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OPPONENTS ARGUE THAT THE ENVIRONMENT FUND LACKS TRANSPARENCY AND COULD LEAD TO MISHANDLING OF PUBLIC MONEY

Debated fund pushed through

DARK clouds momentarily gathered over next year's state budget when the Hungarian Coalition Party (SMK) sided with opposition parties to push through the Environment Fund Act in parliament.
The Act obliges the government to launch the Environment Fund in January 2005, requiring it to find an additional Sk1 billion (€25 million) in the state's 2005 coffers.
After much laying on of blame, with particular attention given to the SMK for allegedly violating its ruling coalition agreement by allying itself with the opposition, coalition partners agreed October 25 that the Environment Ministry would come up with the €25 million for the fund itself.

DARK clouds momentarily gathered over next year's state budget when the Hungarian Coalition Party (SMK) sided with opposition parties to push through the Environment Fund Act in parliament.

The Act obliges the government to launch the Environment Fund in January 2005, requiring it to find an additional Sk1 billion (€25 million) in the state's 2005 coffers.

After much laying on of blame, with particular attention given to the SMK for allegedly violating its ruling coalition agreement by allying itself with the opposition, coalition partners agreed October 25 that the Environment Ministry would come up with the €25 million for the fund itself.

Experts say that it will be a Herculean task for Environment Minister László Miklós to find the money to launch the Environment Fund. The fund is supposed to remain independent from the state with resources coming mainly from environmental fundraising and income generated by fines against businesses that exceed water and air pollution limits.

The Environment Fund was established to provide subsidies and loans with significantly lower interest rates than those provided by commercial banks to small towns and villages with appropriate environmental projects.

The predecessor of the Environment Fund was the state Fund for the Environment, which functioned between 1992 and 2001. It was dubbed "ineffective" and melted back into the state's budget.

Minister Miklós stands firmly behind the creation of the fund, and its earlier than anticipated launch date. He believes that it will help towns and villages build much needed sewer systems and wastewater purifiers.

Miklós rejected claims made by his detractors that the SMK-appointed minister would give preferential treatment to projects benefiting those villages with a high Hungarian population.

He told the news wire SITA that the funds would be distributed according to the proportion that the region is lagging behind others, so that regional differences would be gradually erased.

The Environment Minister promised to submit an environmental action plan within three weeks.

The Finance Ministry argues that the Environment Ministry should be financing these activities itself, and that the creation of the fund was a superfluous move that, in the end, would only increase bureaucracy.

"Funds [like the Environment Fund] create an avenue for the non-transparent handling of taxpayers' money and encourage corruption. The original environmental funds were cancelled under the administration of [Brigita] Schmögnerová, which turned out, for the reasons I just mentioned, an unambiguously correct step," Peter Papanek, advisor to the Finance Minister, told The Slovak Spectator.

According to Papanek, the establishment of the Environment Fund is not a solution to the problems of financing the environment sector, and not entirely compatible to increasing the transparency of public finances, which is a part of the ruling coalition's structural reform platform.

"The establishment of the Environment Fund is a negative signal, not only for international institutions but also for other departments that might call for the creation of similar public funds," Papanek added.

According to the Environment Fund Act, Minister Miklós will control the head of the fund and oversee the creation of a council, which will advise the minister on the distribution of the money. The distribution will also fall under the minister's authority.

The Finance Ministry had hoped to postpone the creation of the fund until 2006 to keep the 2005 public finance deficit at 3.4 percent of GDP.

The leader of the SMK and deputy speaker of parliament, Béla Bugár, suggested that the €25 million could be found by delaying the drawing of the EU structural funds for the environment, a move that would lower the need of co-financing the state budget.

The fact that the SMK teamed up with the opposition to pass the Environment Fund Act left another scar on the fragile body of the ruling coalition.

For its part, the SMK does not feel that it breached any ruling coalition agreement.

"The creation of the Environment Fund was passed based on a deputy initiative in the parliament. There was no particular coalition agreement made on the approval or the rejection of the fund, so the coalition agreement could not possibly have been violated," spokeswoman for the Hungarian Coalition Party, Lívia Pokstaller, told The Slovak Spectator.

"The SMK is content that the whole matter was moved to a more pragmatic level and that the ruling coalition council has already started seeking the necessary resources. We are confident that the Environment Minister, together with the Finance Minister, will find a suitable way of financing the fund," she added.

Not all ruling coalition partners feel so sanguine. Prime Minister Mikuláš Dzurinda said October 23 that the SMK's conduct "disappointed" him.

A few days later, Dzurinda said that the ruling coalition's unity and keeping the 2005 public finance deficit at 3.4 percent remain his top priorities.

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