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Weathering The Storm – Icelandic Municipalities’ Handling of an Unprecedented Economic Crisis

Year 2016, Volume: 2 Issue: 3, 25 - 42, 15.04.2016
https://doi.org/10.25069/spmj.290501

Abstract

Within a few days in October 2008, following serious turmoil on financial markets worldwide, some 85% of the Icelandic banking sector collapsed, together with the Icelandic currency, the króna. Almost all the rest followed early in 2009. The Icelandic stock market took a nosedive. The Republic of Iceland had entered the worst economic crisis of its history.

Icelandic municipalities, which had taken on an increasing burden of running the welfare state, were hard hit financially, without the ability of the state to help out. In fact, some of the post-crisis actions of the state, under IMF direction, were difficult for the municipalities. It did not make things easier that the crisis had been precluded by an unprecedented period of growth, encouraging the municipalities to borrow in international markets and invest in infrastructure that turned out to be superfluous in the post-crisis period.

This paper will look at the reactions of the Icelandic municipalities to the crisis, the political implications of it, where they are now and if there are lessons that can be learned from the difficult years in the last decade.

References

  • Daníelsson, J., & Zoëga, G. (2009). Hagkerfi býður skipbrot - Skýrsla Gylfa Zoega og Jóns Daníelssonar. Reykjavík: University of Iceland. Retrieved from http://www.hi.is/files/skjol/felagsvisindasvid/deildir/hagfraedi/2008_2009/Hagkerfib____ur_skipbrot.pdf
  • Gildi vísitölunnar. (2009, April 30). [A Stock Market Website]. Retrieved from http://www.m5.is/?gluggi=gjaldmidill&id=22
  • Grábók sveitarfélaga og hvítbók ríkisins. (2014, November 14). Retrieved October 15, 2014, from http://www.ruv.is/frett/grabok-sveitarfelaga-og-hvitbok-rikisins
  • Hagstofa Íslands. (2014). Mannfjöldi eftir kyni, aldri og sveitarfélögum 1998-2013 - Sveitarfélagaskipan hvers árs. Retrieved from hagstofa.is
  • Haraldsson, H. L. (2014). Úttekt á rekstri Reykjanesbæjar og tillögur. Reykjanesbær: HLH ehf. Retrieved from http://www.reykjanesbaer.is/files/skyrsla-hlh.pdf
  • Helstu hagstærðir sveitarfélaga 1980-2014. (2015). Retrieved July 27, 2015, from http://www.hagstofa.is/PageID=2602&src=https://rannsokn.hagstofa.is/pxis/Dialog/varval.aspma=THJ05311%26ti=Helstu+hagst%E6r%F0ir+sveitarf%E9laga+1980%2D2014++++++++%26path=../Database/thjodhagsreikningar/fjarmal_sveiarf/%26lang=3%26units=Millj%F3nir%20kr%F3na
  • Hlynsdóttir, E. M. (2002). Áhrif lýðræðisþátta á sameiningarferli í Skagafirði. Sveitarstjórnarmál, 3:62, 32–4.
  • IMF. (2008, October 25). Iceland: Request for Stand-By Arrangement - Staff Report; Staff Supplement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Iceland. International Monetary Fund. Retrieved from http://www.imf.org/external/pubs/cat/longres.aspx?sk=22513.0
  • Íslandsbanki. (2015). Íslensk sveitarfélög. Retrieved from https://www.islandsbanki.is/library/Skrar/sveitarfelog/Islensk Sveitafelog-skyrsla-2015.pdf
  • Kosningasaga. (2015). Retrieved from https://kosningasaga.wordpress.com/
  • Kristinsson, G. H. (2007). Íslenska stjórnkerfið (2nd ed.). Reykjavík: Háskóli Íslands.
  • Magnússon, M. Á., & Hlynsdóttir, E. M. (2014). From Post-Colonial to PostNPM: Development in Icelandic Local Administration and Service Provision. Presented at the COST WG 1, University of Potsdam.
