By Marton Dunai
BUDAPEST (Reuters) - Hungary denied on Wednesday that a new education law was aimed at shutting down a university founded by U.S. financier George Soros, and suggested a possible compromise in a dispute that has drawn protests at home and criticism from Washington.
Central European University (CEU) found itself in the eye of a political storm after Hungary's parliament passed the new law last week, setting tougher conditions for the awarding of licenses to foreign-based universities.
Critics said the new terms would hurt academic freedoms and were especially aimed at CEU, founded by the Hungarian-born Soros after the collapse of Communism and considered a bastion of independent scholarship in the region.
In an apparent change of tack, Education Secretary Laszlo Palkovics said CEU could continue to operate if it delivered its teaching and issued its degrees through its existing Hungarian sister school.
"We never wanted to close down CEU," Palkovics told news website HVG.hu. "The question is whether CEU insists on having a license in Hungary or having courses in Hungary honored with a CEU degree... (CEU's own) license has little significance."
Government spokesman Zoltan Kovacs said the government would not suspend the disputed law but added: "We are going to have talks with everyone; if the Soros university is driven by good intentions, it will be able to solve the problem."
It was not clear if the suggested compromise would end the dispute, which has provoked some of the largest demonstrations against the seven-year rule of Prime Minister Viktor Orban.
CEU was weighing potential new legal options in the light of Palkovics' comments, spokeswoman Colleen Sharkey said.
The dispute over the university has come to symbolize rival visions of Hungary's future. Soros, whose ideal of an 'open society' is squarely at odds with Orban's 'illiberal democracy', has often been vilified by the prime minister.
The law stipulated that the CEU must open a branch in its home state of New York alongside its campus in Budapest and secure a bilateral agreement of support from the U.S. government.
Both of those conditions would have been prohibitive by a deadline of January 2018, and CEU rejected them from the start.
The United States asked Hungary to suspend the implementation of the law, and the European Union on Wednesday threatened Orban with legal action for moves that it saw as undemocratic.
"Taken cumulatively, the overall situation in Hungary is a cause of concern," European Commission First Vice President Frans Timmermans said.
Analyst Zoltan Novak at the Center for Fair Political Analysis said the government now appeared to have performed a U-turn.
"Calling it 'Soros University' for weeks was a clear way for the government to designate an enemy and attack," Novak said. "Now they made the education secretary bring up a policy argument to back out, containing the political fallout."
Novak said Orban, who faces elections in April 2018, may have miscalculated the resistance the CEU law could provoke, especially from Washington.
(Additional reporting by Gergely Szakacs, Gabriela Baczynska and Alissa de Carbonnel; Editing by Mark Trevelyan)