Has all been said? I am afraid, almost all has - at least about important issues. But maybe a lot only in Hungarian - although never has been Hungary as much in the news as nowadays. But small things are as annoying as anything: that the "government" tv shows the Krishna community distributing food for the needy and then shows the account number of another foundation (close to the government). The Krishna community, by the way, was illegally established under communism, by an emigree who was smuggled into Hungary in women's clothes. The introduction of a Suzuki (the factory is situated in the community where the ex-mayor from FIDESZ did not want to cede power to the newly elected independent and the FIDESZ group in the communal assembly is making the work of the new mayor impossible) destined for handicapped which is not a special version and eliminating from the interview with the president of the association of the handicapped all criticism he voiced.
A letter from the prime minister to the public servants offering them the possibility to take out a subsidised loan to repay their forex-based credits at a fixed exchange rate, calling the loans forex-covered loans, with further grammatical errors and some further queer statements.
The chief whip of FIDESZ in parliament and mayor of Hungary's most indebted city (who had an equipment on his luxury car bought from public money which blocks police speeding indicators) writing a letter to thee bank who lent in Swiss francs to his ciy threatening with new legislative instruments against them if they do not take over part of their exchange losses.
The serious questions remain: who will stop this amok? And how can this be stopped without causing immense pain to the people of Hungary and without enabling the hard core of the right to show it as foreign intervention against the interest of the Hungarians? The two requirements are actually in contradiction with each-other: the bigger the pain in the country, the smaller the credibility of the present policy and thus the smaller the convincing power of the arguments that it was foreign speculation and intervention which made the "freedom fight" of the government to fail.
So those who want to change, have to tread carefully: search those internal forces - even within FIDESZ - who could stop this (I could not find a politically correct expression here).
Saturday, December 31, 2011
Saturday, December 24, 2011
Christmas upheavals
A lot hsa been written about the events with the IMF? the EU and around parliament. I may come back to this, but for now something I discovered during reading about them and which may help to step one step back and maybe r-think certain things: Michel Sandel on justice
Monday, December 12, 2011
The European council decisions
Too much has been said about the no/maybe/yes/I will ask the Parliament response of the Hungarian prime minister to the new Euro pact.
He had one good remark in the runoff to it: he sad that an intergovernmental solution to the problem is not a good one. But the reason of his "naysaying" was not that. He expressed quite a couple of times that he wants to retain the possibility of Hungary to make tax competition to the other European states (see the part on the Euro-plus pact in my previous post How did the Hungarian presidency do?).
The reference to the need for a parliamentary approval also is a pretext only, there is no need for that in case of a Council declaration - ratification of treaties comes after the signature by the heads of government and state and this is not even a treaty yet. Ms Merkel, who needs that, had the discussion in the Bundestag before going to the Council meeting (which can also be called summit, see later).
But in the conundrum about Britain's "no", the two references to the need to have the parliaments approve (Sweden and the Czech Republic) the Hungarian reaction mostly went unmentioned by a lot of commentators. But what was totally forgotten, was what the way the decision will be implemented, means for the EU.
A little off: a lot was said before what Germany and what France wanted, among others in the debate of the Bundestag, so it was no surprise for anybody. But Merkel mentioned there more important changes she wanted to achieve with a change to the Treaties (the legal framework of the EU) - a step towards more intergovernmentalism - powers for the Council and the European Parliament to propose legislation, which now is the privilege of the Commission. She did not directly succeed in that. An indirect blow was, however suffered by the present decisionmaking structures of the EU: the changes will be implemented by intergovernmental treaties instead of a change to the Treaties of the EU themselves. And thus, a precedent was set to circumvent the existing legal framework. Of course, a change to the treaties would have needed a referendum, in particular in Ireland and the U.K. (well, the U.K. failed to agree anyway...) while international treaties are normally ratified by the national parliaments only. That is actually why this Council meeting is also a summit.
So wait and see, what will happen.
Do the governments want the Commission to be the executive organ also behind this system, i.e. check and sanction the implementation of intergovernmental treaties - what will be the legal base for that? If the Commmission accepts, will it be an increase of its powers or the acceptance of the start of (no, not of a beautiful friendship à la "Casablanca") a new decision mechanism in the EU which is paralel to the one which exists? Or will the Council organisation be enhanced for that and thus really create paralel structures - the six point economic package has just entered into force and will immediately get competition?
He had one good remark in the runoff to it: he sad that an intergovernmental solution to the problem is not a good one. But the reason of his "naysaying" was not that. He expressed quite a couple of times that he wants to retain the possibility of Hungary to make tax competition to the other European states (see the part on the Euro-plus pact in my previous post How did the Hungarian presidency do?).
The reference to the need for a parliamentary approval also is a pretext only, there is no need for that in case of a Council declaration - ratification of treaties comes after the signature by the heads of government and state and this is not even a treaty yet. Ms Merkel, who needs that, had the discussion in the Bundestag before going to the Council meeting (which can also be called summit, see later).
But in the conundrum about Britain's "no", the two references to the need to have the parliaments approve (Sweden and the Czech Republic) the Hungarian reaction mostly went unmentioned by a lot of commentators. But what was totally forgotten, was what the way the decision will be implemented, means for the EU.
