Hungary

In its 1997 Opinion, the Commission concluded that Hungary fulfilled the political criteria. Since that time, the country has made considerable progress in further consolidating and deepening the stability of its institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities. Over the past year, further efforts have been made in this direction. Hungary continues to fulfil the Copenhagen political criteria.

In the area of public administration reform, positive steps were taken with the introduction of a new legal framework increasing accountability and efficiency of the administration. In addition, better salaries and career possibilities have made the civil service more attractive. Efforts also continued in the area of training, which has become an important element of the career structure.

Within the judiciary, the overall efficiency of Courts further improved after the introduction of additional measures in the area of institution building, notably the modernisation of IT systems, procedures, continued training and new staff. However, the continued overloading of the Supreme Court reduces its ability to provide guidance to lower courts and to unify the Courts' practice. The scarce budgetary resources make it difficult to implement the remaining elements of the judicial reform.

The fight against corruption remained high on the political agenda and new legislation on asset declaration and more severe punishment was adopted to address the issue. Corruption however remains a problem, and the new measures would need to be implemented quickly to make the fight more effective.

As regards human rights and freedoms, progress can be reported with regard to asylum, where the situation considerably improved due to faster and better procedures and more appropriate reception facilities. However, there is a need to address police behaviour, notably with regard to reported cases of ill­treatment. In the area of public service media, a solution needs to be found regarding the composition of the Supervisory Boards of Trustees.

New policy instruments and measures were adopted for the Roma minority. This process was accompanied by a significant increase of budgetary means for the further implementation of the medium­term action programme, already adopted by the Government in 1999. Support measures in 2001 mainly focused on the areas of education, employment, social policy, legal protection and culture. In this context, it will be important to enhance efforts to fight against widespread discrimination and to fully implement and enforce the legislation already in place. The Roma minority should also be given the possibility to participate more actively in public life.

Hungary had implemented the short­ and medium­term priorities of the 1999 Accession Partnership priorities which related to the continued implementation of the medium­term action programme for the Roma and the increase of budgetary means for this purpose, as well as the further reform of public administration and of the judiciary.

Hungary is a functioning market economy. Provided that it fully maintains and implements its reform programme in a consistent manner, it should be able to cope with the competitive pressure and market forces within the Union in the near term.

The macroeconomic situation continues to be sound, with high GDP growth underpinned by a rising investment share, further declining unemployment and favourable current account development. Railway restructuring continued through a major bailout and debt restructuring. It has adopted a more appropriate monetary and exchange rate framework, which is contributing to lower inflation.

However, fiscal policy has become expansionary in 2001. Together with recent non­transparent fiscal practices, the uncertainty over the further reform of the pension system and the delays in the reform of the health care system have raised some concern about the continuation of consolidation and the medium­term sustainability of public finances. The authorities will need to maintain fiscal discipline to ensure that fiscal policy supports the new monetary policy framework and the external balance. This would contribute to lower inflation. The health care reform should be undertaken swiftly.

Hungary continued to make progress in aligning and implementing the acquis in many areas. In the reporting period, the country has moved steadily towards achieving a degree of administrative capacity needed to satisfactorily implement the acquis.

Continued good progress could be noted concerning the internal market. In this area, the major part of the acquis has been gradually adopted, and basic administrative structures are in place. As regards the free movement of goods, the alignment process has continued in respect of harmonised and ``new approach'' product legislation, and Hungary has been able to apply for full membership in the European standard bodies CEN and CENELEC. Work should be continued to ensure a coherent and comprehensive market surveillance system. With regard to public procurement, efforts will be needed to achieve full alignment and to ensure transparency and enforcement of the current rules at all levels of government and in all sectors, in particular in motorway construction. In the field of services, banking and insurance legislation has largely been aligned, and the supervisory authority appears to be working satisfactorily. Capital movements were almost fully liberalised. The adoption of an important new law on the fight against money laundering, which aims at, inter alia, phasing out anonymous savings books in order to meet the recommendations of the Financial Action Task Force (FATF), is pending at Parliament. In the field of company law, the Hungarian legislation with regard to industrial and intellectual property rights is already largely in line with the acquis; Hungary has a relatively good enforcement record. In competition policy, substantial and procedural rules for state aid control were further aligned with the acquis. Further efforts are needed to align state aid schemes, in particular the fiscal aid schemes. Both anti­trust and state aid enforcement bodies are working satisfactorily.

