Budapest on the edge of the bankruptcy: Who is to blame for it?

Budapest on the edge of the bankruptcy: Who is to blame for it?

Budapest, Ungarn - Budapest faces a potential financial crisis that, according to Gergely Gulyás, the law firm of the Hungarian Prime Minister Viktor Orbán, could lead to an impending bankruptcy. At a press conference, Gulyás blamed the left-green city tour led by Gergely Karácsony. However, he emphasized that the financial burden must be worn not only by the city administration, but by all Budapest citizens.

In the talks between Gulyás and Csaba Latorcai, Parliamentary State Secretary, and Mayor Karácsony, it becomes clear that the Orbán government is ready to help the city. Her main focus is on ensuring economic stability in Budapest. Gulyás also criticized the coalition of Karácsony and Tisza, which in his opinion has significantly led to the drastic financial decline. A central point of the discussion is the question of where the financial reserve of 214 billion forints (approx. 0.5 billion euros) remained at the beginning of Karácsony, which Budapest still had when the former mayor István Tarlós was resigned.

rising tax burden and deficit

The situation is intensified by the introduction of a high solidarity tax, which, according to Gergely Karácsony Budapest, was imposed by the Hungarian government. This tax is to be taken by economically stronger communities and distributed to poorer cities. However, opposition voices fear that this could be seen as the government's attempt to weaken the capital financially. The income from this tax led to a deficit of 31 billion hoof (EUR 76 million) at Easter, since the city has promised high payments that it has to pay to the state budget.

For 2023, a load of EUR 89 billion is expected (EUR 217 million), which leads to the assumption that the deficit could possibly increase to EUR 60 billion (EUR 147 million) by autumn. The state budget also provides only 39 billion hoof (EUR 95.5 million) for solidarity tax, which is less than 50 billion hoofs less than demanded by the government. Despite these impending financial burdens, the government plans to raise full tax, even if it could lead to bankrot Budapest.

hypotheses and future developments

Budapest in response to the high taxes, but the procedure is as tedious. While it remains unclear what the government's calculation methods look like and to what extent the tax increases in the desired financial framework of the municipalities fit, the capital is under the pressure to master its economic and social challenges.

The challenges in Budapest are not an isolated case, since Hungary has been transforming itself significantly since 2010. After a low point in 2008, when the country rely on an IMF aid package of 20 billion euros, Hungary has had a significant recovery since then. The gross domestic product per capita rose from $ 13,177 to $ 22,160, and a series of tax reforms and the introduction of a flat tax of 16 % have stabilized the economic environment.

The future of Budapest and the strategic sovereignty of Hungary now depends on the ability of the city tour to overcome the current financial adversity and to develop future -proof solutions that affect not only the capital, but the entire country.