Budapest Mayor: Cutting regional funds could harm EU social equality

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Any future cuts in EU regional funds could damage the ability of local and regional bodies to balance economic development with vital social and environmental changes, according to outgoing Budapest Mayor Gabor Demszky.

Gabor Demszky this week retired as mayor of Budapest after five election victories and almost 20 years in the job. He provided EURACTIV with an overview of his city’s experience of using EU regional funds, and gave his input into the debate on the future of EU regional policy, currently being hotly discussed at the Open Days in Brussels.

To read a shortened version of this interview, please click here

Overall, do you feel that your/city region has benefited from EU regional/cohesion funds? What is the 'added value' of EU structural/cohesion funds compared to national funding mechanisms?

Budapest has benefited substantially from EU regional/cohesion funds. The city, with 1.7 million inhabitants, forms together with the surrounding Pest County (1.2 million people) one of the seven Hungarian NUTS2 regions, called the Central Hungarian Region.

As the GDP per capita of this region has surpassed the 75% benchmark of the EU average, this region was classified as a 'phasing in' region, so it was treated as a convergence region in the first half of the planning period but then very quickly lost its eligibility for the higher amounts of Structural Fund money. Currently, large investments are co-financed with European money, such as the fourth metro line of the city or the central sewage plant (the largest environmental project in Central Europe).

The largest 'added value' of EU structural/cohesion funds compared to national funding mechanisms is the simple fact that the EU money made possible these large – and also many other, smaller – projects which could not have been financed otherwise.

Furthermore, the EU structural/cohesion funds helped to (re-)introduce into Hungary long-term planning which disappeared with the political changes of 1989-1990. The methodological aspects of the implementation rules were also very important in helping to modernise the national and local systems.

What problems has your city experienced in absorbing cohesion funds? Do project leaders and managing authorities experience problems with complicated application rules?  

Application and implementation rules do not seem to be too complicated as far as written regulations are concerned, but managing authorities interpret some written rules differently which makes it quite difficult for a city like Budapest to manage its high number of projects in a coherent way.

The administrators of the managing authorities do sometimes not have any project implementation experience and therefore are not equipped to understand the mechanisms within a project. This can pose problems, especially in connection with public procurement procedures.

The unit within the Budapest Municipality responsible for implementation has managed to build up good relations with the managing authorities. As a result, they have finally understood the difficult mechanisms within the municipality (a two-tier local government system, in which all the 23 districts have directly elected assemblies and directly elected mayors), thus working together for the success of the projects is not a problem in general.

What is your assessment of new Regional Policy Commissioner Johannes Hahn? Has he identified the right priorities? What could he be doing better?

I met the new Regional Policy Commissioner Johannes Hahn personally in Toledo, Spain, during the informal ministerial meeting on urban issues in early 2010 (where I represented Eurocities). Both his official discourse and our private discussion gave me the impression that he has a very good overview about the problems of the European territories. He gives the necessary attention to the large cities of Europe, which already now (and even more in the future) act as the most dynamic actors of development, together with their surrounding areas.

At the same time I understand that he has no easy task to represent this view in a Commission which seems to be less space-sensitive than it should be. I would urge him to continue the fight for the idea of a strong cohesion policy in which dynamic cities play a leading role to plan and implement integrated development.

Do you think the priorities identified by Europe 2020 (which in turn are likely to become the priorities for earmarking regional funds after 2013) are the right ones? What could have been different or better?

In principle the EU2020 contains all important tasks and rightly aims to bring together the social, economic and environmental dimensions of development. I am deeply convinced that all three of these aspects are important and have to be treated in their mutual combinations and inter-dependence, instead of one-by-one.

Do you believe the Europe 2020 strategy gives the regions enough prominence? Could the Commission have gone further in making regions/local authorities a central stakeholder in the strategy?

This is my major problem with the EU2020 document. It mentions 'cities' only once and has no real sub-national dimension. The quick adoption of the document and, even more seriously, the short deadline given to member states to develop their 2020 programmes makes the involvement of the regions and cities practically impossible.

