Money comes, money goes: European Union subsidies in Hungary

Hungarian newspapers regularly report about widespread corruption in the country, amounting to billions of forints. But people complain that it is almost impossible for an ordinary mortal to comprehend just how large these numbers are. Reporters, they say, should “translate” these numbers into a language that the average Joe can grasp.

Péter Magyari of did just that in a recent article on subsidies coming from Brussels. According to his calculations, in the last twelve years Hungary has received a total of 12 trillion Hungarian forints (approximately 38.5 billion euros at today’s exchange rate) in subsidies. Indeed, the average Joe is right. That doesn’t tell us much. Perhaps it would help if we broke this incomprehensible number down into smaller units. What if we explain that in the last twelve years Hungary received 2.2 billion forints of financial assistance every day? Or, even better, let’s calculate in euros or dollars. This way, the daily bundle was more than 7 million euros or more than 8 million dollars. Day after day for 12 solid years. It doesn’t matter how you slice it, this is an incredible amount of money. And what is sad is that Hungary has so little to show for it. The subsidies have been wasted. A historic opportunity was missed.

Although breaking down the total into daily packages helps us comprehend the immensity of the economic aid, it is important to note that the distribution of subsidies has not been uniform over time. The bulk of this money has been spent since 2012, which has given a temporary boost to economic growth in recent years. The word “temporary” is key here. When at the end of the 2007-2013 cycle the government rushed to spend the money to which it was entitled so it wouldn’t lose it (it had until the end of 2015 to do so), and when, with the arrival of 2016, there would be no more EU subsidies for a while, economic growth stalled.

Hungary must be doing something very wrong even in comparison to the other countries in the region because, although the subsidies came to a halt at the end of last year in other countries as well, the economies of Poland, Slovakia, and Romania, for example, still showed healthy growth in the first quarter of 2016.

Some of the EU money was, of course, siphoned off as a result of corruption. But corruption is not unique to Hungary, although with the possible exception of Romania, Hungary has the reputation of being the most corrupt East European country within the European Union. And so corruption is most likely not the chief reason for Hungary’s less than sterling use of EU subsidies. The primary culprit is probably the allocation of these resources.

Of the EU money that went to the private sector, the construction industry, which employs a lot of low-skilled or unskilled seasonal workers for funded projects, got the lion’s share. Only 10% of small or medium-size Hungarian businesses received any EU money, and the little money they received was spent on equipment they already needed. Therefore, the subsidies did not spur business growth; they only saved the business owner money, money that he could then, as Magyari says, spend on a sailboat instead. This is one reason the sustainable growth the subsidies were supposed to generate didn’t materialize.

money falling

And Fidesz politicians and their oligarchs do carry it away in wheelbarrows

A lot of money was spent on useless frills. Everybody who follows Hungarian politics knows about all those main squares, which towns across the country fixed up on EU money. Also wasteful was money spent to run government institutions. European Union money was used to replace money the government didn’t want to spend on the education of its own citizens. The result is a dysfunctional educational system that has spawned dissatisfied teachers, students, and parents. In brief, a large portion of the money has simply been squandered. According to one estimate, perhaps one-eighth of all the EU investment will have some positive effect on the economy in the long run. It is of little solace that the effectiveness of the EU subsidies is low everywhere.

The best administered financial assistance program was the Marshall Plan, which was very small in size (120 billion in today’s dollars) in comparison to the massive amount of aid going to the lesser developed regions of the European Union. Comparing the Marshall Plan to the EU subsidies, one is struck by a substantial difference in implementation. Today, the government receiving aid makes its own decisions about how to spend the money. It is true that there are certain restrictions and the grants must be approved in Brussels, but oversight is minimal. In the case of the Marshall Plan, in each country there was a representative of the Economic Cooperation Administration, usually an American businessman, whose on-the-spot approval was required. I’m convinced that having a savvy businessman (not an economist) representing Brussels in each capital would have improved matters greatly.

Some people in fact go so far as to say that the East European countries would have been better off if they had received no financial assistance whatsoever. All that money, often coming in spurts, disrupts the normal functioning of the market economy, and it may induce a country to pursue a path that is not the best for its long-run health. There is another problem, which might be even more important. These subsidies keep up the appearance of growth, which in turn leads to indolence on the part of the decision makers. In Hungary’s case, serious economic reforms should have been introduced a long time ago, but the crutches the EU keeps offering have allowed governments to postpone them. And as long as the free money keeps arriving, we can’t expect any major change in economic policy and consequently any genuine economic growth.

