Hungarian Transport on the Way to the EU Accession

András Lukács

(Clean Air Action Group, Hungary)

Concrete cases


It might be most interesting to start with some concrete cases of how the European Union has been helping Hungary in improving its transport infrastructure and what effect this had on the environment.While the need to harmonize Hungarian laws with EU environmental directives may help tighten environmental regulation, the overall environmental effects of accession in the transport sector are much more ambiguous. Understanding how the process of accession with the EU is affecting Hungary's transport system and its environment is best made clear by a review of specific cases.



The 40 km section of the motorway M1 (leading from Budapest to Vienna) built with a loan from the European Bank for Reconstruction and Development (EBRD) proved a catastrophe from financial, transportation and environmental aspect. (Although EBRD is not explicitly a EU institution, its Board of Directors consists of representatives of the governments of EU countries, therefore we must mention here the activities of this bank too.) Most of the car traffic and almost all of the trucks continued to use the old road through towns and villages because of the high tolls. The company operating the motorway went bankrupt and the state had to pay the costs. Just now the Hungarian state took over the motorway and reduced the tolls by 50%.

There have been similar problems with the motorway M5 (leading south from Budapest) financed also by EBRD and the motorway M3 (leading to the east) financed by the European Investment Bank. After the construction of the new sections of these motorways and introduction of tolls, strong protests followed from local communities struck by the huge amount of through-traffic. The government was forced to reduce the fees for use of the motorways – and had to pay the bill with the taxpayers' money. By the way, even before the construction of the M3, the World Bank came to the conclusion that this investment would be viable neither financially nor economically.

The M0 motorway was planned as a four-lane ring road around Budapest. One of the Mmost controversial parts was the its northern section which passes through the ecologically sensitive Buda hills and passes some high density apartment complexes. Nonetheless, financing for this northern section was approved by both the European Investment Bank (EIB) and the European Union's PHARE grant funds. Local citizens learned about the construction when they were awakened one morning in the Spring of 1998 to the sound of construction equipment passing by their homes.

The latest scandal rose when the northern section of the motorway M0 has been started.

In a precedent-setting case brought by two environmental citizen groups, the Capital Court of Budapest has issued an injunction to halt construction of the northern section of the M0 motorway. In its decision, dated 21st July 1999, the Court stated that the new motorway would worsen the local environment, endanger the health of tens of thousands of local citizens, and cause economic damage to area residents.

The M0 motorway was planned as a four-lane ring road around Budapest. Financing for the northern section of the M0 came mainly from the European Investment Bank (EIB) and the European Union's PHARE. Its construction began in Spring 1998 in an irregular manner: local citizens woke up one morning to the sound of construction equipment passing by their homes. The locals had received no prior information about construction of this section of the motorway.

The M0's northern section cuts through a nature reserve and passes within two hundred meters of Budapest's Kaposztasmegyer residential area. A junction would pass through the neighborhood very close to a school and a kindergarten. Until now, the Kaposztasmegyer neighborhood has been known as a green area of clean air and peaceful surroundings. Many families moved to the neighborhood because of these qualities.

Confronted with the motorway's construction, local citizens organized themselves into the Kaposztasmegyer Environmental Protection Society (KEPS) and asked for professional assistance from the Clean Air Action Group (CAAG), a national federation of eighty-one non-governmental environmental organizations. Together KEPS and CAAG received legal assistance from the Environmental Management and Law Association (EMLA), a national environmental service provider, and from Mr. Istvan Sarosi, a lawyer and resident of Kaposztasmegyer.

Two of the legal arguments against construction of the M0's northern section were that it had been planned without effective public hearings, and that the official environmental impact assessment was disregarded when it proved to be unfavorable to the construction plans. The environmental impact assessment had focused only on passenger traffic and completely omitted trucks, and even so it had found that the expected air pollution levels would exceed limits permitted by Hungarian norms.