A little off: a lot was said before what Germany and what France wanted, among others in the debate of the Bundestag, so it was no surprise for anybody. But Merkel mentioned there more important changes she wanted to achieve with a change to the Treaties (the legal framework of the EU) - a step towards more intergovernmentalism - powers for the Council and the European Parliament to propose legislation, which now is the privilege of the Commission. She did not directly succeed in that. An indirect blow was, however suffered by the present decisionmaking structures of the EU: the changes will be implemented by intergovernmental treaties instead of a change to the Treaties of the EU themselves. And thus, a precedent was set to circumvent the existing legal framework. Of course, a change to the treaties would have needed a referendum, in particular in Ireland and the U.K. (well, the U.K. failed to agree anyway...) while international treaties are normally ratified by the national parliaments only. That is actually why this Council meeting is also a summit.
So wait and see, what will happen.
Do the governments want the Commission to be the executive organ also behind this system, i.e. check and sanction the implementation of intergovernmental treaties - what will be the legal base for that? If the Commmission accepts, will it be an increase of its powers or the acceptance of the start of (no, not of a beautiful friendship à la "Casablanca") a new decision mechanism in the EU which is paralel to the one which exists? Or will the Council organisation be enhanced for that and thus really create paralel structures - the six point economic package has just entered into force and will immediately get competition?
Sunday, December 4, 2011
Extraordinary taxes covering government mistakes
The law about the transitional rules of the coming into force of the new constitution contain - beyond the controversial pseudo-historic tirades about the guilt of the communist party (Hungarian Socialist Workers' Party) and that the Hungarian Socialist Party shares these guilts, contains a small hidden paragraph: If as consequence of a judgement of the European Court of Justice or the Constitutional Court a payment obligation is arising, a specific tax can be levied and the receipts of this tax can only be used to pay this obligation.
The latter phrase is intended to give a fair countenance to the new tax. Let's go a little beyond the plausible (and somewhat populist) argument, that this means that the government can have the people pay for its errors, and let us go a little deeper.
A tax is a contribution from a certain group of people or organisations to the common tasks (of the government or the municipalities). It is based on an income or a property of the taxable person (but can be a flat tax per person). It can reasonably be expected that the tax base is in correlation with the benefit which the taxable person draws from the service the tax is financing (of course this is very theoretical but local taxes are, for example, based on the revenue or property in a certain locality)
The new basic law actually replaced the term "proportional to property and income relations" by "according to the capability of bearing the load" in the part about taxation. This means that as long as someone is able to pay the tax, that person can be taxed even if another, better off person will not be taxed accordingly.
So who will be the subject of this tax? Those who brought the case in question to the court? Or those who can profit from the court judgement, thus neutralising the effect of the judgement? Dangerous questions.
It is even more difficult to find out what the tax base will be. If it will be a flat tax, it can hurt even the stipulation of capacity which replaced proportionality. And by the way, what will happen to the amount not needed to cover the payment obligation? Or will they just collect this amount: OK, we have to pay x forints (if euros, the exchang rate will also distort the picture), we want y people to pay for it, so everybody pays x/y?
One example: a judgement is already here: the deductible VAT cannot be retained till the invoice on which the tax is accruing, has been paid. This will meant about one to two hundred billion forints (about 350 to 700 million Euro) of payment for the state. This, however, is mostly just brought forward, when we assume that these invoices will be paid. But it is realistic to assume, given the dear state of state finances, that a levy may be raised for that. Who will be the subjects? All who reclaim VAT have to pay 2% of the amount reclaimed into the budget? I am afraid more bizarre ideas will originate in governmental heads.
More dangerous is the political effect: the government can always stigmatise those who go to court to avoid any, however unjustified measure: The people have to pay an extra tax because they went to court (if the measure is justified, it is reasonable to assume the court will approve it).
The latter phrase is intended to give a fair countenance to the new tax. Let's go a little beyond the plausible (and somewhat populist) argument, that this means that the government can have the people pay for its errors, and let us go a little deeper.
A tax is a contribution from a certain group of people or organisations to the common tasks (of the government or the municipalities). It is based on an income or a property of the taxable person (but can be a flat tax per person). It can reasonably be expected that the tax base is in correlation with the benefit which the taxable person draws from the service the tax is financing (of course this is very theoretical but local taxes are, for example, based on the revenue or property in a certain locality)
The new basic law actually replaced the term "proportional to property and income relations" by "according to the capability of bearing the load" in the part about taxation. This means that as long as someone is able to pay the tax, that person can be taxed even if another, better off person will not be taxed accordingly.
So who will be the subject of this tax? Those who brought the case in question to the court? Or those who can profit from the court judgement, thus neutralising the effect of the judgement? Dangerous questions.
It is even more difficult to find out what the tax base will be. If it will be a flat tax, it can hurt even the stipulation of capacity which replaced proportionality. And by the way, what will happen to the amount not needed to cover the payment obligation? Or will they just collect this amount: OK, we have to pay x forints (if euros, the exchang rate will also distort the picture), we want y people to pay for it, so everybody pays x/y?