Under these circumstances there is a real danger that the EU2020 will do no better than the Lisbon Strategy: the aims accepted on national level will not become accepted and followed by the regions and urban areas. This is very problematic as these are the territorial levels where real integration of the three main dimensions of development can be assured.

Where does your city stand in the debate on the future of EU regional/cohesion policy? What changes would you like to see brought in?

Integrated development is the main idea we believe in. Integrated across the sectors and also across the territories: the functional urban areas should be the units of integrated planning, with the urban centre in the lead. Although the current regulations allow for urban priorities in the operational programmes and for delegation to cities, in practice neither is being used sufficiently. This is severely limiting the impact of cohesion policy.

For the next period mandatory urban priorities will be essential. The principal cities in a region or functional area should be directly involved in setting these priorities. This will require a true multi-level governance approach. Cities should get a stronger role in determining the appropriate scales of intervention, they should get the opportunity to manage urban measures directly and they should receive delegated funding.

Do you think the budget for EU regional/cohesion policy should remain at its current level beyond 2013 (approx. 33% of combined EU budget)? Why?

The challenges are growing while the financial crisis makes it practically impossible that the 'cake', i.e. the total amount of the EU budget, could be increased. The growing importance of the climate and the demographic challenges can easily lead to a situation where not only the Common Agricultural Policy but also cohesion policy are crowded out. This would be a pity and would lead to the collapse of the EU2020 strategy. Pure technical interventions might improve slightly the performance in a given sector but could consequently lead to more harm in other sectors.

An ideal example is the sustainability-oriented rules for new housing construction, as a result of which housing units become more expensive and social inequalities grow.

It is a major task to explain to European decision-makers (and also to our national leaders) that local integrated development is the only way to combine and strengthen the objectives of Europe 2020. This is best done in our cities and functional areas, supported by a strong cohesion policy. Thus urban areas and their large cities have key role to play in the post-2013 cohesion policy

The European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Rural Development Fund should be aligned to support cohesion policy and integrated local development. Separating the ESF from the structural funds would in our view undermine an integrated approach and territorial cohesion.

Do you believe events such as the Open Days serve a useful purpose in developing debate about the future of EU regional policy or are they an expensive waste of money?

Budapest has participated in the Open Days as a co-organiser of seminars since 2004. I think that the real use of events like the Open Days is that it stimulates regions and cities to work together on common interest issues and then present the results to decision-makers and other regional policy  stakeholders. In this regard the Open Days contributes to the debate about the future of EU regional policy or other European policies in proportion as representatives of those who shape these policies are there to listen.

Another useful outcome depends on the practitioners themselves. If they attend a good number of meetings, are listening carefully and contributing actively, then the Open Days can be a very rich source of knowledge for them, as they get the opportunity to meet their colleagues from many other cities and regions and receive information and ideas which would otherwise fail to reach them.

Can you describe, in your own words, how Budapest has changed since EU accession?

EU accession has resulted in a set of positive changes for Budapest, having provided not only financial resources, but also new approaches, models and networks  for the elaboration of urban development policy – what we call 'humanised urban reform'. Due to the EU support we have received since 2006, we could focus in parallel on social, educational and youth strategies and necessary economic development. For example, vocational training in Budapest has been fundamentally transformed and modernised, preventing youth unemployment and opening prospective professional careers at the same time.

Another significant change was the distinct improvement of infrastructure and the city transport: tram lines were reconstructed, 'green' buses were brought in, the fourth underground line is under construction.

The most radical improvements were implemented in the environmental protection and healthcare sectors. For example, Central Europe's largest waste water treatment plant was constructed on Csepel Island. The new Danube Strategy promises a new type of cooperation with neighbouring countries for sustainable social and economic development, and Budapest is sure to profit from this venture.

To conclude, although there are still tasks and challenges ahead – for example, encouraging tolerance and solidarity – all in all I can say that Budapest has, thanks to the possibilities afforded to it by EU accession, gotten closer to the objective set out in our Development Strategy, namely to become a 'livable and loveable' city. 

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