Central Europe Review: politics, society and culture in Central and Eastern Europe
Vol 1, No 21
15 November 1999

Csardas C S A R D A S:
Budapest: A Sustainable City?
Development in the Hungarian Capital

Gusztav Kosztolanyi

Sustainability is a fairly new concept, and not just in Hungary. In a situation where the majority of the population eke out a living month by month, it appears remote from ordinary concerns, a term to be trotted out by politicians paying obeisance to Europe in the hope of attracting funds or speeding up the accession process. It might even appear as something of a luxury, the prerogative of wealthy countries waking up to the need to salvage the appearance of a healthy environment, to breathe new life into deserted and inhospitable urban wastelands. Indeed, one of the areas singled out for particular attention in the most recent country report from the European Commission was Hungary's progress (or lack thereof) in the environment: "Some progress has been achieved in the areas of nature protection, pollution from industrial plants and large combustion plants as well as the control of major accidents. However, substantial efforts are still needed, in particular, in the areas of waste and waste management, water and air quality. Hungary has made steps to address the short term Accession Partnership priorities. If Hungary wants to achieve its ambitious target for full transposition in 2001 [the reference is to Mr. Orban's plan to implement the full corpus of Community legislation, the so-called acquis communautaire, by the end of next year, thereby enabling him to place the blame squarely on the shoulders of the EU itself if Hungary is not admitted forthwith - an adroit political move designed to help him avoid reaping the bitter harvest of failure to join the EU by the next elections] it will need to urgently speed up both legal alignment and investment in environmental technology and infrastructure" [Regular Report, p.49, English version].

Surveying the city of Budapest from Janos Hill on the Buda side, the image is similar to the artificial cityscapes throughout the rigidly planned former Communist domains, with the historical core enclosed by a depressing array of pre-fabricated buildings (panelhazak), rising from the haze like malignant growths. It is as if Pest, stretching to the horizon on its plain, consisted of two separate worlds: the chic, often strident world inhabited by tourists and the shifting population of diplomats, officials and company managers, and the grimy suburbs, with row upon row of blank, unadorned concrete frontages gazing resignedly upon a no-man's land where foreigners never dare to venture.

Pest is a city of decayed grandeur with a whiff of the decadence of a coffee house culture that produced the writers of genius whose names have become part of the literary pantheon. Her faded glory, bricks peeping out from behind the crumbling plaster, shrapnel holes gouged out of vast granite blocks, add a certain fin-de-siècle melancholy to a stroll through her streets. In the semi-darkness of the inner courtyards, glass ceilings and intricate ironwork rot away in silence, unnoticed by the visitors in their air-conditioned buses and the passers-by with their bowed heads and shopping bags stuffed with loaves of bread and fresh paprika.

One of the most striking monuments of the Pest side, the New York Palace, familiar to generations of tourists as the building which houses the hidden architectural pearl which is the New York coffee house, is an emblem of the city and its aspirations. This month, it is expected to be handed over to a new owner, the Messerschmidt Foundation. What a strange irony of fate that this organisation, whose most famous product in the past was synonymous with deadly efficiency and destruction, should now be entrusted with the salvation of a once glorious monument, reversing the decline it has been subjected to for decades.

The New York Palace

The building was erected by the New York Life Insurance Company as its headquarters according to plans drawn up by master architect Alajos Hauszmann. After it opened for business, the offices of the insurance company occupied a few rooms on the first floor, the rest being rented out as flats. The coffee house on the ground floor soon became the stamping ground of authors, transforming it into an intellectual and artistic power house. In 1918, it was bought over by the Est newspaper publishing house, only to be sold on to the Adria insurance company ten years later. It was taken over after 1937 by the Nova Transport and Industry Company, and its final owner before it was made the property of the State in 1950 was the Hungarian General Credit Bank. From 1951 onwards, it was placed in the charge of the Newspaper Publishing Company (Lapkiado Vallalat), housing the editorial staff of a variety of newspapers until the beginning of the 1990s. In 1993, Profit Invest, a company owned by the Postabank, acquired 100% rights to it. Plans to renovate the building did the rounds even then, one of the ideas being to make it the site of the National Theatre. As part of a portfolio swap, the Palace returned to State hands. At the moment it is owned by Valto 4 Libra, a subsidiary of the APV (the body responsible for privatisation in Hungary).

Initially, the APV only intended to sell off the building, charging 18 intermediaries with the task of offloading it. This was not to prove an easy task: the dizzying costs of restoring the premises and the difficulties in providing sufficient parking opportunities deterred potential investors. The Palace was and is a listed building, further restricting the uses to which it might be put. In the meantime, a neighbouring site was bought over by Valto with the prospect of conversion to parking spaces.