One example: a judgement is already here: the deductible VAT cannot be retained till the invoice on which the tax is accruing, has been paid. This will meant about one to two hundred billion forints (about 350 to 700 million Euro) of payment for the state. This, however, is mostly just brought forward, when we assume that these invoices will be paid. But it is realistic to assume, given the dear state of state finances, that a levy may be raised for that. Who will be the subjects? All who reclaim VAT have to pay 2% of the amount reclaimed into the budget? I am afraid more bizarre ideas will originate in governmental heads.
More dangerous is the political effect: the government can always stigmatise those who go to court to avoid any, however unjustified measure: The people have to pay an extra tax because they went to court (if the measure is justified, it is reasonable to assume the court will approve it).
Wednesday, November 23, 2011
What is the use of the IMF for Hungary
Looking at the path the Hungary has followed, it appears that turning to the IMF is just the continuation of a strategy, however abrupt a change it seems to be. By distancing i tself from the IMF the government got the necessary freedom of maneuvre to take the steps necessary to build its power base, occupy all institutions and prepare to make the next government a lame duck using the occupied positions. Also, it benefited from some "non-orthodox" steps and thus installed the mechanisms to favour its clientele and the party itself in distributing the financial resources of the budget. This almost brought the coutry to the brink. The sole announcement that it re-starts negotiations with the IMF has stopped the free fal of the forint and may enable the financing of the budget, independently whether an agreement will arrive or not. By this, the consequences of its past steps can be avoided - if not, Hungary is worse off also.
Another way to avoid consequences is a sentence hidden in the law containing the transitional regulations for the new Constitution. This law has been submitted to the Parliament by two members - I may return to this in a later post.
Another way to avoid consequences is a sentence hidden in the law containing the transitional regulations for the new Constitution. This law has been submitted to the Parliament by two members - I may return to this in a later post.
Wednesday, August 17, 2011
What some recent numbers tell about Hungarian education
According to a publication on Hunagrian education (2009 data), in Hungary, 84 percent of the 20-24 years old population has completed at least upper-secondary education (grammar school or vocational secondary school) compared to 78.6% in the 27 EU member states.
Early leavers (population aged 18-24 years with at most lower secondary education – equivalent to the classes 5-8 of the 8-years primary school - and not in further education and training) are 11.2% compared to the EU-27 average of 14.4%.
In the population between 25 and 64 years, Hungary has a high proportion of upper-secondary (grammar school or vocational secondary school) and post-secondary graduates (61 versus the Eu average of 47 %). The proportion of both lower and higher education is lower than in the EU overall.
Source: Spotlight on VET, Hungary, European Centre for the Development of Vocational training http://bookshop.europa.eu/en/spotlight-on-vet-pbTI3111147/downloads/TI-31-11-147-EN-C/TI3111147ENC_002.pdf?FileName=TI3111147ENC_002.pdf&SKU=TI3111147ENC_PDF&CatalogueNumber=TI-31-11-147-EN-C
Some recent results of the PISA tests also show an interesting picture. Just one graph from the EC press release:
Some recent results of the PISA tests also show an interesting picture. Just one graph from the EC press release:
Percentages of low-achieving 15 year-old students in reading (2009)
Source: OECD, PISA 2009 database
Hungary has slightly higher proportion of low achievers than the EU target but lower than the EU average and scores better than its neighbours.
These figures raise interesting questions concerning the educational concept and changes in the school system:
Did the reforms yield a result in spite of scepticism? Hungarian students scored significantly better in the last two PISA tests than before. In the first one, two years age, the area investigated was one where Hungarians usually scored better (technical and scientific) but the latest one (late 2010) did show a significant improvement in areas where we did not score well before.
Is it justified to decrease the number of students in higher education? Are we really over-qualified?
Will the decrease of compulsory education age limits improve the rate of early school leavers (which is not high even with the present limit) or ont he contrary, yield more pupils who leave school without finishing their education to a level where they can find their place on the labour market?
Monday, August 8, 2011
Court of Justice detects flaw in Hungarian VAT system
The European Court of Justice decided in its judgment in Case C-274/10 that the Republic of Hungary has failed to fulfil its obligations under Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax - by requiring taxable persons whose tax declaration for a given tax period records an ‘excess’ within the meaning of Article 183 of to carry forward that excess or a part of it to the following tax year where the taxable person has not paid the supplier the full amount for the purchase in question, and
– because, as a result of that requirement, certain taxable persons whose tax declarations regularly record such an ‘excess’ may be required more than once to carry forward the excess to the following tax year,
More precisely, Hungary has exceeded the limits of the freedom available to the Member States under Article 183 which allows the Member States to lay down conditions for the refund of a deductible VAT excess.
What is this about? One way of VAT fraud is when the seller does not pay the VAT which is claimed by and refunded to the buyer. In these cases sometimes the buyer does not pay the seller. The first Orbán government decided that one way to counter this is not to enable actual payment of the VAT reclaimed if the buyer did not pay the seller. The amount can be deducted from VAT payable, the excess being carried over to the next period (which can be the next month, the next quarter or the next year, depending on the amount of VAT payable by the company over the previous year – exceptions to shorten the period are difficult to get), Thus, companies having one big purchase (usually investing) can in some cases have to wait a year or more till the get the VAT back.
