BRUSSELS (Reuters) - The European Union threatened Hungary with legal action on Wednesday over moves by Prime Minister Viktor Orban that it fears run counter the bloc’s values on rights and democracy.

Long exasperated by what it sees as Orban’s authoritarian tendencies, Brussels is concerned at new Hungarian laws that it fears curtail freedoms and contradict asylum rules - culminating in criticism of an education bill that could shut down a Budapest university founded by U.S. financier George Soros.

The EU executive’s deputy head said Orban’s government needed to assuage the bloc’s worries by engaging in a political dialogue with the European Commission, which is also trying to persuade Orban’s right-wing allies in the Polish government to amend plans for constitutional changes there.

“Taken cumulatively, the overall situation in Hungary is a cause of concern,” First Vice President Frans Timmermans told a news conference after the commissioners discussed Hungary at their weekly meeting.

Domestic opponents of the new law, which on Sunday triggered some of the largest demonstrations against Orban’s seven-year rule, consider it part of a wider crackdown on dissent and a political drift towards Russia.

Timmermans said the Soros-funded Central European University (CEU) was a “pearl” that must be protected, and the bloc was evaluating the new education law to decide whether to launch an infringement case - a measure that could eventually but only after lengthy negotiations land Hungary in Europe’s top court.

The EU executive has “resolved to use all the instruments at our disposal under the Treaties to uphold the values on which our Union is grounded,” Timmermans told reporters. “The vision of an open society, of a diverse society is under threat.

Grievances between Brussels, some EU capitals and Budapest go beyond the higher education law, however. Orban’s “illiberal” brand of democracy has already earned him a tongue-in-cheek greeting of “Hello Dictator!” from the head of the executive, European Commission President Jean-Claude Juncker.

However, the Commission has a struggle to impose stronger sanctions on Hungary, such as a supervision procedure that could lead to the suspension of Budapest’s voting rights in the bloc.

While some in the EU and its political capital want to be harsher on Budapest, others are more restrained. Orban’s warm ties with the government in Poland, a post-communist EU peer that joins him in opposing Brussels on issues from migration to energy policy, means he may be shielded from any harsh moves that would need backing from all other EU states.