Soon after the legal case was filed, together with the CEE Bankwatch Network and the New York-based Institute for Transportation and Development Policy, KEPS and CAAG petitioned the European Investment Bank to withdraw its funding. Sir Brian Unwin, the Bank's president, denied the request. In its response, the Bank stated that any project it finances has been subject to detailed environmental studies and has received the necessary legal clearances. Furthermore, the Bank stated that it was not its task to judge the national legal procedures of the country in which it finances a project. Unlike the World Bank and the European Bank for Reconstruction and Development, which hasve their own internal review procedures to help ensure that the projects they are funding are not causing major environmental or social problems, the EIB feels that it has no responsibility to demonstrate even that the project is consisteant with EU policy or in compliance with the acquis communautaire (EU Directives). While all of these development banks use their loans to leverage policy changes, the World Bank and EBRD other development banks have articulated transport policies which outline the sorts of policy changes they are trying to leverage. The EIB, by contrast, has no official transport policy, leaving its project officers free to leverage policy changes in a completely unaccountable ad hoc manner.

In addition to working through the Hungarian legal system, in November 1988 the mentioned NGOs with the help of the European Environmental Bureau turned for redress to the European Parliament's Ombudsman. According to the environmental NGO's, international financial institutions should be held accountable for the legality of the projects they finance, and they should be consistent with the policies of their governing institutions, such as the EU. In addition, the NGO's argue that such institutions should take into account environmental and social impacts, not just financial, when making the initial funding decisions. The Ombudsman is now investigating the case and asks the EIB for detailed information about its decision to grant the M0 loan.

Another example is the 40 km section of the motorway M1 (leading from Budapest to Vienna), built with a loan from the European Bank for Reconstruction and Development (EBRD). Although the EBRD is not strictly an EU institution, as its Board of Directors also contains Americans, it consists primarily of representatives of the governments of EU countries. The M1 highway proved a catastrophe from financial, transportation and environmental aspect. Most of the car traffic and almost all of the trucks continued to use the old road through towns and villages because of the high tolls. The company operating the motorway went bankrupt and the state had to pay the costs. Recently the Hungarian state took over the motorway and reduced the tolls by 50%.

There have been similar problems with the M5 motorway (leading south from Budapest), also financed by the EBRD, and with the M3 motorway (leading to the east) financed by the European Investment Bank. After the construction of the new sections of these motorways and the introduction of tolls, trucks and cars seeking to avoid the tolls crowded onto parallel local roads, increasing pollution and traffic accidents in those communities. The government was forced to reduce the fees for use of the motorways – and had to pay the bill with the taxpayers' money. Unlike the EIB, which has the nickname of 'Mr. Cash Machine" in Europe because of its lax environmental and financial due diligence, the World Bank refused to fund the M3 highway project because it felt that road maintenance was a higher priority and the project was neither financially nor economically viable.



Transport in Budapest

A major problem with EU transport sector funding is that it is heavily concentrated on international corridors. This means that it is very difficult to get EU money for public transport, even though funds for ring roads, which directly competes with local public transport, is easily available. A major exception to this was the agreement by Tthe EIB made a contract with to the Budapest Municipality to give a a loan to the Budapest Municipalityloan for the construction of a new, 7-kilometer long underground (metro) line.

The environmental organizations, especially the Clean Air Action Group, strongly criticized the project. It showed that this extremely costly investment would not help much in solving Budapest's traffic problem, and at the same time would drain all resources of the Municipality badly needed for the operation, maintenance and renewal of the already existing public transport system. The World Bank also disapproved of the project for the mainsimilar reason. After the national elections in 1998, the new Hungarian government stopped the project, but the municipality is still trying to get hold of EU money ftor finance it.

Another project considered for EU aid (PHARE or ISPA) is the widening of a road on the West bank of the river Danube in the center of Budapest. Both environmental NGO's and local residents are strongly opposing the project because it would increase car and truck traffic in an area where noise and air pollution already exceed the Hungarian and WHO norms. Decision by the EU is not made yet.

