Development and Finance from issue 2008/3

Miklós Vásáry

Adapting EU Direct Payments for Hungary

- Abstract -

JEL F-150, Q-140

The introduction of the Common Agricultural Policy (CAP) is a decisive factor in ensuring the success of EU membership for Hungary. A key aspect of its implementation is the adoption of the Community agricultural system, including the direct payments scheme. This process is unusual in that, in line with the Accession Treaty and the 2003 CAP reform decision, the switch to direct payments is taking place in two phases. Implementation of the second phase, which is currently underway, will be of crucial importance in terms of the future situation of Hungary's agricultural sector. The introduction of progressively increasing aid amounts will have a major impact on Hungary's success in adapting to the new payments system. Alongside reduced amounts of aid during the transitional period it was possible to use the simplified implementation system and national co-financing. During the initial period the system faced significant difficulties, but in terms of its performance in the first years the construction and operation of the system can be considered successful. On the basis of longer term experience and emerging effects we can state that the results of restructuring of the aid system and the application of the CAP fall short of what was hoped for and expected from a number of points of view.

Miklós Vásáry, PhD student, (Szent István University, Institute for European Studies, Hungary)

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