Some Thoughts on the Accession Negotiations of Hungary: a Retrospective

https://doi.org/10.63189/FFNS7629

What we now take for granted was not always obvious

As Hungary’s chief negotiator for accession Endre Juhász – who was also Minister without Portfolio for European Integration (2003-2004), among his other assignments related to the integration process^[1] – reflects: while many people today think that Central-Eastern European (CEE) integration into the European Union (EU)  was basically a smooth and logical historical process – coming right after the collapse of the ‘Eastern Bloc’ and the associated changes of regimes – receptiveness of the member states’ leaders and citizens was not, in fact, so obvious.

Different plans were drawn up, and many suggestions were made. The then French President François Mitterrand, for example, argued that the countries of the region should form some kind of loose alliance, which would certainly be linked to the West but not necessarily meaning a membership in the then European Communities. The US government also expressed an interest in the region, offering the countries free trade agreements. However, this idea was dismissed as it might have disrupted the expected accession process, which remained the primary goal for most CEE countries except for the Czech Republic, as – in contrast with Czech public opinion^[2] – the then Prime Minister Václav Klaus displayed a sceptical attitude.^[3]

As for future membership in the European Communities, the negotiations on the Association Agreement between the European Communities and Hungary^[4] and a meeting with the presence of the then Hungarian prime-minister Péter Boross and the then-president of the European Commission of the EU Jacques Delors were wake-up calls according to Juhász. The negotiators on the European Communities’ side refused to include the words ‘accession’ or ‘membership’ in the text. Instead, the parties agreed to include a sentence in the preamble, which can be deemed as a compromise.^[5] During the meeting – as Juhász recalls – Delors reacted in a rather dismissive tone, when Juhász mentioned Hungary’s desire for a formal accession request. Delors stated that the accession process was a long, multi-year process and that there was no point in rushing ahead.^[6]

While Juhász recalls Delor’s reaction as surprising, based on the other parts of his reminiscence he in fact shared this view. What is more, he had said it as well before the meeting with Delors. When József Antall – who was the prime minister before Boross – asked Juhász why they had not yet submitted the request, he told the prime minister that it was premature, since the effects of even the Association Agreement had not been analysed. He assured the prime minister that, after the necessary preparations, the request would be submitted.^[7] A few years later, when the then prime minister Gyula Horn appointed him as ‘Ambassador Extraordinary and Plenipotentiary’, and Chief of Mission of the Republic of Hungary to the European Union, and then told him his expectations regarding his assignment, Juhász had to mitigate them—which almost led to his dismissal. The message that Juhász tried to ‘transmit’ to the prime minister, and often to other leading politicians, was that diplomatic meetings and political agreements were not enough for accession. Instead, it required accurately identifying and solving the problems that stood in the way of integration and, finally, transforming the country’s economy and legal system, which is a long process.^[8] This is especially true if one considers that for the first time ever the EU screened not only the legal acts’ conformity with the acquis, but also the institutions that were expected to secure their prevalence as Péter Gottfried – who also played an important role in the accession negotiations in different assignments^[9] – reiterated in a 2004 interview.^[10] It is likely that the governments of the then 15 member states foresaw that integrating countries with a legacy of more than thirty years of socialism would not be a walk in the park.

What is the national interest? Important issues for Hungary during the accession negotiations

The European Council decided to launch the negotiation process with six countries – including Hungary – at the December 1997 Luxembourg meeting.^[11] In order to conduct successful negotiations resulting in agreements that served the Hungarian national interest, it was important to determine what the national interest was. This was not an easy task, which is well-illustrated by an issue, which arose during the negotiations on accession and was told by Gottfried in a 1999 interview.^[12] – Let us call this the ‘tobacco-paradox’ in this study.  – The Hungarian delegation asked for the extension of the deadline on fulfilling the Union’s rules on limiting the tar content of tobacco products to a certain limit defined by Union law. One may ask why the Hungarian delegation asked for exemption from rules that serve the protection of human health?” The answer, in Gottfried’s view, is that Hungarian decision-makers had to consider the interest of the Hungarian families making their living by growing tobacco. These families were typically living in the most undeveloped regions of Hungary, and enforcing the Union rules immediately would have meant that tobacco companies could not procure raw material from Hungarian markets—threatening these families’ financial existence.

