As always, Hungarian Spectrum welcomes democratic voices from and about Hungary. Today András Lukács, President of the Hungarian NGO Clean Air Action Group (Levegő Munkacsoport) and Board Member of Green Budget Europe, presents his opinion, in the wake of the Brexit referendum, of the role of EU funds in the rise of Eurosceptism. He also offers some possible solutions.
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The results of the Brexit referendum strengthened the conviction of all those who think that profound changes in the European Union are necessary to stop and reverse the rise of populist parties with Eurosceptic and, in some cases, even Europhobic agendas. It is hardly an unfounded opinion that if the governance of the EU is not changed radically, then even the mere existence of the EU is put at risk.
One of the main drivers of Eurosceptism is the way EU money has been used. It is telling that, according to a recent representative opinion poll, 61 percent of those surveyed in the Czech Republic, a net recipient of European funds, believe that the EU member countries should get along financially by their own means, i.e. wealthy member countries should not support poorer ones. I know of no similar survey in Hungary, but I do know that there is a widespread opinion here that EU money has led to serious problems. Many are even convinced that EU funds cause more harm to the country than good. For example, speaking at a conference in May this year, Zsombor Essősy, CEO of MAPI Hungarian Development Agency Corp., “The Expert of EU and Domestic Funds” (as it is described on MAPI’s website), stated the following: “If our country spends EU money following the present trends and framework, this might cause the biggest tragedy of Hungary.”
According to a detailed study on the topic by Hétfa Alapítvány, the use of EU money in other countries does not seem to be more efficient than in Hungary. Having spoken to quite a few people dealing with the issue in other net recepient countries, I am not surprised by this conclusion.
Along with others, our organization, the Clean Air Action Group (Levegő Munkacsoport), analyzed the reasons for such a perverse use of EU money. Here I will summarize just a few of these reasons, described in detail in our report.
EU funds are distributed to companies in a way that seriously distorts the market. Many companies make an enormous effort to receive as much EU money as possible in order to gain a competitive advantage, instead of improving their products or services. This situation is also a serious threat to democracy because practically no business group would be willing to criticize the government for fear of not receiving public money.
A substantial amount of EU money has been spent to support the construction of new hotels. Even the Hungarian Hotel Association expressed strong criticism of state subsidies for hotel construction, emphasizing that existing hotels often struggle for survival. Such results of EU funding are characteristic not only of the hotel industry but practically all sectors of the Hungarian economy. Photo by András Lukács
The present system of distributing EU funds is also a hotbed of corruption. Free money irresistibly attracts all those looking to get rich (or much richer) within a short time by illegal or semi-legal means. These circles do everything they can to capture the national and local governments, and, as practice proves, they often succeed. (This has been described in detail, for example, in studies by Transparency International Hungary.)
Another driving force behind the ill use of EU money is the endeavor of the government to spend every last cent, rendering the efficiency of spending much less important. Coupled with corruption and other factors, this leads—among others—to investments that are not really necessary, or do not represent the most efficient way to spend public money in a given period of time. Furthermore, even if the investment can be justified and even if there is no corruption behind it, it is often implemented in a very wasteful manner because it is financed with “free money.”
A new brandy distillery built with EU money. A World Health Organisation report (as summarized by 247wallst.com) states: “No country had a higher rate of alcohol use disorders than Hungary, where 19.3% of the population abused alcohol in some form. As many as 32.2% of Hungarian men and 6.8% of women suffered from alcohol use disorders, the highest among countries reviewed.” Photo by András Lukács
In our report, besides describing the situation, we also made concrete proposals to the European Commission and governments of EU member states to remedy the situation. The main points are the following.
In the Treaty of Accession, all EU member states declared: “Our common wish is to make Europe a continent of democracy, freedom, peace and progress. The Union will remain determined to avoid new dividing lines in Europe and to promote stability and prosperity within and beyond the new borders of the Union. We are looking forward to working together in our joint endeavor to accomplish these goals.” In our understanding, this means that all member states will improve their legislative and institutional systems as much as possible in order to achieve these goals, but at least they will refrain from any backward measures. Therefore, it must be stipulated that member states repeal all legislative and institutional measures that have been adopted by the given member state since its accession to the EU that contradict the principle of non-retrogression as far as “working together in our joint endeavor to accomplish these goals” is concerned.
The European Commission must demand that the Hungarian government implement all possible best practice measures within a reasonable time to reduce corruption and other malfeasances. In our opinion, this is a measure that would fully comply with EU legislation. The European Parliament also called for measures “to be implemented right across the spectrum of EU policies, and for action not just in response to cases of fraud but also to prevent them.”
The Commission should require strict implementation of the European code of conduct on partnership in the framework of the European Structural and Investment Fund. According to the code, the governments of the member states must closely cooperate with “bodies representing civil society at national, regional and local levels throughout the whole program cycle consisting of preparation, implementation, monitoring and evaluation.” However, the Hungarian government has been doing just the opposite.
The fulfilment of the National Reform Program (NRP) and of the Country-Specific Recommendations (CSRs) should be the main criteria for the assessment of the efficiency of the use of EU funds, and not the success or failure of individual projects or groups of projects. The European Commission should strictly control the former, and not the latter. (The NRP is a document that presents the policies of the member country, which aim to achive the targets set forth in the EU’s Europe 2020 Strategy. The CSRs are the yearly assessments by the Commission on the progress of each member state towards achieving these targets, and they include recommendations for improving the country’s performance.) The NRPs and CSRs are approved by the governments of the member countries as well, thus they are binding commitments for these governments. In spite of this, the Hungarian government is generally doing just the opposite of what it committed itself to in these documents. This is well known to the European institutions concerned; for example, an assessment by the Economic Governance Support Unit of the European Parliament came to the conclusion that in 2014 only Bulgaria and Hungary made no meaningful progress in implementing any of the recommendations.
The EU should give all EU funds, destined for national purposes, directly to the national governments, without any requirements for the precise use of these funds, i.e. each national government should decide that for itself. On the other hand, in the event that a country does not comply with the above requirements, EU funding must be partly or completely suspended until it comes into full compliance. We believe that this is not only legally possible even today, but it is an explicit duty of the European Commission: according to EU legislation it is the Commission’s task to protect the EU’s financial interests.
I strongly believe that it is absolutely necessary to provide EU funds to the less developed member states with the goal of improving their economic well-being as well as their political stability in order to strengthen the EU as a whole and to make it more competitive globally. But EU taxpayers’ money must be used for this purpose, not against it.