June 9, 2016
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June 9, 2016 7:09 pm

London Calling!

The size of this ‘support’ beggars belief. And to realise that there has been very little oversight or auditing does too.

Brussel’s own accounts have not been audited for years – lest they show the true cost of corruption.

It’s no wonder that people over here want out.

As I’ve mentioned before, it’s the EU leaving us – not the other way round.

Many countries are sitting their hands waiting to see what happens with Brexit – as they too want out.

Meanwhile Hungary embezzles, steals, misappropriates……….

Btw – Britain only paid off its ‘Marshall- Plan’ loan in 2006!



June 9, 2016 8:03 pm

gross and net EU contributions to Hungary.

2000: 155.7- 0 = 155.7
2001: 195.2- 0 = 195.2
2002: 139.8- 0 = 139.8
2003: 189.7- 0 = 189.7,

2004: 713.4- 537.1 = 176.3, operating balance: 193.4
2005: 1357.0- 833.2 = 523.8, operating balance: 590.1
2006: 1842.2- 782.5 = 1059.7, operating balance: 1115.0
2007: 2427.6- 870.2 = 1557.4, operating balance: 1605.9
2008: 2002.6- 947.1 = 1055.5, operating balance: 1111.7

2009: 3568.6- 908.9 = 2659.7, operating balance: 2719.4
2010: 3650.0- 955.0 = 2695.0, operating balance: 2748.4
2011: 5330.9- 937.4 = 4393.5, operating balance: 4418.3
2012: 4177.1- 928.4 = 3248.7, operating balance: 3280.4
2013: 5909.8-1011.1 = 4898.7, operating balance: 4954.5
2014: 6620.2- 995.8 = 5624.4, operating balance: 5681.6

June 9, 2016 8:04 pm

in millions of euros

June 9, 2016 8:27 pm

2014. Operating balance as % of GNI

Net receivers:

Hungary 5.64%

Bulgaria 4.45%
Lithuania 4.38%

Poland 3.47%
Latvia 3.46%
Romania 3.09%

Greece 2.89%
Estonia 2.49%
Malta 2.35%
Slovenia 2.17%
Czechia 2.08%

Portugal 1.88%
Slovakia 1.37%

Cyprus 0.69%
Croatia 0.42%
Luxembourg 0.27%
Spain 0.10%

June 9, 2016 8:35 pm

Net contributors, as % of their GNI , in 2014:

Netherlands 0.71%

Sweden 0.52%
Germany 0.52%

Finland 0.40%
Austria 0.38%
Belgium 0.37%
France 0.33%
Denmark 0.32%

Italy 0.28%
UK 0.23% (cf BrExit debate )

Ireland was a net recipient in 2014:

June 10, 2016 9:37 am

Sorry to appear to split hairs, but is that % of GNI or GDP? I think it is probably GDP – the total income earned within Hungary by the people of all nationalities living in Hungary. GNI is the total of all the income of all Hungarian nationals, no matter where they live. Still amazing that Hungary receives the highest portion as a % of GDP.

June 10, 2016 12:06 pm

I checked my source – % of GNI, not GDP.

June 9, 2016 8:08 pm

Hi Eva,
One of the aspects of the analysis I didn’t like was the separation of corruption from the “self-serving investment” category. However if you look at it along the fiduciary responsibility – self-serving investments – corruption axis, the trends are unmistakable. The final conclusion just depends on where you draw the line between the latter two categories. The author clearly stayed on the side of caution.

While reading the article, couldn’t help but think of a joke about a sailor (must have been a Hungarian sailor!) and a mermaid (EU mermaid?):
Once the sailor cast his line he caught a beautiful mermaid. The mermaid pleaded the sailor:
– Dear sailor let me back to the sea and I grant three of your wishes
– All right, get me two shots of rum – sounded the first wish
So the mermaid gave him two shots that the sailor immediately sent down.
– Make the ocean made of rum! – sounded the second wish and so the mermaid did.
– What is your third and last wish? – asked the mermaid.
– Give me two more shots of rum! – ordered the sailor

June 9, 2016 8:58 pm

Generic scheme:

European taxpayers’ money —-> [phony tenders]
—-> Fidesz oligarchs
—-> privatized agricultural land, mass media & propaganda, real estate & offshore accounts.

