A view of the Romanian Parliament building in Bucharest, Source: Katie Moon / Unsplash

Bucharest starts 2023 by paying off all its public debt

Bucharest starts 2023 by paying off all its public debt

Mayor Nicuşor Dan believes that a clear balance sheet is a strong sign of reliability for banks and investors

Yesterday, Bucharest Мayor Nicuşor Dan announced that the city had paid off all its outstanding debts, which sat at around 3 billion lei in 2020, roughly equivalent to just over 600 million euros. Mayor Dan claimed that the Romanian city was starting 2023 with a clean slate – a clear sign for investors and businesses that City Hall is managed by competent administrators.

Furthermore, the mayor went on to explain that this ‘experiment’ was a way to gain the trust of both banks, the private sector, and foreign investors. Moreover, a good balance sheet of the local administration would help the city to incur new debt, especially for emergencies.

Mayor Dan pointed to a 500 million lei (100 million euros) debt the municipality had to take out last year to avoid the collapse of the heating system. According to him, this has led to a definite increase in confidence in the capabilities and attractiveness of Bucharest.

The secret sauce – austerity

Although the idea of paying off all debts seems like an enticing promise, the Dan administration has had to make some hard choices to achieve these results. This includes controversial measures of austerity that have gutted some public services and have left others in disarray, without a clear successor.

At the same time, Bucharest’s current mayor insists that expenses greatly outweigh incomes in the city's past. Also, he cited several instances of outstanding debts prior to 2020 due to a lack of liquidity including the examples of handball players’ salaries and public tender for Otocar buses.

Moreover, Mayor Dan claimed that without austerity measures, Bucharest was faced with bankruptcy, meaning the imminent closure of essential public services like public transport and heating system, for example. Yet, the cost of balancing the budget included dissolving several municipal companies, most notably the park maintenance services.



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