The European Union currently allocates 58 billion euros annually to subsidize agriculture. These expenditures account for about one-third of all EU spending. For years, EU policymakers have looked enviously at the ease with which billions are spent yearly on the Common Agricultural Policy (CAP). Reports of fraud and abuse are now playing a major role in the upcoming discussions about a drastic revision of the agricultural funds.
In most Central and Eastern European countries, agricultural subsidies end up in the hands of self-serving politicians at the expense of farmers, who see their land disappear. The New York Times recently investigated how the EU subsidy system works, and the Flemish newspaper De Morgen compiled the following breakdown of how the circle of friends surrounding Hungarian Prime Minister Viktor Orbán funneled EU millions to themselves in Hungary.
How does Hungarian Prime Minister Orbán operate? To qualify for European subsidies, you need land. So Orbán sold off thousands of hectares of state land to close associates, family, and friends. One of his childhood friends became one of Hungary's richest people in this way. While agricultural subsidies are intended for small farmers, research shows that 80 percent of the money ends up in the hands of 20 percent of the landowners. Farmers who criticize the system systematically miss out on subsidies and face audits or strange environmental inspections. Such intimidation makes the communist era seem not far away.
In 2010, Orbán made another bid for the premiership, hoping to win farmers' votes by forming a coalition with farmer leader Angyan. He succeeded amply and made Angyan Secretary of State for Rural Development.
Orbán leased large tracts of land to political allies because European subsidies are distributed based on the size of the plot. Orbán's government began leasing public lands in 2011. Although it was said that only local farmers were eligible, the land went to Orbán’s allies, who paid very little rent.
In 2015, Orbán went even further by selling hundreds of thousands of hectares of state land to political allies and family members. In this way, Orbán strengthened his power over the countryside. The buyers, in turn, can count on millions in agricultural subsidies. Dissatisfied with this direction, the Secretary of State resigned and has since turned against Orbán.
The European Union prefers not to interfere in politically sensitive domestic matters and usually relies on elected national politicians. But in reality, Europe simply lacks the tools to intervene in such situations. In 2015, after warnings about practices in Eastern Europe, the European Parliament commissioned a report from the Transnational Institute in Amsterdam focusing on land grabbing and dubious deals. That report revealed partly the same issues as those uncovered in The New York Times investigation.
Following the investigation, the European Commission stated that it tolerates no fraud with agricultural subsidies and conducts audits. The 2018 annual report of the European Court of Auditors cites an error rate of 2.4 percent for EU agriculture and rural development expenditures. For direct payments to farmers, no error rate was even established.
The member states and the European Parliament are currently negotiating expenditures through 2027. In that context, the European Commission has proposed linking fund payments more closely to good management and respect for the rule of law. The European Commission also has high hopes for the newly appointed European Public Prosecutor, who will be able to prosecute and bring to court fraudulent use of European funds starting next year.
Now that significant cuts must be made in the coming years (due to Britain's departure or a desire for new policies), and heads of state and ministers want to keep their annual contributions at most at current levels, the question is no longer if agricultural subsidies will be cut, but how much they will be reduced.