June 9, 2016 9:11 pm

How ironic, it is the “liberal, democratic” EU that finances the re-feudalization of Hungary.

June 9, 2016 9:50 pm

The Fidesz super majority in the “National Election Committee” killed three anti-corruption referendum initiatives on June 9.

June 9, 2016 9:56 pm

Did Orban change sides in the spat between his oligarchs?

Csanyi, Demjan vs Speder

Polt ordered a police search at Speder’s bank.

June 9, 2016 10:02 pm

Will Speder make, (which he owns) part of the Fidesz propaganda machine?

June 10, 2016 12:39 am

The government may have spent billions on revamping city squares, and they worked hard on the number 1 tram line which circumnavigates the Hungária körút, the main ring road around the city, but the road itself is still in exactly the same appaling condition as ever.

We are not talking about a small city street, but the main artery of a capital city, linking and connecting almost all important transit points. After crossing over to Pest on the Árpád bridge, driving next to the nice new tram line, even large and heavy cars get tossed about on the roller coaster ride of waves (literally) in the tarmac. I simply scratch my head and wonder how the moneys from the EU ( which Orbán and Co have kindly left for municipal improvements) has been allocated?

So whoever decided that the tram line needed a facelift, failed to notice the main road on which it was running.

June 10, 2016 3:24 am

Not too much OT re roads and their usage:
Shouldn’t Hungary have introduced a city toll for Budapest by now under EU orders?

Maybe that would reduce the load on the roads – which really are abominable btw.
We only visit Budapest maybe twice a year to bring stuff to our young ones, never go into the center.
An now that we helped them buy a new apartment we’re happy because this is in the Western part of Buda so we can reach it without having to go near the Danube and its bridges which are always overcrowded.

When my sister went to Bp with their family, on my advice they also rented an apartment in the West (near the Gellert baths) on the right side of the Danube and used the metro and buses to get around …

Our new troll(s) seems to have disappeared again …

June 10, 2016 4:18 am

Wolfi7777: “without having to go near the Danube and its bridges which are always overcrowded.”

I do not know when you were there the last time? Unless there is something like road construction, cultural or sporting event around the Danube, traffic during weekdays is since 2009, is mostly like a Saturday in the period 1995-2010 including coming from road M1/M7.

June 10, 2016 5:03 am

Just a few weeks ago …
But of course we usually have to go “with the flow” in in the morning and out in the evening.
And even on Sundays there is a lot of traffic, ok I’m getting old and maybe am no longer accustomed to it.

Here at the Balaton in the “pensioner’s town” Hévíz life is quieter generally …

June 10, 2016 5:08 am

I would agree that traffic planning isn’t a Hungarian strong suite. That said, traffic isn’t all that bad for such a large urban area. And, a toll would infuriate the population as the city is missing infrastructure that makes the alternatives useful. And more bridges over the daube are definitely needed.

Fully connecting the M0 to the M1 in the north of Buda would be extremely helpful in diverting traffic away from the Center of the city. Parking needs to be added to all terminal points. Yes some terminal points have parking but it is very limited. Budapest is not Paris or London. In those cities you can get from one edge of the city to another in a reasonable timely fashion. This means that there would have to be an investment in extending and adding metro lines. Again we see constant and ongoing maintenance and improvements in London and other cities where as in Budapest this activity only seems to happen in the context of some mega project.

June 10, 2016 5:23 am

LwiiH:I fully agree with your statement, but I would like to add the following regarding the M0 connection.

Demsky Gabor rejected the idea of expanding the M0, and Fidesz (Tarlos included) suggested that Demsky lost it due to listening to the wrong people (the environmentalists).

The area were I live including the surrounding villages, people crave for this extension of the M0.

The other thing is that all villages in that area during that period were working together (including Fidesz) to get this extension. Until today nothing happened.

As to these transferiums, some were build (just a field prepared for parking), but there was no security, and therefore, theft was a major problem. If they had arranged security for HUF 100-200 per day per car, people would use it more often.

