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Wednesday, April 2, 2014

Let's carry on - on the EU budget

Everybody likes to get money. But not too many like to give. The masters of the EU (who are, contrary to common belief, still the member states) gave the Union a moderate financial framework (this is how the long term budget is called in EUspeak) and 2014 budget. The negotiations were relatively successful for Hungary - it remains the second-third most supported country in terms of net balance per capita or by share of GDP. So now the Hungarians should be happy, shouldn't they? Well, the EU funds are well "earmarked", at least the area where they could be spent, is defined.You cannot spend European Social Fund money for economic development or infrastructure, only if there is a social benefit, and cohesion funds also have certain goals to be adhered to and also limitations. Rules of spending, documentation and accounting are not so simple. Partly this is due to the conditionality, adherence to which has to be checked. There is, however space for simplification. Increasing the flexibility in using the funds both concerning eligibility criteria and administrative requirements in beneficial but this should be done in a way that the possibility of fraud should be avoided. On the other hand, in spite of the short-term temptations, the real interest of the country is to prevent that EU funds should be used to distort competition as on the long term this means loss to Hungarian competitiveness to richer countries. Hungary is interested in simplification and also in decoupling the EU budget from conjunctural changes and spirit fluctuations between member states, thus also in giving the EU genuine own sources, for example from a future financial transaction tax or energy tax. This has nothing to do with the extraordinary taxes introduced in Hungary and probably would require their abolition which would actually help the Hungarian economy. Work is in progress and finally sme member state control and also mechanisms to equalise temporary fluctuations can be expected. The condition of agreement of the European Parliament to a decreased budget was more flexibility in reassigning funds and also a review to see if increases are necessary. Hungary should carefully follow this review and support an increase in the budget - improvement of economic conditions can be expected and thus more could be made available - benefiting the recipient countries, Hungary among them. Inevitably there will be a question, what the additional funds should be used for. Part of the funds was made available already to the youth employment programme - if more Hungarian regions could benefit from increasing its amount and lowering the threshold where it can be used, it would address a burning problem.

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