This of course addressed only a marginal aspect of the problem as in VAT fraud it is often the seller which then vanishes with the money. This regulation put actually investors and leasing companies (who invest in goods and thus have immediately a claim to reimbursable VAT to lease them out where their income comes over time) and also their lessees (who only pay in installments and were thus not able to get even the VAT of the first large installment repaid) in a difficult position. After a discussion between the Ministry of Finance and the Leasing Association the problem was partially solved (in this case reimbursement can be made if the amount of the VAT is paid which leaves only lessees who pay a first installment below 20/% out in the cold).
The complaint of sellers, which could also be the basis of the rule, namely that if they do not receive the payment, it is difficult to pay the VAT (and thus this rule could improve payment discipline) could actually have been solved based on Article 66(b) of the Directive which allows that a Member States makes VAT chargeable, in respect of certain transactions or certain categories of taxable person no later than the time the payment is received. However, the Republic of Hungary has not claimed to have made use of that possibility (point 50 of the judgment).
The Court of Justice found that this rule infringes the fiscal neutrality of the VAT system: "such conditions must enable the taxable person, in appropriate circumstances, to recover the entirety of the credit arising from that excess VAT. This implies that the refund is made within a reasonable period of time by a payment in liquid funds or equivalent means, and that, in any event, the method of refund adopted must not entail any financial risk for the taxable person" (point 45 of the judgment).
It must be noted that no deadline has been set for changing this rule. It is also clear that the main problem highlighted by the Court was that there was no assurance that the tax will be recovered and when it can be recovered (the taxable person may have to carry forward the excess several periods giving rise to an uncertainty and a long delay).
Point 55 of the judgment states: "In that regard, it must be borne in mind that the carrying forward of a VAT excess over several tax periods following that in which the excess in question arose is not necessarily irreconcilable with the first paragraph of Article 183 of Directive 2006/112 (see, to that effect Enel Maritsa Iztok 3, paragraph 49). However, given that the national legislation at issue provides for tax periods from one month to a year in length, it may create a situation in which certain taxable persons, do not, because of the repeated carry-over of an excess, obtain a refund of that excess within a reasonable period."
So the consequence is not - as it is hinted by several articles in the news - that the amount of VAT has to be repaid immediately to everybody who has an outstanding claim, but the time to refund has to be limited to a reasonable and foreseeable extent and the conditions have to be in accordance with the VAT directive.
Of course, from this moment on, VAT subjects can request the refund of their excess VAT in their first VAT return. The judgment of the Court gives them the assurance that they are acting correctly. Although in general, European directives are not directly applicable, the member states have to transpose them into their national legislation and the national legislation is applicable, the judgment of the Court of 19 January 1982 in the case 8/81, (Ursula Becker v Finanzamt Münster-Innenstadt) enables direct applicability of the directives if the provisions of a directive "appear, as far as their subject matter is concerned, to be unconditional and sufficiently precise, those provisions may, in the absence of implementing measures adopted within the prescribed period, be relied upon as against any national provision which is incompatible with the directive …". And this can be done by all those who still have recoverable VAT which has not been paid to them based on the provision of the Hungarian VAT law which was annulled by the Court. If they do not request it, however, then they have to wait till the Hungarian Parliament modifies the tax law - ideally the modification should contain transitional provisions on the cases in progress.
– because, as a result of that requirement, certain taxable persons whose tax declarations regularly record such an ‘excess’ may be required more than once to carry forward the excess to the following tax year,
More precisely, Hungary has exceeded the limits of the freedom available to the Member States under Article 183 which allows the Member States to lay down conditions for the refund of a deductible VAT excess.
What is this about? One way of VAT fraud is when the seller does not pay the VAT which is claimed by and refunded to the buyer. In these cases sometimes the buyer does not pay the seller. The first Orbán government decided that one way to counter this is not to enable actual payment of the VAT reclaimed if the buyer did not pay the seller. The amount can be deducted from VAT payable, the excess being carried over to the next period (which can be the next month, the next quarter or the next year, depending on the amount of VAT payable by the company over the previous year – exceptions to shorten the period are difficult to get), Thus, companies having one big purchase (usually investing) can in some cases have to wait a year or more till the get the VAT back.
This of course addressed only a marginal aspect of the problem as in VAT fraud it is often the seller which then vanishes with the money. This regulation put actually investors and leasing companies (who invest in goods and thus have immediately a claim to reimbursable VAT to lease them out where their income comes over time) and also their lessees (who only pay in installments and were thus not able to get even the VAT of the first large installment repaid) in a difficult position. After a discussion between the Ministry of Finance and the Leasing Association the problem was partially solved (in this case reimbursement can be made if the amount of the VAT is paid which leaves only lessees who pay a first installment below 20/% out in the cold).
The complaint of sellers, which could also be the basis of the rule, namely that if they do not receive the payment, it is difficult to pay the VAT (and thus this rule could improve payment discipline) could actually have been solved based on Article 66(b) of the Directive which allows that a Member States makes VAT chargeable, in respect of certain transactions or certain categories of taxable person no later than the time the payment is received. However, the Republic of Hungary has not claimed to have made use of that possibility (point 50 of the judgment).
The Court of Justice found that this rule infringes the fiscal neutrality of the VAT system: "such conditions must enable the taxable person, in appropriate circumstances, to recover the entirety of the credit arising from that excess VAT. This implies that the refund is made within a reasonable period of time by a payment in liquid funds or equivalent means, and that, in any event, the method of refund adopted must not entail any financial risk for the taxable person" (point 45 of the judgment).
