Hungary bids to prolong ban on sales of farmland

Date: 20/05/1999

By Simon Taylor

Hungary is planning to ban foreigners from buying farmland for a decade after it joins the EU in a bid to protect its vulnerable agriculture sector against western speculators.

Endre Juhasz, Hungary's ambassador to the Union, told European Voice this week that his country would seek a ten-year exemption from EU rules allowing the free sale and purchase of farmland.

Juhasz said the move was motivated by the desire to prevent farmland from being snapped up in Hungary, where prices are up to 40 times cheaper than in existing Union member states and where foreigners are currently only allowed to rent farmland under fixed-term contracts.

Under Budapest's plan, non-agricultural land would be protected for up to five years.

A European Commission official acknowledged that the issue was a sensitive one, but said the Union believed all transition periods should be as short as possible.

" The argument that the difference in land prices would only be to the benefit of speculators is a valid one," he said, adding that it was still too early to say whether Union governments would agree to Budapest's request.

However, Hungarian officials believe it will be difficult for the EU to reject the bid. They point out that existing member states such as Sweden were given similar exemptions when they joined the Union.

Other former Communist countries applying for EU membership are expected to apply for similar delays.

Fears that foreign investors would take advantage of low prices to buy up massive tracts of farmland are rife in most countries, and especially in Poland, where the large agricultural sector wields considerable political power through the Peasants' Party PSL.

Foreign ownership of farmland is a serious political issue throughout the region because of the applicants' history of invasion and occupation by neighbouring countries.

Hungary's bid to defend its farmland against foreign speculators is just one sign of a hardening of positions on both sides in the enlargement negotiations. This week, Union governments refused to accept bids from the applicants for special treatment on state aid rules and customs tariffs.

Budapest's stance on farmland is contained in its position paper on the free movement of capital. It is also calling for a five-year delay before complying with rules governing how much state-backed pension and health funds can invest in foreign assets. Juhasz said the delays were necessary to maintain public confidence in the recently reformed health insurance system.

As part of its submission on social policy, Budapest is also asking for a five-year exemption from EU limits on the tar content of cigarettes because levels tend to be higher in Hungarian brands. Officials argue that Hungary's tobacco industry, which employs 15,000 people in the country's poor north-eastern region, needs time to switch to producing a range of new brands.

By presenting four new position papers on free movement of capital, social policy, energy and economic and monetary union, Hungary has now covered more than half of the 31 areas of EU legislation. But the Union is not expected to begin negotiations on the new chapters until after Finland takes over the EU presidency in July.