After the national interest was identified, it was time to enforce it during the negotiations.  Juhász identified six plus one fields – that is 7 out of the 31 chapters of the negotiation process – in which differences between the delegation of Hungary and the European Union came to light, and where the negotiations proved tougher than in other fields. These fields were: (i) free movement of persons; (ii) free movement of capital (the acquisition of agricultural land by foreign nationals or legal entities); (iii) issues related to agricultural dotation; (iv) structural and cohesion politics; (v) competition; and (vi) the implementation of the ‘Schengen acquis’ and the exact determination of Hungary’s external and internal borders (that is, which neighbouring countries would enter the Schengen area with Hungary).^[13] —The additional issue was the conformity of the existing nuclear power plant (Paks I) with the safety rules of the Community.^[14]

Within the framework of the current study, the author elaborates in detail only on two topics, which he deems to be still relevant – and does not deny the arbitrariness of picking them for analysis. These are namely: (i) the free movement of capital, and the restriction Hungary asked for during the negotiations and (ii) the issue of introducing the common currency.

Why was the exemption under the free movement of capital so important for Hungary? The applicable interpretation of EU law is nowadays – as it was back then – that agricultural lands fall under Article 63 of the TFEU, which guarantees the free movement of capital. This is advocated by the European Commission^[15] and supported by the case-law of the Court of Justice of the European Union.^[16] At the time of the accession negotiations, Hungarian decision-makers foresaw a situation where the relatively cheap Hungarian agricultural lands may be bought up by Western investors. This had in fact happened in a neighbouring Member State.^[17] – In Juhász’s view, the Hungarian delegation successfully avoided this situation by reaching a favourable compromise with the possibility of a 7+3 years long derogation period. The derogation was enacted into Act LV of 1994 on Agricultural Land by Act XXXVI of 2004.^[18] The derogation period provided Hungarian legislation enough time to elaborate a regulation that ensures Hungarian interest in keeping the agricultural land in Hungarian hands, while also conforming with EU law.^[19] However, there is still a debate between Hungary and the European Commission about the Hungarian regulation that seeks to maintain certain restrictions —mainly on the acquisition of arable land by foreign legal persons. The sustainability of the current market-oriented regulation of the EU is also questioned in scientific literature.^[20] Many argue that it would be better if the member states had larger space to manoeuvre, so that they can decide on the conditions of trading in their arable lands.^[21] The significant differences in the price of arable land among member states still causes a problem worth decision-makers’ attention.^[22]

“There was a bright optimism”, as Ferenc Bartha^[23] recalled professional opinion around the Millennium on the possibility of introducing the Euro soon after Hungary’s EU accession.^[24] However, as Gottfried reiterated, the issue was soon abandoned, as it became clear that Hungary was far from fulfilling the Maastricht criteria around the proposed date of accession to the EU—originally in 2002. The country was thus scheduled to enter as a member state with a derogation under the Founding Treaties – currently Article 139(1) of the Treaty on the Functioning of the European Union.^[25] While some argue that Hungary does not need the common currency,^[26] which has been a longstanding opinion of the current ruling party and the governor of the Hungarian Central Bank (HCB), György Matolcsy. In 2023 both the then Minister of Finance^[27] Mihály Varga^[28] and Matolcsy himself^[29] made statements on the possible introduction of the Euro around 2030.^[30] —Still, there are some constitutional issues around the issue that may need to be dealt with.^[31]

Concluding remarks

As this short study shows, some of the issues tried within the accession negotiations are still open and subject to debate. Accordingly, they may arise again when a possible revision of the Founding Treaties occurs, and Hungary has to ensure that her national interest prevails.