It must be noted that no deadline has been set for changing this rule. It is also clear that the main problem highlighted by the Court was that there was no assurance that the tax will be recovered and when it can be recovered (the taxable person may have to carry forward the excess several periods giving rise to an uncertainty and a long delay).
Point 55 of the judgment states: "In that regard, it must be borne in mind that the carrying forward of a VAT excess over several tax periods following that in which the excess in question arose is not necessarily irreconcilable with the first paragraph of Article 183 of Directive 2006/112 (see, to that effect Enel Maritsa Iztok 3, paragraph 49). However, given that the national legislation at issue provides for tax periods from one month to a year in length, it may create a situation in which certain taxable persons, do not, because of the repeated carry-over of an excess, obtain a refund of that excess within a reasonable period."
So the consequence is not - as it is hinted by several articles in the news - that the amount of VAT has to be repaid immediately to everybody who has an outstanding claim, but the time to refund has to be limited to a reasonable and foreseeable extent and the conditions have to be in accordance with the VAT directive.
Of course, from this moment on, VAT subjects can request the refund of their excess VAT in their first VAT return. The judgment of the Court gives them the assurance that they are acting correctly. Although in general, European directives are not directly applicable, the member states have to transpose them into their national legislation and the national legislation is applicable, the judgment of the Court of 19 January 1982 in the case 8/81, (Ursula Becker v Finanzamt Münster-Innenstadt) enables direct applicability of the directives if the provisions of a directive "appear, as far as their subject matter is concerned, to be unconditional and sufficiently precise, those provisions may, in the absence of implementing measures adopted within the prescribed period, be relied upon as against any national provision which is incompatible with the directive …". And this can be done by all those who still have recoverable VAT which has not been paid to them based on the provision of the Hungarian VAT law which was annulled by the Court. If they do not request it, however, then they have to wait till the Hungarian Parliament modifies the tax law - ideally the modification should contain transitional provisions on the cases in progress.
Tuesday, August 2, 2011
Voting patterns in the European Parliament - Hungarians among the illoyals
Do members of the European Parliament (MEPs) vote according to their national interests or their party affiliation? My experience which draws on reading a number of committee amendment proposals to legislation, suggests that professional convictions also play a significant role. On the other hand, decision-making is largely consensual, so the differences in opinion are not necessarily visible in the votes.
The voting behaviour in the EP was subject to two analyses recently:
The Robert Schuman Foundation of France published a two-part report (http://www.robert-schuman.eu/question_europe.php?num=qe-189 and http://www.robert-schuman.eu/ question_europe.php?num=qe-190 while VoteWatch, an independent monitoring organisation, which collects and publishes interesting statistics on its website and also regularly reports on voting behaviour investigated in the first semester of 2011 the dynamics of voting behaviour in the three largest groups in the European Parliament. Their results were also reported in European Voice, a weekly on European affairs. The full report on power in the EP covers the period between 2009 and 2011. I draw the conclusions below from these two reports.
On the website of VoteWatch, also the loyalty of individual members is investigated and it can be seen that their loyalty is above 90% both with their party group and their national majority. This supports the idea outlined above that voting is largely consensual. One more factor has to be kept in mind: there are a number of votes which are not roll-call, so the voting behaviour in them cannot be analysed. This was the case when the motion about the new Hungarian Constitution was voted upon. The evaluation of the politics of the Hungarian government is one of the most controversial issues under discussion (you could even say that the FIDESZ party could polarise the European Parliament to an unprecedented level as they did so already with Hungarians). The vote was won with more than 50% of those present, 331 votes. Although this is mathematically possible without any EPP (to which FIDESZ belongs) vote, the proportions indicate at least that the EPP, the ECR (another centre-right, somewhat more eurosceptic grouping), the eurosceptics and the far right could have blocked the resolution.
Roll call votes can be initiated by the party groups and are usually enhancing
voting discipline but - in case of a difficult decision, can also lead to MEPs not voting, writes the Schuman foundation. Thus, there is no regularity in which question is put to a roll call vote and which one is not. Roll call votes are about one third of the total voting procedures. Since 2009, however, all legislative proposals must be approved by roll call voting (according to the internal regulations of the European Parliament.
Based on 16 votes in the first year of the legislative 2009-2014, the Schuman
foundation concludes in general that the right-left divide plays a smaller role in the European Parliament than on national level, as it coexist with the national affiliations, its role is increasing. There is also another divide: those who favour and those who oppose the enhancement of European integration. This line of course also extends between parties but is still not the same.
There is another trend: increase of the power of the Parliament through the Lisbon treaty has - in the opinion of the foundation - led to an increase of the role of national interests in voting.
The mixture of national and party (ideological) affiliations can lead to strange phenomena: European Voice concludes, for example, that French, Italian and Hungarian delegations in the centre-right EPP are more aligned with the S&D (social-democrat) group than other national delegations. "Among the seven largest national party delegations in the EPP, the Hungarian FIDESZ has voted with the majority least often (95%)." states the VoteWatch report. The biggest deviation was in the area of agriculture, where FIDESZ voted only 69% of the time with the rest of the group. On the other hand: "In the EPP, the highest degree of similarity in voting behaviour between leaders of the largest national party delegations has been between heads of the Polish and the Hungarian delegations." writes the report. European Voice also mentions environment and public health as points of dissent. The Hungarian delegation in other political groups is small and thus their behaviour is not analysed.
