Bailout of Local Governments and the Introduction of Active Control in Hungary After 2010

Comprehensive legal reform in Hungary affecting the regulation on the whole fiscal sector was made after the general parliamentary election of 2010. It covered the renewal of the rules on local governments too. Regarding local public finance two changes are of paramount importance from the aspect of budget sustainability: 1) passive control was replaced by active control in confining local borrowing; 2) local governments were bailed out by the central government. These changes allowed Hungarian local governments a new beginning in the management of their functions, however, massive centralisation of public services was implemented. These parallel processes transformed the substance of localism in Hungary; meanwhile, the framework of local governments has remained stood constant since the transition.