Hidden Depths: The Case of Hungary

Abstract

This report investigates corruption risk of EU funds spending in Hungary within the framework of the Public Procurement Law. Its finding is that in spite of what is a tight regulatory framework EU funds are likely to fuel the abuse of public spending. Even though public procurement using EU funds faces considerably more stringent regulation, their use poses much greater corruption risks when compared with funds procured domestically and corruption risks are particularly pronounced for large projects. The report also argues that large-scale institutionalized corruption in Hungary may be widespread and driven primarily by political cycles. Such corruption, often labelled “legal corruption”, typically involves neither bribery nor collusion between lower level bureaucrats and private individuals; rather, it operates through contractual relationships which benefit the highest echelons of the political and business elite. There are a small number of new anti-corruption initiatives of the new government which entered office in 2010, but while they might indicate a positive step towards higher public sector integrity, their results are yet to be seen.