, Castro and all the world's totalitarian and authoritarian regimes," said Daniel Cohn-Bendit, co-chief of the Greens group of legislators.

"Homeless people, intellectuals, Jewish intellectuals, are afraid."

Orban, now 48, leapt to prominence in June 1989, when as a young lawyer he made a speech at a ceremony for national martyrs where he demanded the withdrawal of Soviet troops.

Educated in liberal studies in the post-democracy period, including a spell at Oxford University, he was seen by the West as a glittering prospect. He first became Prime Minister in 1998 at just 35, heading a centre-right coalition.

In 2010, he cruised to victory as a conservative populist, campaigning on nationalism, religious devotion and the mismanagement of the Socialists. His party, Fidesz, won two-thirds of the seats, making it the strongest government in post-Communist Hungary and enough for it to change the constitution.

One of Orban's first acts was to spark tension with neighbouring countries by offering nationality to ethnic Hungarians there, who he charged were suffering discrimination.

But it is his constitutional changes and assault on the media, including the impending closure of Klubradio, the country's only national opposition radio station, that have drawn most fire.

Reflecting Orban's strict Calvinism, the constitution also says God and Christianity hold the nation together, defines marriage as a union between man and woman and life as beginning at conception. The country will no longer be known as "the Republic of Hungary" but simply "Hungary".

Guy Verhofstadt, a former Belgian premier and head of the Liberals in the European parliament, lashed the new constitution, which took effect on December 31, as a "Trojan horse for a more authoritarian political system in Hungary based on the perpetuation of one-party rule." Other critics include the United States, Amnesty International, the Council of Europe, the International Press Institute and the Organisation for Security and Co-operation in Europe.

Orban shrugged off allegations of authoritarianism, claiming he defended persecuted minorities and "Christian and family values". He also said he had brought Hungary back from the brink by cutting debt, overhauling taxes and health charges.

In fact it is his economic record that is his Achilles heel. He was able to balance books last year only by hiking sales taxes, imposing a windfall levy on banks and foreign companies and by nationalising the country's compulsory private pension scheme. On January 6, Hungary's debt was downgraded for the third time in two months and is now junk status. The national currency, the forint, has lost a fifth of its value against the euro in the last six months.

Middle-class Hungarians are incensed at the slump in the value of their savings. Many have been badly hit by housing loans that were contracted in Swiss francs during the boom years.

Fidesz' standing in the opinion polls, which stood at 68 per cent approval in 2010, is now less than a third.

On January 2, a rally outside the Budapest Opera House drew between 70,000 and 100,000 people brandishing placards dubbing the premier the "Viktator" and head of "Orbistan".

Yesterday about 100,000 government supporters marched to Parliament in support of Orban.

Exploiting his weakness on the economy, the commission is saying that without a rollback of the three contested laws, it will not join the International Monetary Fund (IMF) in a standby loan of up to €20 billion ($32 billion) that Orban initially rejected but is now urgently seeking.

Orban and Barroso are set to go to the mat in Brussels next Wednesday. In final talks with visiting commission officials at the weekend, Orban appeared to back down on the question of the independence of the central bank but showed no signs of compromise on the other two issues.