Reykjanesbær council—one of Iceland’s most populous municipalities—may be about to take the unusual decision to ask the central government to take over its finances in an effort to get spiraling debt under control.
The council plans to ask the Ministry of the Interior to appoint a financial control board to take over the municipality’s finances. The mayor explains that Reykjanesbær’s debt burden is far too high and that contract negotiations with creditors have so far come to nothing.
A majority of the council cabinet voted in favor of the move this week, and are urging members of the full council to approve it when they meet on Tuesday. The role of the financial control board would be to research and account for all council expenditure and all activities and costs. Reykjanesbær owes over ISK 40 billion (EUR 284 million/USD 320 million). It is the fifth most-populous municipality in Iceland, with around 15,000 residents.
Reykjanesbær municipality is home to the settlements of Keflavík, Njarðvík, Hafnir and Ásbrú.
“The situation is so bad that although the annual accounts, which will be submitted to the council meeting on Tuesday, show a big turnaround in the council’s accounts, as we are continually gaining a better hold on overall operations, that just isn’t good enough to service the loans that the municipality has and we need a lot more (money) for that to be the case,” mayor Kjartan Már Kjartansson told RÚV.
Kjartan predicts that the full council will vote in favor of the proposal—saying that creditors have not wanted to come to a deal on write-offs or reductions, making this the only course of action left open. “We’ve been trying for 18 months and, as the law demands, if we don’t manage it the we have to ask for a financial control board to be appointed and we are just following the laws that municipalities have to follow. It’s that simple.”