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The Debt Consolidation of Hungarian Local Governments

Author

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  • Lentner, Csaba

Abstract

The total debt of Hungarian local governments accumulated during the 2002–2008 period was consolidated in full by the government between 2011 and 2014. Most of the debt assumed by the central budget was denominated in foreign currency, which involved high exchange risk and, therefore, financial instability for both the central and the local subsystems of public finances. According to some economists, the bailout of local governments by the state is another manifestation of the soft budget limit, showing that the Hungarian market economy is unable to break with the bad culture of centrally planned economy. The present study – buil-ding on primary research – presents the process that led to the indebtedness of local governments, as well as the theoretical and practical background of consolidation. The author believes it is unwarranted to enforce a hard budget limit for the local governments at any price.

Suggested Citation

  • Lentner, Csaba, 2014. "The Debt Consolidation of Hungarian Local Governments," Public Finance Quarterly, Corvinus University of Budapest, vol. 59(3), pages 310-325.
    • Handle: RePEc:pfq:journl:v:59:y:2014:i:3:p:310-325
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    File URL: https://unipub.lib.uni-corvinus.hu/8877/
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    Citations

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    Cited by:

    1. Laszlo Vasa & Szilard Hegedus & Csaba Lentner, 2021. "Debt Dynamics Among European Municipalities and Their Organizations: Comparative Analysis with Focus on Hungary," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 622-645.
    2. Tamas Attila Racz & Balazs Toth, 2020. "Fiscal Distress of Hungarian Local Governments in the Light of the Debt Consolidation and the Reorganisation of the Municipal System," Public Finance Quarterly, State Audit Office of Hungary, vol. 66(1), pages 91-111.
    3. Bethlendi, András & Lentner, Csaba, 2019. "A magyar önkormányzati eladósodás és válságkezelés nemzetközi összehasonlításban [The indebtedness and crisis management of Hungarian municipalities in an international context]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 1013-1030.
    4. Lihe Tu & Emanuele Padovani, 2018. "A Research on the Debt Sustainability of China’s Major City Governments in Post-Land Finance Era," Sustainability, MDPI, vol. 10(5), pages 1-21, May.
    5. András Bethlendi & Csaba Lentner, 2018. "Subnational Fiscal Consolidation: The Hungarian Path from Crisis to Fiscal Sustainability in Light of International Experiences," Sustainability, MDPI, vol. 10(9), pages 1-16, August.

    More about this item

    Keywords

    debt consolidation; local governments; soft and hard budget limit; transition to market economy; new systemic approach to state finances;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E69 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Other
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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