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Given the choices, and having been to all three. Prague.
I don't really understand the constraint of walking etc. Taxis are cheap and plentiful in all of them (though munich they are more expensive). Prague even has uber what was laughably cheap.
Since, like you I haven't been to any of these... other than a quick & pleasant business foray in Munich once, & they are all central European cities of merit, I would probably find something like a festival or event to tip in favor of one over the others. Or an interest in something very location specific like architecture, cuisine, beer, art...
Prague - has original architecture since Hilter spared bombing it. Most compact.
Budapest - A little more spread out. Mostly rebuilt. Has good tram system. Liked it.
Munich - a bit run down and not having as many touristy spots - but that might be a positive to some.
I would choose Prague, having been to all three.
Salzburg is good and has attractions but I found it a bit pricey, a bit too glitzy and people a bit cold and rude. Have not been to Bruges or Ghent, which I heard are lovely.
Prague seems most suitable. It is compact, and has a lot to see, and many great restaurants as well. Very touristy but that's because it is so uniquely beautiful.
Munich is not so pretty. People go to Munich to explore the surrounding mountainous areas. If you are not ready to walk and hike, forget about it. There are bus tours though.
I have not been to Budapest, but from what I learned it is not as beautiful as Prague (but still a great place to see) with fewer impressive attractions/buildings outside the parliament building. I myself want to see it next spring.
Prague. Four of the five historical areas (Hradcany or castle area, Stare Mesto or old town, Josefov or Jewish quarter, and Malastrana or lower quarter) are right on top of each other, an easy walk. Novy Mesto, new town, starts just outside Old Town but wanders a bit farther afield. There is nothing quite like Old Town Square at night or the Charles Bridge during the day - and they are 3 minutes apart.
Budapest has two "old towns" (Buda and Pest), making it harder to see it all, but is very much worthwhile. To me, Munich is bland compared to the other two cities.
Since, like you I haven't been to any of these... other than a quick & pleasant business foray in Munich once, & they are all central European cities of merit, I would probably find something like a festival or event to tip in favor of one over the others. Or an interest in something very location specific like architecture, cuisine, beer, art...
Umm, crowds are the last thing we're interested in when we travel. Waiting for tables in the restaurants, waiting on lines, waiting and hassling to get taxis/uber, crowded streets. . . No thanks. I don't like them in the US either.
Anywho, the river cruise that would have brought us to this area of the world has been postponed for at least another year. Thanks for the suggestions - and actually Praque sounds wonderful, following closely by Budapest.
I realize the river cruise is put on hold but I'll add another suggestion. Bavaria is only an hour from Munich. You could also go to Dachau as well. I remember Bavaria as a much smaller city than Munich.
I've been to all three and Budapest would be my first choice followed by Prague. They feel smaller and you are able to spend time in a small part of the city.
But don't overlook Krakow. I would go there before any on your list. We had a rental car and drove to Auschwitz. It was worth the trip.
I'm surprised to see people describe Munich as run down. It's a very affluent and well-heeled city. The train station and immediate vicinity isn't the most attractive area (which is generally the case for most urban train stations) but the city center is otherwise quite lovely and well cared for. Budapest, by contrast, is far more shabby.
Prague is the most stunning of the three cities and the most compact. That would be my first choice based on the parameters you gave. But Krakow is also well worth a visit.
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