EU money having little effect on poverty in Hungary

While EU-funded projects look nice on paper, the money has little real effect in addressing social issues in Hungary. The huge subsidies could be a strong weapon in the fight against poverty, but EU funds barely reach their target groups. EURACTIV Hungary reports.

''If German taxpayers knew how much of their one euro really gets to the target groups, they would not sleep well,'' a source close to the institutions distributing EU funds told EURACTIV Hungary.

Those who have been involved in projects financed by EU funds know that they have huge administrative, management and wage costs and that very little of the financial support is actually spent on the target activity or the target groups.

Indeed, at a recent conference hosted by the Alliance of Social Professionals (3sz) in Hungary, several social-sector stakeholders claimed that EU monies from the European Social Fund (ESF) have minimal impact after implementation.

The social professionals cited "red tape" as one of the most problematic issues when applying for a tender. European rules are not the only problem, with national authorities imposing numerous other requirements.

''Sometimes I think that we could even throw the money out of the window and it would have the same effect,'' a source told EURACTIV Hungary.

Intermediate bodies not helping applicants?

Éva Pataki, president of the Alliance of Social Professionals, told EURACTIV Hungary that the applicant is the ''most defenceless'' actor in the process of application, implementation and assessment, and receives little help from the authorities.

EURACTIV Hungary asked for statistics on the effectiveness of ESF funding, but was told by the Hungarian Ministry of Social Affairs that as the second tender period has not yet ended, no official assessments are available at the moment – at least none since 2006.

In 2008, the Hungarian National Development Agency published an official study about the Human Resources Operative Programme (HEFOP 4.2), which aimed to develop the infrastructure of social inclusion services.

HEFOP 4.2 provided support for reducing territorial disparities and providing nursery services, homeless shelters and housing for the disabled. Job creation for women and disadvantaged people was also a priority of the programme.

The study recorded significant falls in female unemployment in settlements with less then 5,500 inhabitants, where projects mainly focused on care services for minors and the disabled. This result is all the more impressive considering that at national level, female unemployment rose by 1.6 percentage points.

''Before implementing the projects, the infrastructure has been the weakest element. In the case of daytime shelter for homeless people [and] regarding nurseries, the bad state of housing and furniture caused major problems. According to the responses [of the directors of these institutions] the projects have offered significant remedies to these problems,'' the study states.

Nevertheless, the Eötvös Lóránd University in Budapest recently published a study on the efficiency and use of European Structural Funds in general, which claims that a lack of transparency and information causes numerous problems and makes implementation a difficult process.

''The distribution system of European Union subsidies is working within the structures of an isolated, gigantic organisation, but it cannot completely secure the implementation of directives, nor the transparency of the distribution of resources,'' the study states.

The flow of information was also criticised. ''Information available on the Internet could be complemented with information received directly from the National Development Agency, the managing authorities or the intermediate bodies. Our experiences show, however, that that these are non-existent channels that bring no results,'' the study concludes.

How deep is Hungarian poverty?

Through the ESF, Hungary receives a total of €3.7 billion for the period 2007-2013: around 5% of the country's GDP. While professionals claim that the system is inefficient and non-transparent, Hungary falls in the middle of the EU average with its poverty rate of 12%.

However, among certain societal groups the figure is even higher. One in five children, one in three families with more than three children and nearly one in two unemployed people live in poverty. So too does every second person of Roma origin in Hungary.

Despite these figures, the poverty threshold is substantially lower than in the EU as a whole, meaning that poor people in Hungary are much poorer than those in older member states.

When questioned by EURACTIV Hungary, the Ministry of Social Affairs pointed to the results of former national strategies. According to the National Strategic Report on Social Protection, Hungary has achieved most of the goals of the 2006-2008 strategy. The employment rate rose above the 57% goal in 2007, and the figures on elderly people and women are also satisfactory. However, the report was prepared before the financial and economic crises and the targets were therefore set in a less difficult social situation.

European Year against Poverty and Social Exclusion – just a PR stunt?

Asked whether the 2010 European Year against Poverty and Social Exclusion would bring concrete results or whether its aim was just to attract the public's attention, the Hungarian Ministry of Social Affairs replied: ''Yes, the aim of the European Year is exactly this: drawing attention to the problem. It is the aim of every European Year.''

The ministry explained that two basic activities of the European Year are as follows: first, a communication campaign in the second half of the year; and second, a tender for NGOs, which can use public money to promote their activities in the field of poverty eradication.

The ministry hopes that these activities will lead to concrete political commitments at both national and European level for long-term solutions to the problem.

Social protection: A slippery political issue

This implies that rapid changes to poverty rates in Hungary are not to be expected. However, the figures would be even worse if social protection tools were not in place. Social protection looms large in Hungary and is a contentious political issue.

Social protection rules have changed massively due to the financial crisis. The 'crisis management' government led by Gordon Bajnai abolished pensions for the 13th month, froze family allowance rates for two years and raised VAT from 20% back to 25% (a 3% increase had already been planned), among other measure.

The changes have lowered public costs in general and have brought confidence to the markets, although NGOs in the social sphere have warned that the 'Bajnai package' could have a catastrophic effect on society.

''The significant strengthening of policies over the past one-and-a-half years has improved confidence and placed Hungary on a path towards stability and growth. Government spending has been reduced in a durable way, while the fiscal deficit target was increased to 3.9% of GDP in 2009 to avoid exacerbating the economic contraction,'' James Morsink, leader of the International Monetary Fund (IMF) mission to Hungary, said in a press release in February.

However, poverty researcher Zsuzsa Ferge believes that the package does not consider the long-term. ''I don't think that we can come out of the crisis if we do not think about what there will be after it,'' she told web portal Fn.hu. She claimed that the restrictions are affecting the poorest first and foremost, but also middle class people who are in danger of sliding into poverty.

Social security – including health care – will have to be addressed by the new government, which was elected on 25 April. The conservative Fidesz-KDNP party secured a two-thirds majority in the Hungarian parliament and therefore has an easy task if it wants to make reforms (EURACTIV 26/04/10).

Reforms are badly needed in a country where 34% of people say that they have problems earning a living, where the net monthly average income is €416 per month and the average pension just €326.

Fidesz-KDNP's programme targets families, the elderly, the disabled, child care, Roma people, the fight against poverty and sport.

''The destruction of the past years has led to the fact that in 2009 the population of Hungary decreased by 34,000 […] For the new government, which is based on common values and the representation of national issues, the foundations of social policy are families,'' the programme states.

However, it does not list any explicit changes, because – as the leaders of Fidesz have repeatedly said – the new government does not know how much money it will find in the country's coffers.

Background

The fight against poverty is one of the five priorities of a draft ten-year economic plan unveiled by the European Commission in March, called 'Europe 2020' (EURACTIV 03/03/10).

The strategy defines five headline targets at EU level, which member states will be asked to translate into national goals reflecting their differing starting points:

  • Raising the employment rate of the population aged 20-64 from the current 69% to 75%.
  • Raising the investment in R&D to 3% of the EU's GDP.
  • Meeting the EU's '20/20/20' objectives on greenhouse gas emission reduction and renewable energies.
  • Reducing the share of early school leavers from the current 15% to under 10% and making sure that at least 40% of youngsters have a degree or diploma.
  • Reducing the number of Europeans living below the poverty line by 25%, lifting 20 million out of poverty from the current 80 million.

In a series of articles, the EURACTIV network will present the state of play in individual EU countries on each of the targets. The first series of articles focuses on poverty reduction, a target seen as controversial in several circles (EURACTIV 01/03/10EURACTIV 25/03/10).

Further Reading