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The timetable of integration was drawn up in Hungary in 1993, and was actually announced in Brussels in November 1993. On that basis, Hungary was the first to submit its request for accession on March 31, 1994, and it handed over a Memorandum on Hungary's preparations and schedule on April 22 of the same year. The Hungarian strategy of integration has enjoyed continuous support, not interrupted by the elections of May 1994, from the new government and from all parties represented in Parliament. By 1997, Hungary will be ready to start negotiations, and by the year 2000, it will be, with a few exceptions, ready for Europe.
"Qualified" for Europe: the costs of integration
Although what had to be done was defined in Hungary at a relatively early stage, "maturity" for Europe has evolved at a different rate and reached different levels in the various social and economic areas. With the signing of the association agreement, the requirements of full membership were taken into consideration at every step by the Hungarian legislature. As a result, well over 70 per cent of Hungary's legislation is compatible with the legal system of the Union, a far from negligible achievement, given that the country is still at least five years away from membership.
Co-operation in law enforcement and justice involves considerable costs in training, quality improvement and recruitment. In the case of a multi-stage, step-by-step enlargement, the Eastern and South-Eastern borders of the Union will be located in Hungary, making the job of Hungarian border control and customs increasingly difficult. Preparations have already begun, but the funds required by the achievement of full efficiency would run into 0.4-0.5 per cent of GDP.
Nor is military integration exempt from school fees. NATO's receptiveness is strongly affected by the composition of Hungary's "dowry". Increasing the value of that dowry requires replacing the Hungarian army's Soviet-made weapons systems with NATO-compatible military equipment, reorganization of the Hungarian command, decision-making and management structure and its integration into NATO structures, training and retraining of personnel, creation of suitable logistic, transport, information and storing capacities. Meeting the minimum demands would require raising the country's present defense budget by a full 1 per cent of GDP over four years, should efforts aimed at obtaining the extra money through external funding fail.
It will be the economy which will bear the brunt of the burden of integration into Europe. Reasonably enough, the EU will not want to integrate backward, stagnating countries struggling with severe balance problems. The Maastricht norms specify strict requirements on domestic and foreign balances. True, the overwhelming majority of the present member countries fails to measure up to those standards, and a breakthrough is not expected by the end of the decade either. The new members, however, are likely to face even stricter demands. Therefore, Hungarian economic policy has to begin preparations for meeting the Maastricht norms.
From a macro-financial point of view, it is strictly laid down that the budget deficit of the member countries must not exceed 3 per cent of annual GDP, and government debt 60 per cent. According to the medium-term plans of the Hungarian government, in 1996 the budget deficit, as opposed to 6.5 per cent of GDP in 1995, would be only 4 per cent in 1996, and 3 per cent in 1997. The gross indebtedness of the central budget would drop from the present 87 per cent to 61 per cent in 1998. Should the "forced march" to Maastricht be successful, Hungary, with regard to those two macro-financial indicators, would become fully "Maastricht-qualified" by 1998, at the start of negotiations.
That schedule, somewhat dream-like as it is, however, has to be made more precise and specific in two respects. The military, internal security and customs organization costs of eligibility for NATO and the European Union, making up for the customs revenues lost up to then and also as a consequence of membership, the additional structural modernization, improvement of competitiveness and development of education needed to make the country able to face keener outside competition, require a further improvement of the eco- nomic equilibrium making up another 3 per cent of GDP. In other words, the country is expected to achieve an improvement in the budgetary equilibrium to the order of 7 per cent of GDP between 1995 and 1999. That is something the country would be unable to produce on its own if the institutional framework of the parliamentary system is to be kept going, and relative social stability is to be maintained.
At the same time, however, a different light is cast on the entire situation if it is considered that all the present percentage projections are based on statistically registered GDP. That figure, in fact, falls nearly 20 per cent short of the total generated by the Hungarian economy. The statistically registered GDP figure covers only a minor part of the profits of the black economy, which produces some 28-33 per cent of GDP. If those incomes were included in the estimates, the deficit, measured as a percentage, would be reduced by 20 per cent by the start. Obviously, there is no chance of a statistical solution to this problem. A partial legalization of the black economy - with the help of certain preferences and through more efficient controls and policy conditions making for economic growth - however, could furnish a realistic base for "Maastricht-compatible" indices of budget deficit and indebtedness. Although the incomes from privatization are not intended directly to reduce the budgetary deficit, even the sale of a half of the some $10 billion worth of privatizable government property might suffice to cover the Maastricht targets, and in itself reduce the size of interest-carrying state debt by 25 per cent. [...]
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Europe today is an international economic and commercial power but, as was sadly shown by the tragedy of Bosnia, by no means a military power. Nor can it, unfortunately, be called a future-building power, one with a vision of the future and of ways to achieve it. If it were to turn inward and become preoccupied with procedural and organizational problems, then it would inevitably be left behind in the next century by the dynamic Far East and by an American continent which is showing a strong tendency towards integration. Enlargement is the common interest of the receiving and acceeding countries alike, the condition for organic European development. In the second half of the 1980s, after a period of "Eurosclerosis", we saw an unfortunately short-lived period of European renaissance. The creation of a European Grand Strategy, Eastern enlargement and fresh blood may bring back the forces of that renaissance, the forces of Eurodynamism.
Béla Kádár is Chairman of the Budget Committee of the Hungarian National Assembly. He was Minister of International Economic Relations in 1990-94.