It is no secret that the European Commission is withholding funds in nearly 10 out of 15 Operational Programmes in Hungary, which may be a high figure but the amount of funds withheld is not so large to endanger the absorption target this year, said Jakub Adamowicz, Commission Spokesman for Transport and Regional Policy, in an exclusive interview with Portfolio.
Whereas he has given a slightly evasive response to a question whether Hungary will be able to absorb all the EU funds available in the 2007-2013 programming period, he has stressed that everyone is doing their utmost to avoid a loss of funds. As regards the relationship between Budapest and Brussels, which “has its ups and downs", Adamowicz made a few important suggestions to Hungary that would help spending EU funds and convergence to Western Europe, as well. One of these was to respect procurement rules and the other is to focus on added value in the real economy, i.e. to create as much added value as possible from projects co-funded by the EU. This, he stressed, will be an important pillar of Cohesion Policy beyond 2020 therefore it should be taken seriously.
Portfolio: How would you describe the relationship between Hungary and the European Commission in terms of Cohesion Policy?
Jakub Adamowicz: Hungary is a very important country when it comes to cohesion policy for several reasons. One element we here in the Commission are looking at with certain satisfaction is the economic development because Hungary was affected by the economic crisis in a very harsh way, and it’s clear now that recovery is around. This a great result and it’s very positive that the economy is growing. With Hungary we have a very thorough and very close relationship when it comes to the implementation of cohesion policy. And as in every close relationship there are ups and downs in the sense of challenges. This is also because regional policy and cohesion policy are a very demanding and toughening exercise for all parties involved.
We at the Commission have the responsibility to watch very carefully all the money that we spend has to be spent very well, because it’s taxpayers’ money. So we have watch very closely how the money is spent, also with respect to problems that arise. In that sense, with the government of Hungary we have a very tested relationship because when things don’t go as they shouldn’t in our eyes we have an audit system in place. We are in touch with the Hungarian authorities and in most cases we sit down together, we identify the problems and we agree on a solution. That is the normal process in terms of cohesion policy.
Now that the 2007-2013 development period is almost over, the situation is possibly more complex than in the case of regular consultations, isn’t it?
Yes, now we are at kind of a junction. 2007-2013 is coming to an end. The new period is starting so this is a crucial moment for all countries. Hungary is not different.
What is important from our point of view? To make sure that all chunks of money that was allocated for 2007-2013 is used [...] now take a good last breath and get the job finally done to avoid unnecessary loss of funds because that is in no one’s interest. That’s one thing.
Then strategically it is an important thing to look ahead: the lesson of Spain should be relevant to Hungary. Spain is now living through what Hungary will experience seven years from now, in the sense that once all the nice infrastructure is completed - the motorways, the bypasses in the cities, the landing spots for helicopters at hospitals - the question arises: How does Hungary continue with the convergence process to catch up with Western European countries in terms of living standard and in terms of economic power?
This will probably not happen through just by pouring in more money into hard infrastructure; the key will be the soft infrastructure, in the sense of research and development, supporting small and medium-sized enterprises. And I believe the most important point: it will not be enough just to allocate billions of euros in R&D programmes on paper, to feed SMEs. The key point decisive for national wealth and ergo for the standard of living is the added value that this new R&D capability will bring to the value-added chain of economy. Added value in the real economy will be the decisive point.
It’s already time to start thinking about post 2020. The decisions taken now will have an impact on the future. It is also important that the chunk of money for co-finance for the following financial period will also be decided in the framework of the MFF but now or very soon. This means it’s never too early to be exemplary in terms of all the parameters involving regional policy implementation. This has a proven impact [...] on the negotiations in the MFF.
How would you assess the steps Hungary has done to close the past cycle? Do you think Hungary can reach 100% in absorption?
We have 80.6% of absorption in mid-September (Editor’s note: it is now up at 83.6%). This is still not 100% but we’re aiming to get as much as possible.
There are some interruptions, we all know about them, it’s not a secret. The Task Force is working hard and this 80% should not be the last figure. I don’t have a crystal ball to look into and say this will 100% by the end of the year. Of course, we want as much money spent as possible, but we shouldn’t take things for granted. The truth is, as with good friends and in every family some issues will need to be sorted out. For almost 10 out of 15 operational programmes there are still payments withheld which is considerable. [The amount] is not that substantial that would threaten a good finishing of the year. But challenges are still there.
The message - for the short term but also for the long term - is also that public procurement rules are important. When there’s a decision who will be implementing it should be done in a transparent way. It’s important that different actors have equal access. This is something we really care about it because it brings better results, it’s fair and in the end everybody benefits from it. As a community of law this is something we need to uphold and we will always uphold it, I think.
I would say that the ingredients for a soft landing are there. There is the Task Force which is working. We some issues to resolve, we have an absorption rate of nearly 81% even probably more now. Let’s stay focused - that is the message.
What changes to you think the mid-term review of the 2014-2020 programming period bring about? As regards the refugee crisis do you think the Hungarian proposal to the EU to allocate larger funds for the management of this crisis will be endorsed? And a related question: If Hungary decided to modify some of its Operational Programmes citing the costs of the refugee crisis as the reason, how would the Commission respond to that?
There are two elements here. As regards MFF 2016, there has been an agreement that in this MFF we will take stock of economic developments that took place after the adoption of the 2014-2020 framework, which concerns countries where economic impact of the crisis, etc. have occurred. That is certainly something that will be accounted for.
Hungary now has a good growth rate but nothing is happening in a vacuum. And, of course, we have the migration crisis, which is an existential crisis for the European Union. What is left of Europe if we don’t have the Schengen Area in place, free movement of people inside Europe? It’s very substantial. It’s absolutely important that everybody is on the same wavelength here. We have put forward our proposals and we believe this is the appropriate way to generate solidarity in an efficient way. And we hope that all member states will be on board.
We have also said what I will repeat here about migration. There are already funds in place for legal refugees but only for them. Legal migrant sounds very technocratic because these are people who are fighting for their lives. But someone who is a refugee and gets an asylum recognition, hence becomes a legal migrant. Then we have at our disposal in Cohesion Policy 20 billion euros for social housing, many things that can be used in the European Social Fund.
On top of that, every time we should be receiving a concrete, comprehensive proposal, we will look into it to see if it is relevant to addressing the refugee crisis also with funds from the Cohesion Policy. But this has to be reasonable, proportionate and well-founded. Since we are in an urgent situation we will look into these demands, but these will have to be made by Member States. It is obvious that Hungary, Greece, Italy, Croatia, Slovenia are countries that are at the frontline here. We are, of course, open to consider all those proposals that they would be getting on our table.
[As regards a possible modification of Operational Programmes by Hungary] we need to assess everything. [...] Operational Programmes have parameters that are fixed. We cannot open everything but we are studying and evaluating everything that contributes positively to the management of the migration challenge and the refugee crisis now. If can be through the modification of Operational Programmes or other means I would not go as far at this stage [...] but it is certainly good that a process has already started. Of course, we will not be replying in three months because time is short and winter is around the corner so there is no time to lose.
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