Hungary’s parliament passed Wednesday a bill which could force the cash-strapped city of Budapest to borrow money under unclear conditions and would make the capital’s opposition mayor criminally liable for potential breaches.
The contested financial lifeline comes weeks after Budapest’s environmentalist mayor Gergely Karacsony warned the city of 1.6 million faces the threat of insolvency.
An outspoken critic of nationalist Prime Minister Viktor Orban, Karacsony blames the government for the city’s financial problems, saying it has significantly increased levies and withheld promised funds.
Karacsony has repeatedly accused Orban of bleeding the capital and other large municipalities dry to prevent them from providing an alternative model of governance.
But Orban’s ruling party alleges the mayor’s “irresponsible spending” caused the city’s financial troubles.
The law on “granting a loan to prevent the bankruptcy of Budapest municipality” was adopted by the 199-member parliament — dominated by Orban’s governing coalition — with 136 voting in favour, 34 against with no abstentions.
The bill was fast-tracked and passed during an extraordinary session.
Under the law, the city of Budapest may apply for a loan from the state-owned Hungarian Development Bank to stay afloat and pay salaries.
A government-supervised office in the city — led by an Orban appointee — can also force a loan on the municipality, according to the text.
The government can also dictate the terms of the agreement, including the interest rate, the duration of the loan, and the property and other assets pledged as collateral.
The law also obliges the mayor — or any other applicants — to compile various financial documents and carry out reforms within six months or face a two-year prison sentence.
Karacsony has previously dismissed the bill as a “political bludgeon” that does not solve anything.
“There is only one new element in this proposal, namely the amendment to the Criminal Code, according to which the mayor can be sent to prison if he does not assist in the plundering of the capital,” he said earlier this month.
The city of Budapest is required to pay so-called solidarity contributions to the central government.
These have increased almost nine-fold since Karacsony was elected mayor in 2019, and currently amount to a fifth of the capital’s revenues.
The municipality has filed multiple lawsuits in recent years that argue the tax is unconstitutional.
The government has justified the contributions by saying it needs to redistribute funds from wealthier cities to financially weaker municipalities.
ros/kym/rl