Brussels, 20 December 2010
Commission grants Hungary extension of transitional period for the acquisition of agricultural land
The European Commission decided today to grant Hungary a three-year extension of its transitional period for the acquisition of agricultural land by non-resident EU citizens and all legal entities, following a request by Hungary on 10 September 2010. The Commission has granted this extension on the basis of the information supplied by Hungary which highlights a threat of serious disturbances to the agricultural land market otherwise. The Commission also calls on Hungary to speed up its efforts to complete ongoing agricultural reform and, in particular, make progress on other institutional factors, such as completing restitution programmes.
Internal market and Services Commissioner, Michel Barnier, said: "The decision taken today is based on a careful analysis of all the arguments. We grant Hungary the extension of the transitional period for three additional and final years because we believe that this will provide the country with the opportunity to continue its preparatory work towards full liberalisation. This will then allow the Hungarian agricultural sector to benefit fully from the EU Internal Market".
In its request, Hungary highlighted the need for the extension on the basis of persistent differences in land prices and income levels of farmers in Hungary compared to those Member States that joined the EU before 2004.
The agricultural sector in Hungary has seemingly been affected more severely by the global crisis, with real agricultural income falling by a significantly higher rate than elsewhere in the EU (about 30% against a Union average of about 12%) in 2009. This fact was aggravated by particularly difficult credit conditions in the country.
Other specific factors impacting on Hungary have been the low progress in the consolidation of land ownership in the agricultural land market as well as the long-lasting and still incomplete process of restitution and privatisation.
In light of the specific situation in the Hungarian agricultural market, the Commission considers that the claimed threat of serious disturbances on the Hungarian agricultural land market exists.
However, the Commission reminds Hungary of the benefits of an increased inflow of foreign capital into the agricultural land market and the positive effect that foreign investment would have in the provision of capital and know-how, on the functioning of land markets, and on agricultural productivity1.
Since the extension can be granted only once, Hungary is expected to use the remainder of the transitional period more effectively than to date. It is indispensable that the country makes progress regarding institutional factors which influence the development of agricultural markets such as:
In view of the future and inevitable liberalisation of the agricultural market, the Commission advises Hungary to consider implementing a progressive loosening of the restrictions on foreign ownership during the remaining period of the application of the transitional measures.
The 2003 Act of Accession provides that Hungary may maintain in force the existing prohibitions in its legislation at the date of accession for a seven-year period (i.e. until 30 April 2011). These prohibitions are applicable to the acquisition of agricultural land by non-resident EU citizens and all legal persons.
This is a temporary exception to the free movement of capital as guaranteed by Articles 63 to 66 of the Treaty on the Functioning of the European Union. The main reason for granting Hungary the transitional period upon accession was the need to safeguard the socio-economic conditions for agricultural activities following the introduction of the single market and the transition to the Common Agricultural Policy.
The 2003 Act of Accession has also foreseen that if sufficient evidence is provided that there will be serious disturbances on the agricultural land market upon expiry of the transitional period, the Commission, at the request of Hungary, can authorise extension of the transitional period for up to a maximum of three years. There are no further prolongations permissible.
The Commission decision of 20 December 2010 extending the transitional period concerning the acquisition of agricultural land in Hungary will enter into force on the 20th day following that of its publication in the Official Journal of the European Union.
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This has already been stressed in the Mid-term Review of the transitional measures presented by the Commission to the Council in 2008; COM(2008)461 final, 16 July 2008.