The buoyancy of the real estate market in recent years revived interest in the Palace. In the last 24 months, Valto 4 Libra has conducted negotiations with 18 companies over the Palace's fate. When he took over as presiding head manager in April, Mr. Istvan Nagy inherited 13 valid purchase bids from his predecessor. Competitors who had put in bids exceeding HUF 1.6 billion were invited to confirm their continued interest in the venture. The final selection was then made on the basis of three criteria: the bidder's ability to pay, compliance with the requirements of protection of listed buildings and the amount proposed. This led to a shortlist of seven. Valto then called in an international credit rating institute to look at the remaining candidates' economic activities. Once this examination was complete, the Messerschmidt Foundation had beaten off its main rival, Intas AG, a German-Swiss company specialising in the hotel branch, which had offered HUF 2.3 billion plus VAT. Intas was rejected mainly because it did not emerge that the company was actually in a position to put up the promised cash. Intas, moreover, blotted its copybook in proposing that shops, a restaurant, garage and multiplex cinema be installed in the Palace, a notion which sent shivers down the spines of the city planners. Not only would such blatantly profit-oriented plans be an affront to the historic past of the Palace and hence to its dignity, but the building was also subject to the rules of the City Framework Plan. This meant that it could only house public institutions, administrative offices, catering facilities, or hotel accommodation with the requisite parking spaces. The then chief architect of Erzsebetvaros (the district in which the Palace is situated) had also written a letter in which he specifically stated that a multiplex would not be appropriate.

The Messerschmidt Foundation, with its headquarters in Munich, has accumulated a great deal of experience in the field of restoring ailing listed buildings, and therefore appeared to be a more respectable candidate. Mr. Nagy travelled to Bavaria to inspect the Foundation's business accounts. The bid comprised HUF 2 billion plus VAT, to be transferred within 8 days of signing the contract. The Foundation agreed to undertake the full restoration of the complete building, including that of the New York Coffee House, returning it to its original condition from 1897. Hungarian contractors will provide the bulk of the restoration experts, converting the Palace into an exclusive office complex with the adjacent premises earmarked as a multi-storey car park. The Foundation has committed itself to completing the work within 16 months of being given the go-ahead in the form of planning permission.

Given that over 40 specialist authorities are required to give their approval to the finalised construction plans, red tape could hold up the project for quite some time. The Palace's listed building status means that the relevant department of the OMVH [Orszagos Muemlekvedelmi Hivatal, or National Monument Protection Office] will be responsible for granting planning permission rather than the municipal authorities. According to Mr. Csaba Bende from the OMVH, the work being carried out will be subject to continuous scrutiny by experts from the Office. Both planners and construction workers must comply with the law on monuments and they will be expected to engage in regular consultations with the inspectorate.

Although all this sounds very reassuring, not everyone is so confident that the plans will be executed satisfactorily. Mr. Ferenc Vadas, an art historian and author of a survey of the Palace's history and architectural significance running to over 180 pages, expressed his anxiety about the impact conversion plans would have on the character of the Palace. In an interview with Magyar Nemzet [9 October 1999, the interview conducted by Csilla Halasz], he gave a timely reminder of one of the more philistine notions put forward: that of employing the Palace as a department store with built-in escalators! The idea of creating a theatre was equally reprehensible to his mind, as it too would mean gutting the entire interior. Mr. Vadas believes that the entrance hall, main staircase, courtyard and halls on each of the floors should be preserved intact. The fact that the Palace contains at present a modest total of three staircases will give rise to difficulties from a fire safety point of view if it is to become a hotel or office complex.

Perhaps then the hapless tourist will not be forced to pick his or her way along the dank planks beneath an uninspiring arcade of heavy wooden supports whilst searching for the entrance to one of Pest's few remnants of a culture that has all but disappeared, the New York Coffee House...

Elsewhere in the city, a notorious eyesore, testimony to the embittered political feud between the government and the Budapest municipal authorities, has been dubbed by locals as a godor, or "the pit". On Erzsebet Square, having ousted the bus station, it is surrounded by billboards advertising the latest shopping centre developments on the outskirts of the capital as well as the fashionable accessories of a consumer society. The site was a gift from the Budapest corporation to the state with the intention of building the National theatre there [see my previous articles on the wrangling that ensued], and on 10 November it reverted to its previous owners. According to a document adopted jointly by the capital's Assembly and the National Cultural Heritage Ministry, an underground garage, shops and restaurants may be built there in the future, whilst a park will adorn the surface.

