Last night's concert at the Royal Festival Hall was a high profile affair. Staged to mark both the opening of the Hungarian six-month presidency of the European Union and the bicentenary of Liszt, it was attended by the President of Hungary and a raft of assorted dignitaries. The Middle European programme was a carefully crafted set of works from Austria, Hungary and Germany, performed by Iván Fischer and the Budapest Festival Orchestra.

The evening started with Haydn's Symphony no. 92, dubiously named the "Oxford symphony" since it may or may not have been played on the occasion of Haydn's award of an honorary degree at Oxford University. Within the first few bars, it became clear that any pre-conceptions I had about Eastern European orchestras (verve, fast tempos, extreme accentuation) needed to be rapidly discarded. The playing was precise, clean and nuanced. The balance between instruments was immaculate, so that every note and phrase came through with elegance and lucidity. Haydn's work shows mastery of the art of passing of melodies between different parts of the orchestra while using the other forces to fill in colour and harmony, and in the shifting of moods from one passage to the next. Fischer seemed in total control of every note, and I especially enjoyed the warmth of the brass, which used the baroque-type valveless instruments.

The centrepiece of the evening was the Liszt Piano Concerto no. 1, in which the orchestra were joined by soloist Stephen Hough. It was a remarkable display of piano playing. We're used to the idea that Liszt was a great virtuoso whose music makes extraordinary demands on the pianist's technique: if a pianist successfully completes one of those demonic octave runs or impossible trills, we admire his skill. Many modern pianists achieve this, but with Hough, we get an added dimension: his technique is so far ahead of what Liszt requires that he can play tricks with the music, finishing one of the apparently unplayable passages with a flourished crescendo or accelerando. There's a finger-breaking passage in the second movement in which the soloist has to play 21 bars of continuous trill with the top of the right hand while playing a chord sequence with the left hand and the rest of the right hand. Hough's rhythmic accuracy never wavered by as much as a flutter. One of Liszt's teachers was Carl Czerny, Liszt's teacher and the author of dexterity exercises which torment young pianists to this day: I could imagine Czerny's ghost looking down and applauding.

All the virtuosity apart, the concerto gives a thorough exploration of musical texture. The complex piano textures are matched to orchestration that is full and lush when the piano is not playing, but quite sparse during the piano parts: the effect is almost like listening to repeated passages of chamber music. Fischer showed the versatility of his orchestra, keeping perfect balance and tonal colour throughout, and keeping disparate instruments precisely in time to the constantly shifting piano part behind him.

My next wrong assumption was that the Liszt would be the high point of the evening. Beethoven's Pastorale Symphony has never been one of my favourite works - a little inconsequential, it has seemed to me, when set against Beethoven's weightier others. Fischer and the Budapest Festival Orchestra were a revelation: such was the lucidity of their performance that I heard many phrases and moods that I have never heard in the work before. The middle movements often turn to mush in the concert hall: last night, that simply didn't happen and the music came through beautifully. The elegance and charm of the opening, the vigour of the heavy-footed peasant's dance, the twittering of birds and buzzing of insects and the sunshine of the last movement all came through beautifully - only the thunderstorm disappointed a little, lacking the burst of awe-inspiring energy that one would wish for.

There were a couple of novelties. Bizarrely, someone decided that it would be a good idea to place a potted tree in the middle of the stage behind the conductor, presumably to give us a nice countryside effect, and making it the first attempt I've ever seen at a semi-staged Beethoven symphony. I found myself wondering what they'd done with the sheep. More interesting was the layout of the orchestra. Instead of sitting in a row, the woodwind players were interspersed through the strings, with principal flute, clarinet and oboe in the front row close to the conductor, turning the piece into a sort of triple concerto. This resulted in a gorgeous blend of sound and may have inspired the wind players, who were certainly on top form.

Particularly in the Beethoven, the orchestra seemed relaxed, happy and thoroughly enjoying themselves. I got the clear impression that this performance was far better rehearsed than the norm, with every musician knowing exactly what was expected of them, and Fischer only making minor adjustments on the night. It was very impressive.

To finish, we were treated to generous encores in the shape of a Brahms Hungarian Dance (what else) and the Strauss Peasant Polka, played (and sung) with gusto. One audience wag likened it to 1930s beer garden music, but the vast majority entered into the spirit and enjoyed it thoroughly. The assembled dignitaries could not have asked for a better display of Hungarian musicianship.