Josef hírek

2012.11.17. 22:19

Negotiations targeting take-over of municipal debt start in SE Hungary

Budapest, November 15 (MTI) - Negotiations between the central and local governments aimed at the states taking over a large part of the debt portfolio of municipalities started with the city council of Hodmezovasarhely in southeast Hungary on Thursday.

Budapest, November 15 (MTI) - Negotiations between the central and local governments aimed at the states taking over a large part of the debt portfolio of municipalities started with the city council of Hodmezovasarhely in southeast Hungary on Thursday.

Before the talks, Economy Minister Gyorgy Matolcsy said that the government programme was designed to "rescue municipalities from the debt trap".

 

Matolcsy said that the situation in each town and city was different, and separate negotiations were needed before the government agreed to repay the debt of a given town or city. Individual solutions are needed for some 200 localities with a population over 5,000, the minister said, adding that talks would take four to six months. Those municipalities have a combined debt portfolio of 520 billion forints, of which the state will repay 40-70 percent, depending on the revenues of each, he said.

 

Hungary has 1,750 towns with fewer than 5,000 inhabitants, owing a total 95-100 billion forints, which the government will repay in full, said Matolcsy.

 

Head of the Prime Minister s Office Janos Lazar, former mayor of Hodmezovasarhely, said at the press conference that the government programme affects the lives of 8.8 million residents, and compared the move to the establishment of local governments in Hungary in 1990.

 

Lazar said that Hodmezovasarhely had spent 42 billion forints on municipal developments in the past 10 years, and owed 20 billion. He added that the state could take over 50 or 60 percent of that portfolio.

 

Government spokesman Andras Giro-Szasz said on commercial HirTV on Thursday evening that the government was planning to benefit municipalities which were not indebted. He said that the idea of reducing their co-payment in European Union development projects had been raised.

 

The spokesman said that a total of 1,956 municipalities needed debt settlement out of a total 3,200. He said that most of the remaining towns were small, with budgets too low to get indebted. On the other hand, he said that there were 27 cities which had no debt owing to good management.

 

Giro-Szasz said that the government would go on to talk with banks following negotiations with the municipalities. Answering a question whether the government would ask for a 15-25 percent discount from lenders rather than making a full payment, the spokesman said that the government was aware that the move would be seen as state bankruptcy by credit rating agencies. "The government is mulling other solutions," he said.

 

Laszlo Botka, Socialist mayor of south Hungary s Szeged, criticised the programme and said that the government was dismantling local governance rather than rescuing municipalities. He insisted that municipalities were in a hopeless situation because of the government s drastic fund-cuts during the past two years.

 

Botka said that though the government would relieve municipalities of services worth a total 300 billion forints next year, the cuts would total 400 billion forints practically depriving local councils of resources to cover debt service.

 

Hungary s local councils have accrued 1,216.5 billion forints of debt over the years.

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