^[1] Based on the bibliography available at the CJEU website [Online]. Available at:  https://curia.europa.eu/jcms/jcms/rc4_170590/en/ (Accessed: 27 August 2024).

^[2] STEM, 20 Years of Czech EU Membership in the Attitudes of the Czech Public (1 May 2024) [Online]. Available at: https://www.stem.cz/en/20-years-of-czech-eu-membership-in-the-attitudes-of-the-czech-public/ (Accessed: 27 August 2024).

^[3] Juhász E. (2019), Magyarország főbb problémái a csatlakozási tárgyalásokon – és hogyan látom ezeket ma, Európai Jog, 2019/6. pp. 1-8., 2-3.

^[4] Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Hungary, of the other part [Online]. Available at: https://edit.wti.org/document/show/b4465a1e-22db-4e6c-8e37-8923fab825ed (Accessed: 27 August 2024).

^[5] ‘Having in mind that the final objective of Hungary is to become a member of the community and that this association, in the view of the parties, will help to achieve this objective […]’.

^[6] Juhász 2019, p. 3.

^[7] Eventually it was submitted by the government in 1994 based on authorisation of the Hungarian Parliament (Országgyűlés) by Resolution 16/1994 (III. 31.), authorising the Government of the Republic of Hungary to submit the application of the Republic of Hungary for accession to the European Union.

^[8] Juhász 2019, pp. 3-4.

^[9] Based on the bibliography available at the Hungarian Central Bank’s website [Online]. Available at: https://www.mnb.hu/en/monetary-policy/the-monetary-council/members-of-the-monetary-council/dr-peter-gottfried (Accessed: 27 August 2024).

^[10] Becsky R. (2004), A változást és az állandóságot együtt kell képviselnünk, Európai Tükör (2004/3) p. 14.

^[11] Presidency Conclusions of the Luxembourg European Council 12 and 13 December 1997.

^[12] Becsky R. (1999), A felkészülés fő irányai változatlanok, Európai Tükör (1999/2-3) pp. 4-5.

^[13] Juhász 2019, pp. 4-8.

^[14] Fortunately, Hungary – unlike Slovakia and Lithuania – did not have to shut down its nuclear power plant – see: European Commission, Comprehensive monitoring report of the European Commission on the state of preparedness for EU membership of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia. COM (2003) 675 final, Brussels, (5.11.2003).

^[15] European Commission Interpretative Communication on the Acquisition of Farmland and European Union Law (2017/C 350/05).

^[16] C-370/05, Festersen, Judgment, 25 January 2007, paras. 21-23, C-452/01, Ospelt, Judgment, 23 September 2003, para. 24.

^[17] Anghel I. M. (2017), Acquisition of Agricultural Land by Foreign Nationals in Romania. Hampers the Exercise of its Territorial Jurisdiction, Pandectele Romane (2) pp. 77–104.

^[18] According to the new wording of the Section 7 of the 1994 Law:

(1) ‘Foreign individuals and legal persons may not acquire ownership of agricultural land, except as provided in paragraph (2).’

(2) ‘The rules applicable to a domestic individual shall apply to a national of a Member State who wishes to establish himself/herself in Hungary as a self-employed farmer and who has been continuously and legally resident and engaged in agricultural activity in Hungary for at least three years.’

^[19] Juhász 2019, p. 5-6.

^[20] Szilágyi J.E. (2024) Chapter 1. The International and EU Legal Dimensions of Agricultural Land Acquisition and the Room for Nation-State Action in Szilágyi J. E. (ed.) Legal Protection of Farmers Wydawnictwo Instytutu Wymiaru Sprawiedliwości Warszawa 2024, p. 295., pp. 29-78.; Szilágyi J. E. (2018), Agricultural Land Law: Soft Law in Soft Law, Hungarian Yearbook of International Law and European Law pp. 189–212. https://doi.org/10.5553/HYIEL/266627012018006001011; Szilágyi J. E. (2017b), Cross-border acquisition of the ownership of agricultural lands and some topical issues of the Hungarian law, Zbornik Radova (51(3-2)) pp. 1055–1072. https://doi.org/10.5937/zrpfns51-13620.