Alignment of VAT and excise duty levels continued in the area of taxation. However, appropriate IT systems allowing for the exchange of electronic data with the Community and the Member States have still to be developed. In the area of customs, in particular, the administrative and operational capacity was strengthened through training and modernisation of the equipment. Hungary still needs to work on the compatibility of its IT system with the EC customs computerised systems in order to ensure interconnectivity by the time of accession. In the area of economic and monetary union, the independence of the National Bank was consolidated with the adoption of a new law. With regard to industrial policy and small and medium­sized enterprises, Hungary made further progress by the adoption and implementation of the Széchenyi Plan. The issue of the restructuring of the Hungarian steel industry has progressed in the reporting period.

Significant progress was also made in the area of environment, notably through the adoption of legislation on Environmental Impact Assessment, on water, waste, industrial pollution control and risk management, on chemicals and on radiation protection. The administrative capacity in this sector was also improved, but needs further strengthening, in particular as regards the clear distribution of tasks between the ministries involved.

As to agriculture, progress in the reporting period was limited to the food safety and veterinary sectors, while the inspection arrangements in the veterinary and phyto­sanitary areas still need to be updated. Further efforts are needed to establish in time the necessary procedures and structures for Hungary's participation in the Common Agricultural Policy. Legal alignment needs to be sustained in the area of transport, and efforts are needed to carry out the restructuring of the rail sector that is indispensable to prepare for the implementation of the market access acquis. In addition, appropriate institutions will have to be set up in order to enforce the acquis adequately. In the energy sector, only limited progress was made. The necessary legal framework for the participation of Hungary in the internal energy market still needs to be created. No progress could be noted with regard to the audio­visual sector.

Considerable progress was made in the area of social policy and employment, notably through the adoption of the revised Labour Law. As to social dialogue, confidence­building measures are needed to enhance real dialogue.

In relation to regional policy, Hungary has been making good progress in preparing for programming Structural Funds and in defining the implementation structures, but administrative capacity as well as financial and budgetary procedures need to be further strengthened. Effective inter­ministerial co­ordination mechanisms should also be set up, and an even wider application of the principle of partnership should be ensured.

The progress made in legal terms in the telecommunications sector needs to be followed up by appropriate enforcement measures.

In the area of Justice and Home Affairs, significant progress was achieved through further alignment with the acquis in the fields of visa policy, migration and asylum. The fight against fraud, corruption, money laundering and organised crime was made more efficient through the adoption of additional legislation and reinforced institutional structures. As regards external borders, a strategy on the integrated development of border crossing points was adopted. The Schengen Action Plan addresses the main issues of the acquis.

In the area of common foreign and security policy, some of the provisions laid down in the Law on Hungarian minorities living in neighbouring countries apparently conflict with the prevailing European standard of minority protection. Hungary should therefore find an agreement with its neighbouring countries with a view to complying with the recent findings of the Report of the `Venice Commission'. Also, as foreseen in its Article 27 (2), the Law will need to be aligned with the Community acquis at the latest upon accession, since it is currently not in accordance with the principle of non­discrimination laid down in the Treaty.

As to financial control, some progress has been made both as regards external audit and public internal financial control. However, the administrative capacity in general and the functional independence of the auditors in the internal audit sector should be further strengthened. As to financial and budgetary provisions, further efforts continue to be needed in order to meet Community requirements with regard to co­financing and multi­annual programming.

Hungary made further progress in building up its administrative capacity to apply the acquis in most areas. However, with regard to the administrative and judicial capacity, further efforts will have to be made in particular in areas such as state aid control, audio­visual, market surveillance, transport and agriculture. Further efforts are also required in establishing the necessary administrative capacity to ensure the sound, efficient and controllable management of EC funds. Hungary has continued to address its short­term Accession Partnership priorities with the exception of certain items in the field of agriculture, audio­visual policy, free movement of goods and competition policy. In addition, Hungary has implemented a number of medium­term priorities in the areas of social policy and employment, environment and Justice and Home Affairs (on asylum matters and visa policy).

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