Budapest on the brink of financial collapse, public transport may halt this summer, but Budapest Pride will be held on Saturday

Budapest is on the brink of financial collapse despite the Budapest Municipal Court’s urgent protection granted last week. As a result, the capital retrieved billions of forints, but the city is obliged to pay HUF 89 billion (EUR 222 million) as a solidarity contribution to the state budget. Without modifications, that is impossible, but such modifications were voted down by two committees of the city council. In the worst-case scenario, Budapest could become inoperable and insolvent next month, resulting in, for example, the halt of metros, trams, trolleybuses, and buses.

Budapest on the brink of financial collapse

According to Népszava, Budapest began talks with the Hungarian government about a possible bailout since the city is on the brink of financial collapse. The former president of the State Audit Office, László Domokos, began a risk analysis concerning the budgetary situation. However, that will only conclude at the end of August when the Budapest Municipal Court’s protection expires. Without the state’s bailout, the city will not be able to pay its solidarity tax.

The solidarity tax is a heavy burden on “richer” local governments. The basic idea behind the scheme is to get money from wealthier local governments and give it to the poorer ones. However, according to the opposition and even some Fidesz critics, its rapidly growing amount and spending scheme lack transparency, which is problematic.

Wednesday’s Municipal Council meeting is crucial

The leadership of Budapest has to introduce several modifications to remain creditworthy. For example, they must plan for the HUF 89 billion solidarity contribution Mayor Karácsony regards as unlawful. However, the modification package was rejected this week by both the financial and the transport committees of the city council because Mayor Karácsony does not have a majority in the council. The representatives of the old leftist opposition (Karácsony’s side), Péter Magyar’s Tisza, and Orbán’s Fidesz obtained approximately one-third of the votes.

The big question is how the Municipal Council will decide tomorrow. However, without a budget, Budapest will not receive the state subsidy (which all local governments in Hungary get) covering a portion of the operation. In that case, according to mayoral director Ambrus Kiss, the city itself “will jump into the well the government has dug for Budapest.”