^[21] ECOSOC, NAT/632, Brussels, 21 January 2015; Directorate-General for Internal Policies of the Union: Extent of Farmland Grabbing in the EU, 2015; EP: Report on the state of play of farmland concentration in the EU: how to facilitate the access to land for farmers; Szilágyi J. E. (2015), Conclusions, Journal of Agricultural and Environmental Law (10(19)) pp. 96–102.

^[22] See in detail: Marinkás Gy. (2022), Human Rights Aspects of the Acquisition of Agricultural Lands With Special Regard to the ECtHR Practice Concerning the So-Called ‘Visegrád Countries’, Romania, Slovenia, Croatia, and Serbia’, in Szilágyi J. E. (ed.), Acquisition of Agricultural Lands: Cross-border Issues from a Central European Perspective, Miskolc–Budapest: Central European Academic Publishing. pp. 25–53. https://doi.org/10.54171/2022.jesz.aoalcbicec_2.

^[23] The last governor of the HCB prior to the change of regime (1988–1990) and the member of the Medgyessy Government’s governmental working group mandated to prepare the introduction of the Euro.

^[24] Kenessei A. (2022), Lesz valaha magyar euró? Múltidéző interjúk, 4. rész: Bartha Ferenc, Menedzsment Fórum, Date of republication: 26 December 2022 (hereafter: Kenessei, 2022, No. 4.) [Online]. Available at: https://mfor.hu/cikkek/tortenelem/lesz-valaha-magyar-euro-multidezo-interjuk-4-resz-bartha-ferenc.html (Accessed: 27 August 2024).

^[25] Consolidated version of the Treaty on the Functioning of the European Union (OJ C 326, 26.10.2012, pp. 47–390).

^[26] Gottfried P. (2021), Thoughts on the Dilemma of When to Introduce the Euro in Hungary, Financial and Economic Review, (20(3)) pp. 110–126.

^[27] MTI (2023), It Is Too Early to Talk about Joining the Euro Zone, Says Finance Minister, Hungary Today, 28 August [Online]. Available at: https://hungarytoday.hu/it-is-too-early-to-talk-about-joining-the-euro-zone-says-finance-minister/ (Accessed 5 November 2023).

^[28] In the meantime – that is after the ‘closing of the manuscript’ –, the President of the Republic – Tamás Sulyok – appointed Varga as the governor of the HCB from 4 March 2025, the same day when the term of Matolcsy expires. Varga’s term as Minister of Finance ended on 31 December 2024. – See: Decision No. 334/2024 (XII. 23.) of the President of the Republic on the appointment of the Governor of the Hungarian National Bank; see also Decision of the President of the Republic 333/2024 (XII. 23.) KE of 23 December establishing the date of termination of the mandate of a Minister.

^[29] Heinrich M. (2023), Hungary central-bank chief sees chance for euro adoption only after 2030, Reuters, 2 June 2023 [Online]. Available at: https://www.reuters.com/markets/europe/hungary-cbank-chief-sees-chance-euro-adoption-only-after-2030-2023-06-02/ (Accessed: 27 August 2024).

^[30] For a detailed introduction of the opinions and statements of high-ranking Hungarian decision-makers throughout the decades, please see: Marinkás Gy. (2024), Some Remarks on the ‘Hungarian Euro’, Law, Identity and Values (4(1), 2024) (Under publishing).

^[31] Marinkás Gy. (2024), Some Monetary Policy Related Constitutional Issues in the V4 Countries (Under publishing. To be published at the CEA Blog: https://centraleuropeanacademy.hu/blog/).