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The incoming Hungarian presidency of the European Union is bracing itself for an unexpectedly difficult six months (Jan-June 2011) at the helm, likely to test the diplomatic skills of the presidency first-timers to the full. The ongoing fight to shore up eurozone stability, together with calls for EU treaty change and acrimonious EU budget talks are among the prickly issues on the packed agenda, with Turkish accession talks and the Roma ethnic question also potential flashpoints.

Some EU and member state officials have been alarmed at what they perceive as a concentration of power under Herman Van Rompuy, the bloc's first president of the European Council, the body representing EU leaders. "Mr Van Rompuy has taken on a number of issues that should instead be run by the rotating presidency, helped by the current political limbo surrounding the Belgian government," one Polish official said earlier this month.

With the future of the euro currency in the balance, the European Commission on Wednesday (1 December) outlined details for a permanent strategy to help countries at risk of defaulting on their debts.

The European Commission presented plans for fundamental treaty changes that will extend the current aid mechanism – the European Financial Stability Facility – beyond its 2013 sunset provision. Details of the proposal will be debated by European leaders at their next EU summit on 16-17 December. The changes, which have been rumoured in financial markets for weeks, would increase risk for sovereign investors. Under the proposal, bonds issued after June 2013 would include a provision to allow creditors to renegotiate new terms if the country is on the brink of insolvency.

The EU's three largest member states - Germany, France and the UK - are set to publish a text on Saturday (18 December), calling for spending restraint in the bloc's long-term financial framework (post 2013). Initiated by British Prime Minister David Cameron, the letter will call for a freeze in the long-term spending plan, excluding inflation, and also seek to rein in the bloc's 2012 and 2013 annual budgets.

The move puts the group of large member states on a direct collision course with the Brussels-based EU institutions, already battered after their call for a six percent rise in next year's EU budget was cut in half by national capitals. With the commission not set to publish formal proposals on the multi-annual financial framework until June 2011, the EU institution may also perceive London's latest initiative as a move to undermine its right of initiative. Still undecided, the framework's period is likely to cover 2014-2020. It is then broken down into annual budgets. Poland and other eastern countries may also be horrified by the attempt to curb future EU payments of which newer member states are large recipients. But other EU members are also set to sign the austerity-letter, with Austria, Italy and Finland among the names suggested by diplomats.

European Commission President Jose Manuel Barroso sought to downplay the letter's significance. "We know different groups of member states sometimes try to position themselves," he said. "What is important in the end is the commission's proposal that is being put forward [next June], and then the discussions on the basis of that proposal." European Council President Herman Van Rompuy was also phlegmatic. "If there are letters, we are very polite people, we read our letters we receive," he said.