As there is no political group with absolute majority, coalitions have to be formed. These are nicely described in European Voice. The consequence I want to mention here is that the liberals seem to tilt the balance in many cases and they were the ones who were on winning side of votes the most frequently.
European Voice also draws conclusions on the dominance of some national delegations in the main political groups. The EPP and the S&D are dominated by the Germans. They form the right wing of the group, together with the Spanish Partido Popular. In the S&D group, the British - being to the right in the group - vote less with the group (this, however, still means 90% loyalty). The influence of the German FDP in the liberal ALDE group was limited due to the fact that the party is the furthest to the right of the group and prefers voting with the EPP. The most rebellious delegation, however, is the French MoDem, to the left of the group in a political sense.
If we add that most decisions are taken together with the Council, where consensus-building is also the rule but qualified majority voting is gaining ground, and that only the Commission has the right to propose legislative acts, a complex mechanism of decisionmaking is unfolding. No wonder it is so badly understood and can be the scapegoat for decisions the national politicians do not want to present to their constituencies.
The voting behaviour in the EP was subject to two analyses recently:
The Robert Schuman Foundation of France published a two-part report (http://www.robert-schuman.eu/question_europe.php?num=qe-189 and http://www.robert-schuman.eu/ question_europe.php?num=qe-190 while VoteWatch, an independent monitoring organisation, which collects and publishes interesting statistics on its website and also regularly reports on voting behaviour investigated in the first semester of 2011 the dynamics of voting behaviour in the three largest groups in the European Parliament. Their results were also reported in European Voice, a weekly on European affairs. The full report on power in the EP covers the period between 2009 and 2011. I draw the conclusions below from these two reports.
On the website of VoteWatch, also the loyalty of individual members is investigated and it can be seen that their loyalty is above 90% both with their party group and their national majority. This supports the idea outlined above that voting is largely consensual. One more factor has to be kept in mind: there are a number of votes which are not roll-call, so the voting behaviour in them cannot be analysed. This was the case when the motion about the new Hungarian Constitution was voted upon. The evaluation of the politics of the Hungarian government is one of the most controversial issues under discussion (you could even say that the FIDESZ party could polarise the European Parliament to an unprecedented level as they did so already with Hungarians). The vote was won with more than 50% of those present, 331 votes. Although this is mathematically possible without any EPP (to which FIDESZ belongs) vote, the proportions indicate at least that the EPP, the ECR (another centre-right, somewhat more eurosceptic grouping), the eurosceptics and the far right could have blocked the resolution.
Roll call votes can be initiated by the party groups and are usually enhancing
voting discipline but - in case of a difficult decision, can also lead to MEPs not voting, writes the Schuman foundation. Thus, there is no regularity in which question is put to a roll call vote and which one is not. Roll call votes are about one third of the total voting procedures. Since 2009, however, all legislative proposals must be approved by roll call voting (according to the internal regulations of the European Parliament.
Based on 16 votes in the first year of the legislative 2009-2014, the Schuman
foundation concludes in general that the right-left divide plays a smaller role in the European Parliament than on national level, as it coexist with the national affiliations, its role is increasing. There is also another divide: those who favour and those who oppose the enhancement of European integration. This line of course also extends between parties but is still not the same.
There is another trend: increase of the power of the Parliament through the Lisbon treaty has - in the opinion of the foundation - led to an increase of the role of national interests in voting.
The mixture of national and party (ideological) affiliations can lead to strange phenomena: European Voice concludes, for example, that French, Italian and Hungarian delegations in the centre-right EPP are more aligned with the S&D (social-democrat) group than other national delegations. "Among the seven largest national party delegations in the EPP, the Hungarian FIDESZ has voted with the majority least often (95%)." states the VoteWatch report. The biggest deviation was in the area of agriculture, where FIDESZ voted only 69% of the time with the rest of the group. On the other hand: "In the EPP, the highest degree of similarity in voting behaviour between leaders of the largest national party delegations has been between heads of the Polish and the Hungarian delegations." writes the report. European Voice also mentions environment and public health as points of dissent. The Hungarian delegation in other political groups is small and thus their behaviour is not analysed.
As there is no political group with absolute majority, coalitions have to be formed. These are nicely described in European Voice. The consequence I want to mention here is that the liberals seem to tilt the balance in many cases and they were the ones who were on winning side of votes the most frequently.
European Voice also draws conclusions on the dominance of some national delegations in the main political groups. The EPP and the S&D are dominated by the Germans. They form the right wing of the group, together with the Spanish Partido Popular. In the S&D group, the British - being to the right in the group - vote less with the group (this, however, still means 90% loyalty). The influence of the German FDP in the liberal ALDE group was limited due to the fact that the party is the furthest to the right of the group and prefers voting with the EPP. The most rebellious delegation, however, is the French MoDem, to the left of the group in a political sense.
If we add that most decisions are taken together with the Council, where consensus-building is also the rule but qualified majority voting is gaining ground, and that only the Commission has the right to propose legislative acts, a complex mechanism of decisionmaking is unfolding. No wonder it is so badly understood and can be the scapegoat for decisions the national politicians do not want to present to their constituencies.
