The government's guide to bleeding out your own capital

09 June 2025

Have you ever tried to burn down your living room? No? Well, maybe that's because it might not seem very practical. But in a sense, that is what the Hungarian government is doing to the nation's capital, Budapest.

Last Friday, its mayor Gergely Karácsony shut down the city's public transportation for ten minutes as a warning in a long-running financial war between the capital and the government. That war is now reaching its tipping point: if the situation does not change, Budapest will go bankrupt before the end of the summer. Then ten minutes could become ten days or ten weeks.

How did it come to this? Budapest is the most important fortress of the opposition, led by Orbán-rival Gergely Karácsony since 2019. Ever since the ruling party, Fidesz, lost the capital after almost ten years of reign, the government has been systematically trying to bankrupt the city by imposing more and more taxes on it and taking away public revenue streams.

One of the main instruments used against Budapest and its administration is the solidarity contribution tax, introduced in 2012 to ensure that wealthier municipalities contribute to supporting poorer ones. On paper, it's a noble idea, but in real life, it has been weaponised since the opposition took over the city.

In 2018, when the capital was still led by Fidesz, the solidarity contribution tax (defined every year by the government) amounted to 5 billion forints (€12,4 million today). This year, the government is asking for a whopping 89 billion forints (€220,4 million).

Fidesz politicians argue that back in 2018, Budapest made a lot less from its main revenue source, the local business tax: while that might be true, the solidarity contribution was only 3% of what the city earned from taxing local businesses; today, it's 23%. Add in reduced state financing, and you get a disaster: the living room is burning.

According to mayor Karácsony, Budapest couldn't pay the whole amount even if it closed all the theatres, nursing homes, homeless shelters, and halted all cleaning operations of the streets and public lighting.

But who will be held responsible for the capital's financial ruin at next year's election? Fidesz clearly thinks it will be the opposition, deemed as incompetent to lead the city. The government's move could also be interpreted as retaliation for Karácsony ruining its mini-Dubai development plan by purchasing the area.

So, what happens if Budapest goes under? In a nutshell, reduced services, potential layoffs, and difficulty attracting new investment. The capital generates roughly 37% of Hungary's GDP, so it could have long-reaching effects on the national economy and every Hungarian's wallet. In the end, the victims of the war are, once again, the people, and no one wins.