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The Effects On Hungary As A New Member Nation In The European Union

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The Effects on Hungary as a New Member Nation in the European Union

Team 5

Paul Davis

Gulizar Halis

Kristin Hanlon

Alyson Heller

Overview/History of Hungary and the European Union

The nation of Hungary is a country that has come a long way in a short period of time. In the years since the fall of communism in 1989 in this country, Hungary has managed to establish an extremely prosperous economy and population. Because of this, Hungary has developed into one of Eastern EuropeЎЇs most attractive business environments. ÐŽoThe level of political, structural and economic stability it has achieved demonstrates the success of its transition into a modern market economy. ÐŽ± This stability has allowed for Hungary to become a member of numerous international organizations, such as the OECD, NATO, and most recently the European Union in May 2004. HungaryЎЇs membership in the EU, although short so far, has brought about many changes in the nation, both positive and negative. The nation has always served as a crossroads that connects Eastern Europe to Western Europe, and this coupled with EU membership will only allow HungaryЎЇs economy to grow more.

The Eastern European nation of Hungary has a population of a little more than 10.2 million people with about 2.5 million, or 25% of the country's population, living in and around the capital city of Budapest. HungaryЎЇs populace is made up of mostly Hungarians with ethnic minorities of Romanians, Germans, Serbs, and Slovaks. The nation is mostly Catholic with minority religions of Calvinism, Lutheran, and other religions. The life expectancy for the total population is 72.25 years and the literacy rate is very high, with 99.5% of the total population able to read and write, which demonstrates the exceptional educational system in this country. The nation has well-established transportation, communication, banking, insurance, accounting, and legal systems. All of this allows for a prosperous nation.

For centuries Hungary had been part of the Holy Roman Empire under the rule of the Hapsburg monarchy. This was until the monarchy was overthrown during WWI and Hungary became a democratic republic; however political and social unrest continued for many years, with the government returning to a monarchy at the end of WWI. The nation also lost two-thirds of its territory as part of the unfair peace settlements following this war. This coupled with economic distress provided ÐŽoincentive for resurgent Hungarian nationalism. ÐŽ±

After World War II, Hungary became a republic once again and held democratic elections after which a coalition government was formed. However, the Hungarian Communist Party, supported by the Soviet army, did not accept the results and overthrew the lawful government and assumed power. Communist policies were implemented in the nation, including the collectivization of agriculture, forced development of heavy industry, and rigid central planning, all of which ruined the economy within a few years. Hungary also joined the USSR and other Eastern European Communist countries in forming the Warsaw Pact. In 1956, a revolt broke out against the communist government. This was at first successful, but then the Soviet army put down the rebellion and did so for any other revolts that followed in the years to come. As inflation grew, as the standard of living became lower, and as the economic condition of the country worsened, strong opposition to the government began to grow.

Slowly over the years, the government began to ease their strict policies and allowed the economy to partly operate according to free market forces. In the summer of 1989, negotiations took place between the representatives of the government and the parties of the opposition concerning the creation of the political and legal conditions for peaceful transition and the creation of the democratic rule of law with a multiparty system. The government began to ease restrictions on emigration, revised the constitution to provide for a democratic multiparty system, and changed the countryЎЇs name to the Republic of Hungary. In 1990, free elections were held, the first in 45 years, completing the establishment of parliamentary democracy in Hungary. ÐŽoThe new National Assemblies and the coalition governments formed after the elections committed themselves to the establishment and stabilization of the political, economic and legal foundations of the systemic change. ÐŽ± The occurrences in Hungary helped to bring about the demise of communist rule in several other countries in Eastern and Central Europe as well.

After non-Communists came to power, ÐŽothe country accelerated the pace of free-market reforms. ÐŽ±The government was successful in attracting foreign investment, and by 1993 Hungary accounted for more than half of all foreign direct investment in Eastern Europe. ÐŽoSince 1989, the private sector has grown from approximately 20% to over 80% of the GDP, and nearly 2,000 state-owned companies were privatized. ÐŽ± One of the main attractions of Hungary is that is has a developed ÐŽowestern-style business infrastructureÐŽ± available at one of the lowest costs in Central and Eastern Europe.

Most of the businesses in Hungary are headquarter in and around the capital city of Budapest. The main industries of the Hungarian are in industrial production of high-tech products such as computers, telecommunication equipment, and electronic consumer goods like televisions. Another important industry in Hungary is the automotive industry with motor vehicle manufacturing and automotive parts manufacturing. These industries account for over half of HungaryЎЇs industrial output.

In the early 1990ЎЇs as HungaryЎЇs economy began to grow, the nation wanted to join the European Union. An application for membership was submitted in 1994 and they were finally made a full member in May 2004. For Hungary to become a member, they had to meet many conditions set forth in the Copenhagen Criteria; these included economic, political, and infrastructure conditions. For the first condition, Hungary had to demonstrate, ÐŽostability of institutions guaranteeing democracy, the rule of law, human rights and respect and protection of minorities. ÐŽ± Hungary had met this condition by having free and fair



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