Thank you gentlemen, that provides the answer - the balloon has to be fitted with a transponder AND radio contact with an ATC agency required to conduct this flight.
On a more general note, what happens if a balloon looks as if it will penetrate an airway. Do ATC ensure that doesn't happen by telling the balloon to descend below it?
If transponder fitted, I guess they must also carry altimeters for the Mode C.(forgive my ignorance, never been up in one).