And with Hungary's regional allies Poland and the Czech Republic offering to shield it against any EU sanctions, Orban's gamble is likely to pay off - although his Fidesz party may end up having to quit the conservative European People's Party (EPP), now the largest grouping in the Parliament. However, a unanimous vote is required to suspend Hungary's voting rights and launch sanctions.
The motion was passed with 448 votes for and 197 against, with 48 abstentions.
When asked for comment, a Hungarian government representative cited Palkovics' interview from June in which he had said they are "currently examining whether actual training is being performed by the CEU in the United States with the involvement of education experts".
He said Europe had no right to interfere in the actions of a sovereign government.
"Therefore, Poland will vote in the fora of European institutions against the imposition of possible sanctions against Hungary" - says the foreign Ministry.
"Hungary will not accede to this blackmailing".
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The move saw some members of the European People's Party bloc - of which Mr Orban's Fidesz movement is a member - vote against their ally in Budapest.
Orban said he expects a "serious legal debate" regarding this decision.
When Orban began consolidating power after his 2010 election victory, he was largely the only leader in the European Union promoting what he calls his "illiberal" platform.
"The European Parliament rightly stood up for the Hungarian people and for the EU".
While Orban's actions have provoked opposition, they have been applauded by populists in the European Union, with prominent far-right figures floating the idea of forging a pan-European alliance ahead of next year's elections.
In his Friday statement, Orban also criticised German Chancellor Angela Merkel, who on Thursday appealed to EU states to ensure the Frontex border agency had enough powers to help stop illegal migration, in line with European Commission plans.
It is the first time in EU history that the European Parliament had initiated and approved such a motion, which needed a two-thirds majority to pass and was approved by 69.4 percent of the lawmakers. "We had enough dialogue". Poland has already indicated it would veto sanctions against Hungary.
"Instead of desertion, we should take on the more hard task of renewing the European People's Party, and helping it to find its way back to its Christian Democratic roots".
"This is a historic result for Hungarian citizens and for European citizens everywhere, that the European Parliament has voted by a large majority to stand up for the values we all hold dear", Sargentini said.