A much more lucrative and promising deal on the National Theatre was clinched by the government with the Canadian Trigranit Fejlesztesi (Development) Company. Once implemented, the declaration of intent signed last week will lead to the establishment of an entirely new urban centre, completely changing the face of one of the most run down parts of the city in the Eleventh District between the Lagymanyosi and Petofi bridges, which will at the same time represent the biggest single investment project in Central Europe. The estimated cost will be somewhere between USD 500 and 600 million. This is not the first costly investment Trigranit has made in Hungary: the West End City Centre shopping mall (the biggest in Central Europe!), opened on 12 November, was also paid for by Trigranit (a snip at USD 200 million).

On the Pest side of the Danube, the development site comprises approximately ten hectares. In 1996, when Budapest cherished hopes of hosting the Expo, 15 building plots were registered individually as state property, three being bought over. The northernmost tip of the site has already been developed, though not all of the new owners have realised the full potential of their investment as well as MOL (the largest Hungarian oil company, in which the state has a 25% stake-holding) has with its petrol station. The total area of the remaining plots is 59,224 square metres, but there are 415,000 square metres open to development according to the city's development plan (planning permission stipulates the height of the buildings minus the underground garages, thus with the requisite number of storeys, the total gross area to be built on is the second figure). This does not include possible underground garages. The National Theatre is now due to be erected at an as yet undetermined location amongst the plots.

The Canadian firm does not intend to build yet another shopping mall on the Theatre site (shopping malls are a growth industry in and around Budapest, but in my opinion, the market has reached saturation point, with very few customers left to cater for), trying its hand instead at a multi-functional cultural and entertainment centre. This would involve three or four hotels, a congress centre with 5,000 seats, exhibition halls, cinemas, thermal baths, offices and residential developments. Work on the South Danube City Centre, as it has been christened, will in all likelihood begin next summer, depending on the speed and efficiency with which the bureaucratic and administrative hurdles are taken (and on where the National Theatre will be placed).

In order to be viable, the development on the Pest side will have to be accompanied by a parallel exercise on the ailing Buda side around Soroksari ut, which presently is in a depressingly dilapidated state. The project managers are convinced that the rehabilitation programme already underway in Ferencvaros will continue apace, given fresh impetus by the prospect of development on the opposite bank.

A second declaration of intent, also signed by the Prime Minister in Canada, concerned the fate of another of the city's architectural jewels (in a similarly scandalous state of disrepair to the New York Palace which likewise began its life as the headquarters of an insurance company) - the Gresham Palace, at the Pest end of the Lanchid (Chain Bridge): it will become a luxury hotel.

It is a far more difficult undertaking to attract investment in renewing the prefabricated blocks of flats or indeed in finding alternative forms of housing. Many of the ordinary Hungarians who live in these austere monoliths can barely scrape together enough money to pay their utility bills; eviction due to chronic arrears is becoming ever more common. They are not, in other words, likely clients of property developers with their well-appointed pieds-a-terre overlooking the Danube. Thus the real estate market reflects the growing gulf between the haves and the have-nots, the polarisation of Hungarian society.

In certain parts of the Hungarian provinces, however, the housing situation is not quite so bleak, and even panelhazak can be an appealing prospect, as the example of Esztergom-Komarom shows. Proximity to the Slovak border and the settling of multinational companies have sparked off a property boom in towns such as Tatabanya, Dorog and Esztergom itself, which has spread into the surrounding villages. Reconstruction of the Maria Valeria Bridge, linking Hungary and Slovakia, is the perfect illustration of how reconciliation pays off.

Sustainability cannot be achieved without the full co-operation of the state and the civil sector, as sociologist Zsuzsa Szeman demonstrates in her study of two Hungarian provincial towns, Ozd and Gyongyos [see the article on the subject in Magyar Nemzet, 14 August 1999]. Under the Communist regime, Ozd (in the vicinity of Miskolc in North-East Hungary) was selected as the location for the metal and engineering industries deemed necessary for the country in spite of the scantiness of its coal and iron ore deposits. The local economy that had been artificially sustained under Communism collapsed completely after the old regime's demise, deprivation and hardship becoming the norm. Zsuzsa Szeman characterises the three main problems as unemployment, the disadvantageous situation of the Roma and the top heavy age structure of the local population.

At the beginning of 1999, the unemployment rate was a disheartening 25%, with a further 25% not recorded in the official register. The Roma, who make up an estimated 14-20% of the population, are particularly vulnerable to long-term unemployment due to their lack of an adequate skills base.

The problem of a greying society is exacerbated by an exodus of the brightest young people, who flee the region as soon as they can to go to university and improve their prospects for the future. About 80% of the middle classes have thus left Ozd.