Sunday, July 17, 2011
Hungarian indebtedness
The Hungarian government is proud that it could decrease the debt of the Hungarian state to 77 percent of GDP from 81 percent in a blow (and from about 90 percent where it stood when they took over). The reason: the funds in the private pensions funds were transferred to the state (not put automatically into the state pension fund) and almost half of these funds (4% of GDP) were in government bonds (as for security reasons they had to be by law) which were now eliminated.
Apart from how other assets will be sold, some of these funds were and will be used for current expenditures.
Also, the state purchased (for an amount 80 Bn HUF, a little over 300 Mn EUR more that for how much the previous government wanted to buy it when it was stopped by the then opposition FIDESZ) the share of Surgutneftegas, a Russian company in MOL, the Hungarian oil and gas giant (also active in the region) using deposits from the loan of IMF which was taken but not used by the previous government.
Thus a blog shows that even the gross debt has not really decreased, not to talk about the net debt, which increased to 20,218 billion HUF from 18,104 billion HUF between end of April 2010 and May 2011.
On top of that, although future pension obligations are not in the balance sheet, they exist as people whose private pension participation was transferred to the state, have to get the total of their pension from the state as opposed to a minimum guaranteed amount to which private pension fund members are entitled.
Why is the net debt more important than the gross? If I borrow and the loan is paid to me and I put it into deposit without using it, I increase the gross indebtedness. Until I spend this money, however, I can always use it to repay my debt. Thus, only if I spend it, do I have a real indebtedness.
OK, so why do states keep reserves which increase their indebtedness? Clearly for security reasons: if unexpectedly an amount has to be paid, the deposits can immediately be used while to get new loans takes time and effort and is also not sure to succeed.
Some analysts, however, also counter the statement that gross debt decreased, the chart on the blog quoted shows this.
How did the Hungarian presidency do?
A lot has been said and written about this. I try to summarise here the main legislative initiatives: which succeeded and which failed.
Economic governance: failed on one question where no political agreement could be reached. The issue is going to be put back in the agenda by the Polish presidency which seems to attribute a lower priority to this question. Hungary did not join the Euro plus agreement as one of a handful states citing "tax competition" as the reason. Enikő Győri, state secretary for European affairs stated that the left in the Parliament was looking for the right thing (growth) at the wrong place (budgetary discipline) however, the one difference left (from over 2000) is about budgetary discipline and not about growth: whether sanctions should be automatic.
Roma strategy and Danube strategy: the Roma strategy was initiated in the Parliament by a FIDESZ MEP of Roma origin and well received. The Commission (partly its Directorate Generals under the Hungarian commissioner (nominated by the previous governing party) was swift in working out the strategy which was endorsed by the Council. The approach was criticised by human rights groups as minimalistic, but it has to be recognised that the EU does not really has competencies in this area. The Danube strategy was already in the making when Hungary took over (just like the Swedes had a Baltic strategy accepted, it was logical that the Hungarian presidency aims at a Danube strategy and the other members of the Trio (Spain and Belgium) probably gave a helping hand) and accepted during the presidency's term, These are issues where no EU money is directly involved and thus their real impact remains to be seen.
Authenticity of the electronic edition of the Official Journal: pursued with ambition and intelligence but still pending on the issue of which treaty article is the legal base. This could further reduce the use of paper and thus help the environment but also improve efficiency of those who work with European legislation, Clearly a must in the 21st century.
No result on labeling of „high-tech foodstuff” i.e. genetically modified foodstock and "new foodstock" in general failed but a general food labeling regulation was finally accepted the 6th july. This latter harmonises the indication of ingredients and nutritional value on packaging and is a good result in face of differing interests.
"The outgoing Hungarian EU Presidency failed to adequately tackle some of Europe’s biggest environmental problems, the European Environmental Bureau (EEB) has said in an assessment. While positive on mercury, biodiversity and GMO cultivation, EEB said several issues were undermined by a lack of political commitment and leadership" http://www.eeb.org/EEB/index.cfm/news-events/news/assessment-of-hungarian-presidency-bad-on-climate-energy-good-on-biodiversity-and-mercury/
Croatian accession negotiation – closed but no accession date fixed explicitly by the Council, although July 2013 seems to be the date.
Energy policy: The presidency achieved a deal on the 2020 energy strategy just before the Japanese disaster and the new strategy also creates more transparency and eliminates some of the European Gas network's inefficiencies (gas dead.ends of which Hungary is one and which hinder that Eu countries share their resources in case of shortages or other problems).
In transport, Hungary brought to decision the agreement on cross-boarder traffic fines (not a big joy for some motorist) which was a long-lasting saga. Also, agreement was reached on the Eurovignette for trucks.
In transport, Hungary brought to decision the agreement on cross-boarder traffic fines (not a big joy for some motorist) which was a long-lasting saga. Also, agreement was reached on the Eurovignette for trucks.
In internal affairs, strictening the rules for sexual abuse of children and child pornography, an agreement about Frontex helping member states with immigration problems were positive but European Voice quotes MEPs that in this area legislative work was hindered by the political quarrels over Hungarian domestic policy.
It was a mistake to set the aim of getting Romania and Bulgaria into the Schengen area, the achievement of recognition that they are technically ready was what could be and was attained.
