Budapest Insolvency Crisis Deepens As Orbán Government Clash Escalates

by Stefan J. Bos, Worthy News Europe Bureau Chief reporting from Budapest, Hungary

BUDAPEST (Worthy News) – Budapest, Hungary’s capital and its political, economic, and cultural heart, risks becoming insolvent — the municipal equivalent of bankruptcy — a crisis the opposition blames on the right-wing government’s tax policies.

The standoff between Prime Minister Viktor Orbán and the city threatens basic services, including public transportation and even garbage collection, during the holiday season.

Budapest and the government have been locked in a years-long court battle over the “solidarity tax” imposed on municipalities since 2019.

Mayor Gergely Karácsony says the levy has cost the city nearly $1 billion — roughly equivalent to Budapest’s annual expenditures — and amounts to political punishment for the capital’s liberal, pro-European Union leanings.

He underscored that message at an alternative city assembly meeting held in a bus depot, after which he led an impromptu torch-lit march of up to 2,000 people to Orbán’s residence in the Carmelite monastery.

CITY ACCUSES GOVERNMENT OF BLACKMAIL

At this week’s rally, Karácsony compared the tax hikes to a landlord raising rent “twentyfold” and accused the government of systematically draining Budapest’s finances while public services such as healthcare and education “rotted” under national policies.

Karácsony and other opposition figures rejected a government offer to assist only if Budapest formally declares itself insolvent. “Budapest isn’t bankrupt, it’s blackmailed,” the Tisza party said.

Tisza deputies boycotted the municipal meeting, calling it “political theater.” The party holds 10 seats in the assembly, tied with Orbán’s Fidesz, and currently leads national polls ahead of April’s parliamentary elections.

Critics say a municipal bankruptcy would allow Orbán to blame the opposition for Budapest’s failings ahead of the vote. Orbán denies wrongdoing saying Budapest is a wealthy region that easily can effort the solidarity tax.

Orbán claims the government is ready to provide “a financial lifeline,” but only after the city assembly adopts a resolution declaring the capital at risk of insolvency. A government decree also states it would step in to cover municipal wages if necessary.

BUDAPEST FACES DEEPENING BUDGET DEFICIT

A draft filed by Karácsony warns Budapest may finish the year with a 33-billion-forint deficit (some $90 million), which would violate Hungarian law and allow banks to cut the city’s overdraft facility, freezing revenues until March.

The solidarity contribution has risen from 5 billion forints (about $14 million) in 2018 to 89 billion forints (approximately $240 million) this year — a twentyfold increase. Critics say the tax is needed as Orbán faces significant deficits while the EU has frozen roughly 18 billion euros (about $20 billion) in funding for Hungary over rule-of-law and corruption concerns.

Hungary’s State Audit Office (ÁSZ) reported in September that Budapest is in “technical bankruptcy,” warning that insolvency threatens essential services.

The audit cited pandemic-era revenue losses, soaring energy prices, inflation, and sharply increased government-imposed payment obligations.

Karácsony also accuses the government of withholding 148 billion forints (roughly $400 million) in previously promised development funds.

TREASURY SEIZURES AND PUBLIC SERVICE RISKS

He says the State Treasury has withdrawn money directly from the city’s accounts to cover arrears as part of what he and other opposition figures view as political retaliation.

Karácsony warns that if 27,000 municipal workers do not receive their January salaries, “the city will come to a standstill,” halting transport, waste collection, and other vital services.

At the extraordinary assembly meeting, he also stressed that Budapest “must remain free, European, and united” despite what he called government pressure.

Representatives of several opposition parties agreed, saying the capital had been “pushed into bankruptcy” by state policies, not mismanagement.

The stakes extend far beyond city limits: Budapest is home to 1.7 million residents, while the wider metropolitan area includes about 3.3 million people, meaning one in three Hungarians could be directly or indirectly affected if the capital collapses financially.

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