The total debt of municipalities in Iceland increased from ISK 155 billion (USD 1.26 billion, EUR 880 million) in 2007 to ISK 190 billion (USD 1.55 billion, EUR 1.08 billion) in 2008.
This year, many local authorities have to undertake rationalization measures at schools because of a 15.5 percent cut to their revenue, which could lead to fewer teachers and more students in each class in elementary schools across the country, Morgunbladid reports.
“We are trying to help municipalities as much as we can during these difficult times and some kind of inner supervision on our behalf is part of that,” said Halldór Halldórsson, chairman of the Association of Local Authorities in Iceland (SÍS).
These measures include that every month SÍS will monitor the position of municipalities and react to the problems they encounter in cooperation with local authorities.
Some of these problems involve maintaining a sufficient cash flow in the operations of municipalities to pay invoices on time. High cost of capital is also a heavy burden on many a municipality.
Local authorities worry that the situation will worsen considerably in the coming months.