June 10, 2016 2:19 pm

Maybe I’m wrong but I remember hearing that the rich people living west of Bp did not want the motorway …

Actually we have a similar situation in/near Munich where there is only half a motorway ring around the town in the north – people living in the richer environs south didn’t want a motorway …
So to get from Ulm to Salzburg on our journey to Hungary we always have to take this detour north of Munich.

June 10, 2016 5:48 am

S&P does not plan to lift Hungary out of the junk status on July 8.

“Nearby Hungary has just had its ratings lifted back into the coveted investment grade bracket by Fitch.

S&P has kept it one notch below that grade at BB+, however, but with a stable outlook and questions over politics there too, Kraemer suggested it was unlikely to be following Fitch soon.

“The key factor holding back the rating now is the difficult predictability of policymaking, weakened institutional framework and maybe also the dependence on the transfers from the EU budget, which is very large.” ”

June 10, 2016 5:57 am

But Moody’s will probably do it on July 8.

June 10, 2016 7:46 am

Re: the Marshall Plan

In hindsight, it was a boon for war-torn Europe right after the war. All that aid surely helped Europe get its economy on its feet after the great destruction of infrastructure and institutions. Years later now in a supposed ‘unified’ conglomeration EU money looks flush in its distribution of doleouts to various countries. And the sucking sound indicates a wasted effort of money going down the European drain. In a way it is strange why European populations tolerate the waste since that money which goes to ‘mafias’ is based on their backs, working like dogs. Maybe time some in the EU to push for a ‘new deal’. They’re getting taken real bad.

June 10, 2016 8:41 am

The Marshall plan is one of the United States greatest achievements, in part because General George Catlett Marshall, Jr. was so brilliant in logistics. Probably only General Robert E Lee was a better rapid organizer of military forces in the history of US ground forces. In my military science classes we studied General Marshall’s book Infantry in Battle and it is still used today to train US Army officers.

The General was criticized for his rapid basic training program during WWII that many officers believed lead to the needless deaths of many draftees, but his strategy got men into the field and broke the back of the Nazi war machine. He has also been criticized for poor planning in the defense of Pearl Harbor leading up to the Japanese attack. ( see a US Army War College study at )

The definitive book on the Marshall plan is Greg Behrman”s The Most Noble Adventure and can be ordered in a kindle edition.

June 10, 2016 10:14 am

Re: Marshall…’brilliant in logistics

Yes ( he knew armies move too as well on their stomachs) and I believe he was the right man at the right time and the right place in the prosecution of the war. He appeared to be more right than wrong in his selection of fighting Army leaders. It’s too bad Magyarorszag couldn’t have had someone like him in the upper ranks prior to outbreak of war. Considering his character he arguably could have lent at least a different perspective in the path Magyarorszag was soon to take.

I think we here in the present now look on to some results occurring in a country which experienced and fought a war with leaders who arguably plunged into life on a journey to eventually becoming criminals and borderline psychopaths and sociopaths. And the latter , even if they are dead, unfortunately in various ways still haunt the country. Magyarorszag today still is paying for taking chances.

June 10, 2016 2:07 pm

We Germans (of course only in the West …) profited enormously from the Marshall plan. I used to work as a consultant for the institution that managed that money and the main point was:
Those were loans and as they were paid back the money was reinvested in new loans …
On 5 June 1947 the American Secretary of State George Marshall announced an economic reconstruction programme for Europe. The “European Recovery Programme”, known as ERP for short, speeded up German and European reconstruction considerably. Thanks not only to its obvious successes, but also to some vigorous PR work, the Marshall Plan also became a legend – responsible for Germany’s “economic miracle”.
And of course it helped enormously in (re)establishing democracy!

June 10, 2016 2:41 pm

Why pity Hungaricoes?
What they have done is tantamount to the citizens of New York State voting in the mafia to rule. And, after four years, they renew the association!

How much stupider can you get?

How much more Hungarian?


June 11, 2016 10:10 pm

Fidesz has zero interest in Hungary’s long term health, the facade they portray is crumbling.

They are leech’s blatently sucking international funds directly from the EU.
Artificially manipulating tender bids, agricultural land grabs, MOL. Extreme property speculation in Budapest, mis-appropriation of pubic money on an industrial scale etc.

The names and the evidence are in plain sight.

International oversight and investigation is required.

Independent checks and balances don’t exist now, within Hungary’s borders.