Agreement was reached that the suspension of the Schengen accord is only allowed in exceptional circumstances but the presidency did not react to the Danish measures contravening this.
I think the reader can draw conclusions, my aim was to collect in one place most of what could be collected on the main legislative measures as legislation is the field where the presidency (of the Council) is active. Political issues are treated in the European Council which has a permanent president.
Money from the EU
The 2009 report on the EU budget contains interesting tables about the net balance (Euro per capita) of individual member states with the EU. Luxembourg is by far the biggest beneficiary but it is a small country with a big presence of European institutions so the figures are distorted. This can be seen when column 5 (administration) is deducted from the amounts on page 57 of the report (see link below).
The other country figures also give interesting reading, however. I am interested in the states joining in 2004 which started with a low balance - all the Eastern Europeans progressed well but their development was different. Hungary started very low (all comparisons in % of GDP) but has now the most positive balance among Slovakia, Slovenia, the Czech Republic and Poland. The figures of Malta showed a steep decline, Cyprus is even in minus (I assume that the assistance to the Turkish part of the island is not included). As the last year counted is still 2009, the situation of Romania and Bulgaria who joined in 2007 cannot be judged but if they continue the trend, they can progress well.
The table summarising the balances by year and by member state is on page 86 of
http://ec.europa.eu/budget//library/biblio/publications/2009/fin_report/fin_report_09_en.pdf
Other sites about the same topic:
Further financial publications and also "myth-busters" can be found on:
(the label points ot the financial report, the publication above).
The other country figures also give interesting reading, however. I am interested in the states joining in 2004 which started with a low balance - all the Eastern Europeans progressed well but their development was different. Hungary started very low (all comparisons in % of GDP) but has now the most positive balance among Slovakia, Slovenia, the Czech Republic and Poland. The figures of Malta showed a steep decline, Cyprus is even in minus (I assume that the assistance to the Turkish part of the island is not included). As the last year counted is still 2009, the situation of Romania and Bulgaria who joined in 2007 cannot be judged but if they continue the trend, they can progress well.
The table summarising the balances by year and by member state is on page 86 of
http://ec.europa.eu/budget//library/biblio/publications/2009/fin_report/fin_report_09_en.pdf
Other sites about the same topic:
Further financial publications and also "myth-busters" can be found on:
(the label points ot the financial report, the publication above).
Wednesday, June 22, 2011
Future in the past
Long, long ago, a European Commissioner, Edith Cresson was asked by a journalist, whether it is true that her dentist is employed as a consultant by the European Commission. She refused to answer.
After some months and a series of other allegations of abusing funds and lack of proper control and accountability, the whole European Commission was forced to resign.
From the news:: The Hungarian government wants to assign one thousand million forints (about 3.8 million Euros) to develop dentistry tourism to Hungary. Newspapers write that the co-ordinator of the programme will be the family dentist of Viktor Orbán, the Hungarian prime minister
Reference has also to be made to the election slogan of the FIDESZ governing party in a previous election: ""The future has begun".
After some months and a series of other allegations of abusing funds and lack of proper control and accountability, the whole European Commission was forced to resign.
From the news:: The Hungarian government wants to assign one thousand million forints (about 3.8 million Euros) to develop dentistry tourism to Hungary. Newspapers write that the co-ordinator of the programme will be the family dentist of Viktor Orbán, the Hungarian prime minister
Reference has also to be made to the election slogan of the FIDESZ governing party in a previous election: ""The future has begun".
Data protection
In Case C‑518/07, European Commission/EDPS Federal Republic of Germany, the European Court of Justice stated:
Declares that, by making the authorities responsible for monitoring the processing of personal data ... subject to State scrutiny, and by thus incorrectly transposing the requirement that those authorities perform their functions "with complete independence", the Federal Republic of Germany failed to fulfil its obligations under the second subparagraph of Article 28(1) of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data;
In relation to a public body, the term ‘independence’ normally means a status which ensures that the body concerned can act completely freely, without taking any instructions or being put under any pressure.
In relation to a public body, the term ‘independence’ normally means a status which ensures that the body concerned can act completely freely, without taking any instructions or being put under any pressure.
... the supervisory authorities responsible for supervising the processing of personal data outside the public sector must enjoy an independence allowing them to perform their duties free from external influence. That independence precludes not only any influence exercised by the supervised bodies, but also any directions or any other external influence, whether direct or indirect, which could call into question the performance by those authorities of their task consisting of establishing a fair balance between the protection of the right to private life and the free movement of personal data.
... they must remain free from any external influence, including the direct or indirect influence of the State
... they must remain free from any external influence, including the direct or indirect influence of the State
That principle does not preclude the existence of public authorities outside the classic hierarchical administration and more or less independent of the government. The existence and conditions of operation of such authorities are, in the Member States, regulated by the law or even, in certain States, by the Constitution and those authorities are required to comply with the law subject to the review of the competent courts.
...conferring a status independent of the general administration on the supervisory authorities responsible for the protection of individuals with regard to the processing of personal data outside the public sector does not in itself deprive those authorities of their democratic legitimacy.
From the news: Hungary plans to set up a government "Authority for data protection and information liberty". The latter phrase is most probably a reflection of the term "free movement of [personal] data".
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