Rather than sink into fruitless despair, the local authorities have allied themselves closely to the voluntary (civil) sector, aware that job creation was the sole means of turning the tide. Favourable conditions were offered as bait to foreign companies seeking to relocate. So far, General Electric have given the most positive response, promising to create 1,000 to 1,200 new jobs by 2000. Workers are retraining and new blood is being recruited for the future. This involves guaranteeing equality of opportunity at school, since drop out rates are influenced as much by children's circumstances as they are by individual ability. Although the local authorities have succeeded in making free school lunches available, it depends for help in providing other activities on the civil sector. In 1998, the authorities had contacts with 44 associations of various types (although the total number of such bodies vastly exceeds that number), including charities and churches, funding them in return for assistance. 40% of these organisations deal specifically with young people and schools.

The civil sector is particularly active in helping people to cope with crises. One organisation in particular, the Maltai Szeretetszolgalat, has seen its workload increase exponentially. Initially, it began with 23 volunteers ranging in age from people in their early 50s to an 80 year old. They run a kitchen offering free meals to the needy, cooking, washing up and cleaning as well as distributing donations of furniture, food and clothing. Their other activities include running a legal advice office and a visitors' service for the sick. They receive no remuneration, a minibus ferrying them to and from work.

General Electric have played a more benevolent role than most companies in local society in Ozd, realising that it is ultimately in the company's own best interests to slow down the rate of migration from the town. As a result, the company gives support to the most disadvantaged sectors of the population and helps in the development of health care provision.

Gyongyos, by contrast, is the centre of an economically less backward region of Hungary, Heves county, and the twin scourges of unemployment and exodus do not affect it as severely as Ozd. One fifth of the local population is aged between 19 and 30, but a falling birth rate raises concern about a ageing population. Once again, the town has to contend with an inadequate skills base and half of the registered unemployed (including a substantial proportion of Roma) have been on the dole long term.

In Gyongyos, the burden of welfare is shouldered primarily by the local authorities. The civil sector has a vital complementary role to play here, with the Maltai Szeretetszolgalat taking care of the elderly with a comprehensive package of services ranging from physiotherapy to hairdressing. The agreement signed with the local government represents a huge relief on the latter's budget, as the volunteers work for a bare minimum.

In Gyongyos, however, there is no equivalent of General Electric. Zsuzsa Szeman points to the valuable work being done by the Munkanelkuliek es Allaskeresok Egyesulete (the Association of the Unemployed and Job Seekers) in trying to find placements for and additional psychological support to the unemployed and their families. In 1998, 1,600 people turned to the Association for assistance. 10% managed to find jobs with its help, a figure that could be improved if only companies adopted a more constructive attitude. As things stand at the moment, companies in Gyongyos reject candidates over the age of 45 (indeed even 35 is considered too old) and those who are "fortunate" enough to be taken on for a probationary period are terrorised into the kind of effort that would put Stakhanov to shame, only to be told at the end of the trial period that they are being dismissed (so that the companies can replace them with further trainees who represent cheap labour).

Thus Gyongyos, with its smaller scale involvement of the civil sphere in basic service provision, and its failure to attract the more philanthropic variety of multinationals that seek to enhance their reputations by involvement in the local community, ends up in a situation in many respects worse than that of Ozd, although the latter has for years been associated in the Hungarian mind with chronic decline.

Before concluding, I would like to make it clear that there is at least one respect in which Budapest may be described as a sustainable city (and where it would do the EU no harm to take a leaf out of Hungary's book): public transport. Budapest never went through a process of dismantling a functioning public transport system only to regret it bitterly later, rebuilding what was lost at enormous cost. A network of trams, trolley buses, buses, metros, the old underground line (the second to be built after London and the first on continental Europe) criss-cross the city whilst the suburban railways link the capital with nearby centres such as Szentendre. The frequency of timetabled services make it the envy of all but the most progressive cities further West. Not that all is rosy in the garden: the Budapest authorities constantly demand more resources from central government for BKV (Budapesti Kozlekedesi Vallalat, or Budapest Transport Company) in spite of state support having increased by 400% over the last five years and fares going up by 350% over the same period.

One of the flaws of the budgetary estimates for next year is that no provision is made for bicycle paths, improving the lot of pedestrians or traffic-calming measures, so there is room for improvement even here.

As an antidote to all fears concerning Hungary's environmental record compared with that of the EU, we would do well to recall that Brussels, the capital of the institutions, unceremoniously dumps its untreated waste water into the local rivers and is at long last on the verge of being fined heavily for failing to comply with waste water treatment directives. Before issuing sanctimonious prescriptions about what Hungary should and should not do, the EU ought to tackle the glaring offences of recalcitrants within its own ranks.

Gusztav Kosztolanyi, 14 November 1999

The sources used in the writing of this article were Magyar Nemzet, 14 August, 1 September, 9 October, 3 and 11 November 1999.


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