2. The Association Council reviewed the state of Hungary's preparation for accession in the light of the second regular report, issued by the European Commission in October 1999, the Accession Partnership, updated in December 1999, and the Hungarian National Programme for the Adoption of the Acquis.

The Association Council noted that Hungary continues to fulfil the Copenhagen political criteria. It noted the efforts made by Hungary to implement the medium-term Roma action programme, the successful implementation of which should lead to noticeable improvements in the situation of the Roma minority.

The Association Council welcomed the macro-economic stability, the improved external position and the continued economic growth in Hungary. It encouraged Hungary to reduce inflation and to closely monitor the current account deficit and the fiscal deficit.

The Association Council welcomed the progress achieved by Hungary in terms of legislative alignment, particularly in the area of standardisation, customs, statistics, financial control and, partially, environment. It encouraged Hungary to continue its efforts and respect the timetable it had set in the NPAA concerning State aids, market surveillance authorities, audio-visual, Justice and Home Affairs and transport. The Association Council also recalled the importance of preparing economic operators for their roles in the changing legislative framework.

The Association Council noted the steady progress made in the overall reform of public administration and encouraged Hungary to continue its efforts in this area, including the handling of pre-accession funds.

The Association Council also welcomed the steps the Union has taken in preparing for enlargement, in particular the opening of a new inter-governmental conference to make the EU institutions fit for enlargement.

3.

The Association Council noted that the implementation of the Europe Agreement runs smoothly and that open issues have been examined in detail by the Association Committee, as well as in day-to-day collaboration between ministerial meetings, so as to enable the Association Council to appraise the situation politically. Position papers reviewing developments to date and considering future priorities were exchanged.

The Association Council particularly welcomed the entry into force of the transition to the second stage under the Europe Agreement. Hungary was the first associated country to pass to the second stage as of 1^st June 2000. This led, inter alia, to further liberalisation as regards the provisions on establishment, in particular concerning self-employed persons. The importance of monitoring the implementation of the Europe Agreement was recalled in this respect.

The Association Council noted the positive evolution of bilateral trade flows between the European Union and Hungary, which has increased more than six-fold since 1989.

The Association Council welcomed the entry into force as of 1^st July 2000, by means of reciprocal autonomous measures, of the result of the negotiations for further bilateral agricultural trade concessions. It encouraged both parties to conclude quickly the negotiations in view of a global wine and spirits agreement covering both tariffs and protection of denominations issues, particularly since the current agreement on wine trade concessions will expire at the end of this year.

The Association Council noted that Hungary has transmitted its programme for restructuring aid to the Hungarian steel industry. Further consultations and adaptation of the plan are still necessary.

The Association Council noted with satisfaction the initialling of the Protocol to the Europe Agreement on European Conformity Assessment (PECA) on 10 July 2000.

The Association Council welcomed the signature of the Road Transit Agreement on 12 July 2000. It stressed the importance to find a satisfactory solution for the participation of Hungary in the multilateral agreement setting up a European Common Aviation Area (ECAA), as well as the usefulness of Hungary's participation in the multilateral Agreement on the Occasional Carriage of Passengers by Coach and Bus (INTERBUS).

The Association Council noted Hungary's participation in several Community programmes: Socrates II, Leonardo da Vinci II, Health Promotion, Combating Cancer, Aids Prevention, Drugs Dependence, Equal Opportunities, Save II, SMEs, as well as the 5th Framework programme for RTD. It underlined the role of Hungarian participation in these programmes as an important element of the pre-accession strategy enabling the Hungarian administration to experience the practical work in Union bodies.

The Association Council welcomed the contribution of the PHARE programme and the European Investment Bank to the development of Hungary's economy, notably to strengthen the crucial sectors of the national economy. It noted the substantial increase of the pre-accession aid to Hungary and other applicant countries from 2000 and the establishment of two additional instruments providing aid respectively for agricultural and rural development (SAPARD) and structural policies (ISPA). It welcomed the progress made by Hungary in eliminating the backlog in the PHARE programme.

4. The Association Council exchanged views on some international issues of common interest. It emphasised the importance of regional co-operation as a means of fostering stability and good neighbourly relations and noted with satisfaction the Hungarian contribution in regional co-operation initiatives, such as the Visegrad Group, CEFTA and the Central European Initiative. It also noted the valuable contribution by Hungary in the Stability Pact, notably through the so-called Szeged Initiative.

5. In conclusion, the Association Council expressed its confidence in the development of the relations within the Europe Agreement and emphasised the crucial role it is further called on to play until Hungary's accession to the European Union.