Icelandic State Applies for International Loan for Grindavík Skip to content

Icelandic State Applies for International Loan for Grindavík

By Yelena

Grindavik from above
Photo: Art Bicnick. Lava at the border of Grindavík.

The Icelandic state has applied for a line of credit from the Council of Europe Development Bank due to Grindavík, RÚV reports. Government response measures for the earthquake- and volcano-hit town are expected to cost up to ISK 100 billion [$718 million, €668 million]. Business owners in the town say the government is leaving them in the lurch.

Roads, buildings, and power lines damaged

Grindavík (pop. 3,600), a fishing town on Iceland’s Reykjanes peninsula, was evacuated on November 10, 2023 due to powerful seismic activity that heavily damaged buildings, homes, and roads in the town. Since December, five eruptions have occurred just north of the town, including one that is currently ongoing. Lava from the eruptions has cut off roads in and out of the town on several occasions, damaged power and water lines to the town, and destroyed three houses at its north edge.

While the town has been largely evacuated of residents since November 2023, some businesses do continue to operate there, particularly in the harbour. Since the seismic and volcanic activity began, they have had to contend with repeated power outages, evacuations, and closures of the town by civil protection authorities.

Line of credit won’t necessarily be used

The Icelandic government’s response measures to the ongoing events have focused on buying up residential properties from residents who want to relocate, building lava barriers around the town, and repairing public infrastructure in Grindavík. The cost of the first two measures is projected to be around ISK 70-80 billion [$503-575 million, €467-534 million], while the cost of repairs to return the town to an inhabitable state is projected at ISK 14-19 billion [$101-137 million, €94-127 million].

“Then we need to draw on some lines of credit, one of the things we have applied for is a loan from the Council of Europe Development Bank,” stated Minister of Finance Sigurður Ingi. “That’s not to say that we need to use it, it’s more of a precaution in order to have the possibility because no one can tell us the exact scope of the projects we have to undertake.”

Grindavík business owners unhappy with support measures

The government of Iceland has drafted a bill outlining continuing support measures for the town of Grindavík. It has received 45 comments on the official consultation portal, most criticising the lack of support for the town’s businesses. Existing measures have largely been centred on compensating loss of income, but business owners have criticised that the government is not offering to buy up their properties as it has done for Grindavík’s residents.

The bill has gone through its first reading in Parliament and is being reviewed in the Economic Affairs and Trade Committee.

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