Demszky, who this week retired as mayor after five election victories and almost 20 years in the job, provided an overview of his city's experience of using regional funds, and gave EurActiv his input into the debate on the future of EU regional policy, currently being hotly discussed at the Open Days in Brussels.
He believes the 'Europe 2020' strategy - which will govern EU economic strategies for the coming decade - contains the right overall goals and "rightly aims to bring together the social, economic and environmental dimensions of development". As such, it can serve as a useful blueprint for the overall aims of post-2013 regional policy.
However, Demszky has one "major problem" with the Europe 2020 strategy as it mentions 'cities' only once and has no real sub-national dimension.
He believes the quick adoption of the blueprint and, even more seriously, the short deadline given to member states to develop their 2020 programmes "makes the involvement of the regions and cities practically impossible".
"Under these circumstances there is a real danger that Europe 2020 will do no better than the Lisbon Strategy," he argued, as "the aims accepted on national level will not become accepted and followed by the regions and urban areas".
Like many leading players, including EU Regional Policy Commissioner Johannes Hahn, he believes regional policy should keep its current chunk of the EU budget.
The combination of the global recession, the growing importance of climate policies and the EU's demographic challenges could easily lead to a situation where not only the Common Agricultural Policy but also cohesion policy are crowded out, he said. "This would be a pity," he argued "and would lead to the collapse of the Europe 2020 strategy".
Demszky added that purely technical interventions might improve slightly the performance in a given sector, but could consequently lead to more harm in other sectors.
"An ideal example is the sustainability-oriented rules for new housing construction, as a result of which housing units become more expensive and social inequalities grow."
The outgoing Budapest mayor praised Hahn, whom he said "has a very good overview about the problems of the European territories".
"He gives the necessary attention to the large cities of Europe, which already now - and even more in the future - act as the most dynamic actors of development, together with their surrounding areas," he said.
At the same time, he argued, "I understand that he has no easy task representing this view in a Commission which seems to be less space-sensitive than it should be".
He concluded that the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Rural Development Fund should be aligned to support cohesion policy and integrated local development.
Separating the ESF from the structural funds would not only undermine an integrated approach but damage the EU's key aim – as outlined in the Lisbon Treaty - of territorial cohesion, he said.