Janos Lazar, head of the parliamentary group of the ruling Fidesz party and mayor of central Hungary’s Hodmezovasarhely, excluded the possibility of an “unconditional” consolidation of local government debt, in an interview published in daily Nepszabadsag on Saturday.

Instead,  Lazar urged debt-burdened municipalities to seek individual solutions and negotiate with banks to reschedule repayments, just as his own city had done.

Lazar said there would be unforeseeable consequences if the state took over sources of operating income from local councils, but he conceded the financing mechanism for local councils needed to be restructured.

Municipalities last week urged the government to mediate with banks to achieve a moratorium on principal repayment on their foreign currency-denominated loans. About 85% of outstanding municipal bonds are denominated in foreign currency, mainly in the Swiss franc, which has firmed markedly since their issue.