By Radu Sigheti
TARGU SECUIESC, Romania (Reuters) - Tens of thousands of ethnic Hungarians rallied in central Romania on Friday to mark Hungary's national day, demanding greater autonomy and displaying their community's flag which sparked a diplomatic dispute between the two countries.
More than one million ethnic Hungarians live in Romania, mostly in three counties in central Transylvania, a territory at the foot of the Carpathian mountains that was run by Budapest until 1918 but is now far from the Hungarian border.
The ethnic Hungarian community in Transylvania has been a frequent bone of contention between the countries and tensions rose in February in a dispute over the use of the flag, which is light blue with a yellow stripe, star and crescent moon.
A Romanian official insisted it be removed from Covasna county's administration office, and the argument escalated to the point where Romania's foreign minister threatened to expel Hungary's ambassador.
Tensions have since eased, and both countries have sought to play down the dispute. Crowds displayed the flag in several rallies across Transylvania on Friday to mark the 165th anniversary of Hungary's 1848 revolution against the Hapsburgs.
About 10,000 people, many in carriages and riding horses adorned with the flag, rallied in Targu Secuiesc, a small town in Covasna county full of pastel-shaded houses known as Kezdivasarhely in Hungarian.
Some wore traditional uniforms and played old folk songs accompanied by accordions and violins.
"We celebrated a day of freedom," said Baldizsar Bela, 57, one of the march organizers. "But we also asked to be heard."
Tamas Sandor, a senior official of Romania's ethnic Hungarian party, UDMR, told reporters at the rally: "The message after 165 years is that ... we want to get organized ourselves and self-govern with moderns means, with ideas and arguments."
Under communist dictator Nicolae Ceausescu, many ethnic Romanians were moved to traditionally Hungarian areas in an attempt to dilute their influence. But since his overthrow in 1989, the community has gained more rights, including a school system in their native language.
Romania's leftist government is considering reorganizing local government into bigger regions to make it more efficient.
Many ethnic Hungarians say they want that to include a specific region of their own, where they would have a greater say over administration and education.
Some Hungarians living outside the country who have been granted dual citizenship by Hungary, including many living in Romania, could be eligible to vote in Hungary's 2014 election.
If they become eligible, they could become an important swing factor as Hungarian Prime Minister Viktor Orban tries to hang on to power, with an economy that languishes in recession.
(Additional reporting by Luiza Ilie; Editing by Pravin Char)
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