The EBRD did give loans for the renewal of buses and tram lines in Budapest and for the introduction of a parking fee system in downtown Budapest, and put a bike lane down a major street, which should bewere regarded as a positive measures.

There were also some smallmodest contributions from PHARE too, especially for the renewal of buses in other Hungarian cities.



As far as railways are concerned, the latest developments in this respect are also not encouraging. While the Hungarian government is pushing for an accelerated construction of new motorways, conditions at the railways are worseningit is letting railways down. For example, during the latest TINA negotiations the Hungarian government asked that 80% of from the EU's ISPA transport funds for transport 80% should be givenused for to motorway construction and only 20% tfor railway improvements.

The EIB and EBRD isare planning to give a loan to the Hungarian state railway company MAV, but the condition is to close about 1000 kilometers (nearly 30 percent) of its branch lines. The Clean Air Action Group pointed out that these branch lines cause only a few percent of the losses of MAV, and the closing of the branch lined would only increase the losses on the main lines.

While the Hungarian government is planning to build 600 kilometers of new motorways in the next ten years, railways are agonizing. Tthe deterioration of the railways over in the last two decades haves been accelerated, caused mainly byfor the following reasons:

1. Hungarian railways for many years had to finance its losses on passenger transport from the profits made in freight transport, because the government failed to pay for the passenger transport services it ordered from the railways . This left no money for renewal of the tracks and rolling stock.

2. Road transport never had to pay the full price of the costs it caused, especially if one considers the external costs.

3. A large part of road freight transport is related to the black market. So railways always had to pay all taxes and duties while road hauliers could and still can avoid much of these.

4. Car production and use has been enhanced by direct and indirect subsidies (government subsidies to car manufacturers, tax-free use of company cars etc.).

5. The use of cars has been widely propagated by both the government and the press as an indispensable part of human life and flourishing economy. At the same time environmental and other considerations were taken into account much less.

6. Hungarian railways practically did not change its own structure. It is still functioning like a huge communist enterprise directed by the ministry of transport and not like a market-oriented company.

The Clean Air Action Group and the Hungarian Traffic Club urge that the EU support the restructuring and reconstruction of railways and give no money for the construction of motorways. At the same time it should urge the Hungarian government to raise all taxes concerning road transport to the tax level in Austria.


Motorways or Railways?

Hungary's intercity transportation system is essentially radial, with Budapest at its center. The major transport corridors connecting the capital to other regions are currently dominated by rail. Highways in the key corridors were planned and initiated over 30 years ago, but construction did not get very far until after 1989. Since then, there has been a large increase in spending on highway construction in four key corridors: the M1 between Budapest and Vienna; the M5 connection to the Balkans, Turkey and the Middle East; the M7 from Budapest to Lake Balaton, Croatia and Slovenia; and the M3 towards Ukraine and the former Soviet Union. Since 1989, rail traffic in all these corridors has continuously declined.

Hungary is now spending far too much money on new roads and not enough on road maintenance and safety. Moreover, some of the new roads cannot be justified by high enough rates of return, nor have their developers performed environmental impact assessments that meet EU standards.

The Clean Air Action Group and Hungarian Traffic Club propose that:

There are alternative ways to link regions, many of them requiring no additional transport modes. Transit alternatives exist for Hungary's Trans-European Transport EN corridors, along with alternative methods of economic development that even circumvent the principles on which the TINAEN concepts are based.


Transit Lorry Traffic

Between 1980 and 1998 the volume of road freight in transit through Hungary grew tenfold. Now one foreign truck passes the Hungarian border every 40 seconds, and a great majority of these trips start or finish within the European Union.

In crossing Hungary, these foreign vehicles cause enormous environmental harm, worsen the nation's traffic jams, damage roads and buildings, and cause a great number of serious accidents. The problem is aggravated by the fact that many of the transit routes cut through towns and cities, with direct effects on the health of local citizens.

