Budapest may face bankruptcy, mayor announces

The municipality of the capital will suspend funding the government, Gergely Karácsony announced at a press conference on Wednesday morning.

Without doubt, he was referring to the various measures the Hungarian government has introduced over the last few years, which have significantly reduced the capital’s income.

Since the opposition politician was elected mayor of Budapest, several laws have been modified at record speed, to redirect various taxes or funds that the city used to receive into the state budget.

Karácsony now said that without the series of measures which are being introduced, the capital could not even make it through the year, so a survival plan has been drawn up. He explained that they had identified two taboos: the current level of public services must be maintained and wages must be paid. Some elements of the package may be adopted by the Municipal Assembly as early as next week.

The mayor added that the capital's leadership has had to grapple both with the coronavirus epidemic and the energy crisis in recent years. “The last six months have been hell for us too”

He said that in his opinion, the capital had done extremely well in dealing with the energy crisis. Thanks to the unique procurement practice introduced, the capital was able to save 29 billion forints.

However, there is one crisis they cannot handle, according to Karácsony: the government's anti-Budapest agenda. He recalled that under the leadership of István Tarlós, the capital had to pay 5 billion forints in solidarity contributions in 2018, while this year the amount is 58 billion forints.

The main points of the survival program were presented at the press conference. A strict liquidity timetable will be set for the capital's companies and institutions, and spending will be rescheduled.

For example, the city's public transportation authority, BKK is taking out a 24 billion HUF loan to finance their operations, which will only be repaid in September. Payments for investments will also be rescheduled to the end of the year. Karácsony noted that this will also affect the recently finished renovation of the Chain Bridge,". The energy saving programme will continue.

"We will collect the arrears that – according to law, we should have received from the government by now. " the mayor said. The municipality has not received a single penny in utility subsidies, and the government has not yet paid the agreed HUF 6 billion subsidy for the renovation of the Chain Bridge.

The government sees things differently

At Thursday's government briefing, commenting on the survival package of Budapest announced by the city's mayor the day before, Minister at the Prime Minister's Office, Gergely Gulyás said that he believes the capital inherited big savings from (former mayor, Fidesz-delegated) István Tarlós, and now they are talking about bankruptcy. They also believe that Ferenc Gyurcsány has ordered Gergely Karácsony to do his bidding, and the mayor is simply obeying him.

What will be the consequences if the capital does not pay the disputed 25 billion tax? – ATV asked. Gulyás did not answer. As far as the case of the Chain Bridge goes, he said that the government will pay the promised money once the capital has met its obligations.

Meanwhile, Finance Minister Mihány Varga wrote on his Facebook page that Gergely Karácsony does not want to pay taxes because the capital's cash box has been emptied. According to him, the capital's tax revenues are higher than ever, with business tax revenues expected to exceed HUF 271 billion in 2023."

September, the month of hope

It was last week that deputy mayor Ambrus Kiss announced that the capital's administration would be forced to make extraordinary cuts to prevent the municipality from becoming insolvent by mid-summer. According to current figures, the capital could face a deficit of HUF 32.1 billion in June, HUF 52.6 billion in July and HUF 76.1 billion in August. If the capital's debt exceeds the HUF 25 billion current account limit, it will no longer be able to finance its tasks, which means that Budapest could go bankrupt.

The deputy mayor also said that while operating revenues have been almost unchanged since 2019, spending has increased dramatically year after year due to inflation, the energy crisis, interest expenses and government decisions.

The capital calculates that direct government decisions have taken HUF 148 billion from Budapest. This includes the increase in the solidarity contribution, which cost Budapest HUF 67.7 billion over the last three years.

The mayor of Budapest expects some of the city's financial problems to be solved in September, when Budapest will receive the business tax, but until that time it has to survive somehow. In response to a journalist's question, he said he did not expect early elections, but regardless of when they would be held, he is confident they would win Budapest.