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Orban Moves to Squeeze Budapest’s Budget After Election Defeat

Orban Moves to Squeeze Budapest’s Budget After Election Defeat

(Bloomberg) --

A month after losing Budapest in a stinging election defeat, Hungarian Prime Minister Viktor Orban’s government unveiled a proposal to restrict the new mayor’s powers over the capital’s budget.

The draft legislation is the opening salvo in what may be three years of power struggle between Orban and his adversaries until the 2022 general elections. A united opposition wrested control over four of the five largest cities in Hungary in last month’s local elections, dealing the self-styled illiberal leader his worst electoral setback in more than a decade.

The bill proposes forcing the capital to spend the roughly $500 million a year it collects in business tax receipts -- Budapest’s biggest source of income -- on the public transport system before any other items. Since the transport system is underfunded and relied on cash infusions from the central government even under the previous Orban-backed mayor, the measure threatens to cut into other spending, including on social services.

Orban Moves to Squeeze Budapest’s Budget After Election Defeat

Budapest Mayor Gergely Karacsony called on the government to withdraw the bill. He also urged Orban not to backtrack on pledges to work in partnership with local councils, even where his party was defeated. His deputy, Ambrus Kiss, said the legislation could put the city in a tight spot.

“This could open the door for the government to financially squeeze Budapest,” Kiss said by phone, adding that the city now spends half of its business-tax income on buses, trams and the metro. “But at this point we’re just trying to understand what the government’s purpose is.”

A senior minister said Thursday that the proposal wouldn’t be a game-changer for Budapest and the central government would continue to support the city’s public transport system to the degree it had previously.

Orban has centralized power to an unprecedented degree since his return to the prime minster’s post in 2010, including by naming allies, often lawmakers from his own party, to helm formerly independent institutions. He’s also taken away large chunks of responsibilities -- and budgets -- from municipalities, including the running of schools and hospitals. The European Union is currently conducting a probe over the erosion of the rule of law in Hungary.

To contact the reporter on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net, Michael Winfrey

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