Jozsef Graf: "I don't have a faction"

The minister for agriculture and regional development still does not want to be prime minister. He thinks a minority government can work. Food prices can be brought under control by increasing production, but he is prepared to "negotiate" about a Fidesz proposal to cut VAT on food.

© MTI

J.G.: There's about Ft1,300bn available. Around Ft320-330bn has already been awarded. That doesn't mean it's all been paid out: it takes two years to modernise a pig farm, and the accounting comes afterwards. Only around Ft23bn has been paid out so far. We can't award the whole amount in one year, because we'd run out of money, and this programme will run for seven years. We can pay for investments in machinery - if somebody buys a machine and brings the bill, we can pay it. But if somebody is going to carry out construction works for two years, he'll only see the money at the end of the second year.

hvg.hu: How much do people have to contribute themselves when they apply for a grant?

J.G.: It depends on the type of investment. Generally, people have to contribute 50-60 per cent, but in the case of certain investments in environmental protection they only pay 25 per cent.

hvg.hu: A few days ago Fidesz suggested VAT on basic foods should be cut from 20 per cent to 5 per cent. You replied that cutting VAT would not reduce prices in the long run. What did you mean?

J.G.: The Socialist-Free Democrat government cut VAT. It was found that the VAT cut was eclipsed within six months. I spoke to economists who made the same point: they thought that not VAT, but corporation tax should be cut. But cutting VAT on basic foods like meat, flower and milk, as the opposition proposes, could be a starting point for discussions. But increasing production is the best way of regulating food prices. If we increase production, then prices won't get out of control. We've produced some 30 per cent more wheat this year than last year, and corn production has doubled. The prices of the two crops have fallen from some Ft60,000 per tonne to Ft30,000-40,000. But, given the increased production, this hasn't had such a bad effect on producers.

hvg.hu: With oil at $140 a barrel, politicians and economists are calling for biofuels to play a greater role in energy production. Could Hungary be the Kuwait of the 21st century?

J.G.: There is a philosophical discussion all over the world about whether food should be turned into other things. My view is that the crops we produce should serve the country's and its people's interests. If it's economical to generate energy using some of our agricultural output, then I have no moral concerns. But the UN secretary general has criticised biofuel production, saying some 850m people are starving in the world.

But not producing ethanol isn't the answer. Fossil fuels are running out. Hungary will have good grain production this year - some 16-18m tonnes of it. We use 8m tonnes at home. We have serious grain stores.

Why can't we use 2m tonnes of it to produce energy? But we shouldn't go too far: some countries are turning their entire production into ethanol. A grain shortage brings price rises. Hungary needs three or four big ethanol factories. We won't be the Kuwait of the 21st century, but we can cut our energy dependency.

hvg.hu: Fruit producers poured their wares onto the square in front of Parliament last week, protesting about low wholesale prices and demanding help from the government. Will the state support them?

J.G.: As an EU member, Hungary can't give subsidies that distort competition or directly intervene in the market. If we gave any direct support, we'd have to pay five times more in fines to the EU - which would hurt other producers. Producers have to understand that they will have good and bad years.

In the west, people don't pour their milk out in front of the ministries - but in front of the headquarters of the big grocery chains. The buyer is the partner, not the state. Twenty years after the regime change, people are still expecting the state to solve their problems.

hvg.hu: In EU member states, smallholders who use pure fertiliser and don't pollute the environment get serious state subsidies. As do those who raise animals "humanely". Can Hungarian producers be encouraged to move in this direction too?

J.G.: We have funds available for environmentally aware farming. Those funds will grow in size from 2012. Until then, Hungarian producers will only get 64 per cent of the subsidies that are received by farmers in the old member states. The EU keeps introducing new rules on plant and animal protection. At the same time, we hope, German, Austrian and also Hungarian buyers will become more environmentally aware.

Péter Szegő