Financial reform in Hungary's agricultural economy

Abstract

Hungary's accession into the European Union on 1st May 2004 brought both long-term opportunities and enormous challenges to the country's agriculture. With accession, we became part of the common agricultural policy of Europe which itself also went through a significant renewal in recent years. Subsidization shifted from the former production volume basis (which used to generate those well-known mountains of butter, beef and wheat) to a direction that is intended to propel into dominance efficient, market-oriented, environment friendly agricultural systems which provide better guarantees for food safety. This policy is not only supporting agriculture in the narrow sense. Instead, it provides for the long-term viability of the countryside. Agricultural producers in the new member states and thus in Hungary have been given a green light for taking their products to the single European market, profiting from relative price stability, direct payments and subsidies for rural development. To a certain degree it is natural that a fast and radical change like accession to the EU is not only bringing benefits to the new entrants but temporary difficulties as well. Unfortunately, it was also the case for Hungary's agriculture. We spent years preparing for the adaptation of EU legislation and enabling its application in our country. We have reinforced our food safety, animal and plant health systems. We have established the institution that verifies eligibility for subsidies and makes support payments. Still, these efforts to prepare our agriculture for EU accession ended up being controversial. Problems were caused in part by inherited weaknesses like gaps in technological development, low efficiency, lack of horizontal and vertical integration, underdeveloped logistical systems, unfavourable holding structure and belated political decisions, inappropriate training of farmers and the scarcity of national financing resources. What is more, even the European Union was late sometimes with taking a stance on certain matters or changed its strategy without prior warning.