We must achieve the following goals:

Up to 1992 this traffic went untaxed, or nearly so. At the end of 1991, however, energetic lobbying by the Clean Air Action Group led the Hungarian Parliament to raise the transit charge tenfold, to HUF 3 (about 3 cents) per ton-kilometer, roughly the same as Austria, although without many of the Austrian restrictions such as the ban on night-time and weekend passage. Even so, the measure was challenged by truck drivers and haulage companies from EC countries, especially Greece.

A delegation from the European Community came to Budapest to negotiate with the Hungarian government on transit fees. Representatives of the Clean Air Action Group met the delegation and explained that raising the transit charge was in full accordance with the associate membership agreement between Hungary and the EC, which was scheduled for approval within the next few months.

The agreement emphasizes the commitment from both sides to observe human rights, and the Action Group argued that the damage caused to the health of thousands of Hungarians by transit traffic was a gross violation of human rights, and that raising the transit charge would both help reduce traffic and provide financing for combatting its harmful effects.

Whereas the total income from transit charges in 1996 only amounted to HUF 1.5 billion, the damage from transit traffic that year alone is estimated to have equalled at least HUF 90 billion. Even with the higher charges, transit traffic would be paying only a fraction of its real costs — so in effect the people of Hungary have been subsidizing foreign trucks' trips through their land. One of the associate membership agreement's main aims is to help Hungary move toward a market economy; and raising transit charges was an important part of this process.

Rail freight transport must be further encouraged according to the EU, too. An increased transit charge will help reduce road freight subsidies and make rail shipments more competitive.

But because of tremendous pressure from the EC delegation, the Hungarian government severely compromised its program. In theory, the state still imposes transit charges, but has issued so many free passes that nearly 90% of the trucks passing through Hungary (and practically all trucks from EU countries) now pay nothing at all.

The Clean Air Action Group and the Hungarian Traffic Club will continue to fight for controls on damages arising from transit traffic, and to make hauliers pay the full cost of their activities. These two NGOs are also lobbying for fuller development of Hungary's rail capacities.





Why Fuel Prices Should Be Harmonized?

As Europe's borders have opened up since 1989, the freer mobility also brought along more opportunities for smuggling. Fuel is one of the products smuggled in great quantities. This is especially true in Central and Eastern Europe. Fuel prices vary greatly among the countries: for example, the price of a liter of diesel oil in the Ukraine is about one-third of the price in Hungary.

The region's lower fuel prices cause serious problems in EU countries, too; smuggling and usage of cheap fuels are not only illegal and untaxed, they also worsen traffic and its accompanying environmental ills.

The solution could be the harmonizing of fuel prices all over Europe. The public and their governments must be alerted to this issue and urged to take steps necessary towards adjusting Central and Eastern European fuel prices to prices in neighbouring EU countries (Austria, Germany, Italy). The EU should give no aid to countries whose governments support (even indirectly) smuggling and the resulting aggravated pollution. EU and non-EU countries alike could raise their prices to a common standard simply by increasing excise duties on fuel.

Even before countries harmonize their fuel prices, we propose that they reign in smuggling by limiting car drivers to 10 liters of tax-free imported fuel per crossing, and lorry and bus drivers to 20 liters. EU countries, particularly Germany and Austria, will likely welcome this assistance in controlling law-breaking and environmental harm. Some other good reasons for harmonizing fuel prices:

Clearly, an international approach, and EU involvement, is essential to combatting the serious problem of "fuel tourism".

The Clean Air Action Group (Levegõ Munkacsoport), founded in 1988,

is a national federation of 76 Hungarian environmental NGO's.

Clean Air Action Group

Budapest, Pf. 1676, HU-1465, Hungary

Phone: +36 1 209-3822 or 361-3631. Fax: +36 1 365-0438

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