The rector of the liberal Budapest academy founded by philanthropist George Soros which is under threat of closure by Viktor Orbán’s government, has said “the future of Europe hangs in the balance” as Brussels prepares to thrash out its response to Hungary’s move to the right.

Speaking before a week in which MEPs vote on a report calling for an investigation into whether Hungary has breached EU core values, Michael Ignatieff said the fate of the Central European University (CEU) – and the action of conservative MEPs – would be telling.

“This is not an abstract issue. And CEU is right at the centre of that debate, because the position you take on CEU is the position you take on the democratic-agenda side of things. Depending how Christian democracy in Europe decides these questions, a lot of the future of Europe hangs in the balance,” he said.

“There have always been people on the European conservative right who like what Mr Orbán says about migration,” said Ignatieff, a former Canadian Liberal politician and Observer columnist. “The issue of decision for European conservatives is whether they like what he says about democracy and academic freedom and a free press.”

Orbán’s government has been accused of corruption and nepotism, cracking down on independent media and bringing formerly independent institutions under government control. It has accused Soros of launching a campaign to destroy European states using uncontrolled migration and ran a campaign based on anti-migration and anti-Soros propaganda before elections in April. Orbán’s Fidesz party won a two-thirds majority of seats, prompting an invigorated prime minister to begin the creation of what he has called “a new era” for Hungary.

Ignatieff was careful to say that the university was “not the political opposition” to Orbán, but stressed that the fate of CEU would be indicative of broad currents in European politics. “European conservatives have got to figure out what story they want to tell as they go into the European elections,’ he said.

Viktor Orbán, prime minister of Hungary, ran an anti-migrant election campaign in April. Photograph: Pier Marco Tacca/Getty Images

Orbán’s government says the problem with CEU is that it hands out US-accredited degrees without having a US campus. The university has set up programmes in New York and has had an agreement ready for the government to sign for several months. Orbán’s spokesman, Zoltán Kovács, said it would “take some time” for the government to review the agreement. Privately, some governmental officials say it comes down to Orbán’s personal decision on whether to let the university stay.

Ignatieff said if the agreement was not signed by 1 January, the university would “have no legal basis to operate” in Hungary and would be forced to begin a withdrawal to Vienna.

David Cornstein, the new US ambassador to Hungary and a long-standing friend of Donald Trump, has made clear that while the Trump administration will not publicly criticise Hungary over rule of law and press freedom issues, CEU is a priority. Cornstein is due to meet Orbán for the first time this week and has promised to raise the issue.

Orbán’s Fidesz is part of the centre-right European People’s party (EPP) group in the European parliament, which includes German chancellor Angela Merkel’s CDU. The EPP has faced calls to kick out Fidesz and there have been suggestions that after EU elections next year, there could be a reconfiguration, with Orbán emerging as a figurehead for populist, anti-migration forces.