  • Magnússon, M. Á. S. (2014a). Moving Iceland Forward – The fate of a government initiative to reform municipal cooperation in post-crisis Iceland. Presented at the Simplification of Local Administration in Europe : Levels and Dimensions, Bologna: Observatory of Local Administration.
  • Magnússon, M. Á. S. (2014b). Umbætur á sveitarstjórnarstigi og viðbrögð sveitarfélaga á Íslandi við efnahagshruninu, Opinion poll amongst mayors and municipal councillors in Iceland on the impacts of the economic crisis. Reykjavík: Bifröst University.
  • Matthíasson, T. (2009). Spinning out of Control, Iceland in Crisis.
  • Moody’s Investors Service. (2008). Moody’ issues annual report on Iceland. Retrieved from http://sedlabanki.is/lisalib/getfile.aspx?itemid=5762
  • Nordregio. (2014). State of the Nordic Region 2013 (Nordregio Report No. 1). Stockholm.
  • Organisation for Economic Co-operation and Development. (2013). Country statistical profile: Iceland (Country statistical profiles: Key tables from OECD). Paris. Retrieved from http://www.oecd-ilibrary.org/content/table/20752288-table-isl
  • Samband íslenskra sveitarfélaga. (2011). Hagræðingaraðgerðir sveitarfélaga; Fjárhagsáætlanir fyrir árið 2011. Reykjavík
  • Samband íslenskra sveitarfélaga. (2014). Flutningur málefna fatlaðs fólks frá ríki til sveitarfélaga; Afstaðaþjónustusvæða til faglegra og fjárhagslegra forsendna yfirfærslunnar. Retrieved from http://www.samband.is/media/thjonusta-vidfatlada/Flutningur2014.pdf
  • Samkomulag ríkis og sveitarfélaga um tilfærslu þjónustu við fatlaða. (2010). Retrieved from http://www.samband.is/media/felagsthjonusta/Heildarsamkomulag-um-tilfaerslu-thjonustu-vid-fatlada-endanl.pdf
  • Svar fjármála- og efnahagsráðherra við fyrirspurn frá Óla Birni Kárasyni um tekjur ríkissjóðs. 143. löggjafarþing 2013–2014. Þingskjal 611 — 104. mál. (2014, February 18). Retrieved from http://www.althingi.is/altext/143/s/0611.html
  • Sveitarstjórnarkosningar. (2015). Retrieved July 28, 2015, from http://hagstofa.is/Hagtolur/Kosningar/Sveitarstjornarkosningar/
  • Sveitarstjórnarlög, 2011 nr. 138. (2011, September 28). Alþingi. Retrieved from http://www.althingi.is/lagas/143a/2011138.html
  • Úrvalsvísitalan OMXI15. (2009, April 30). [A Stock Market Website]. Retrieved from http://m5.is/gluggi=visitala&visitala=13

Weathering The Storm – Icelandic Municipalities’ Handling of an Unprecedented Economic Crisis

Year 2016, Volume: 2 Issue: 3, 25 - 42, 15.04.2016
https://doi.org/10.25069/spmj.290501

Abstract

Within a few days in October 2008, following serious turmoil on financial markets worldwide, some 85% of the Icelandic banking sector collapsed, together with the Icelandic currency, the króna. Almost all the rest followed early in 2009. The Icelandic stock market took a nosedive. The Republic of Iceland had entered the worst economic crisis of its history.

Icelandic municipalities, which had taken on an increasing burden of running the welfare state, were hard hit financially, without the ability of the state to help out. In fact, some of the post-crisis actions of the state, under IMF direction, were difficult for the municipalities. It did not make things easier that the crisis had been precluded by an unprecedented period of growth, encouraging the municipalities to borrow in international markets and invest in infrastructure that turned out to be superfluous in the post-crisis period.

This paper will look at the reactions of the Icelandic municipalities to the crisis, the political implications of it, where they are now and if there are lessons that can be learned from the difficult years in the last decade.

References

  • Daníelsson, J., & Zoëga, G. (2009). Hagkerfi býður skipbrot - Skýrsla Gylfa Zoega og Jóns Daníelssonar. Reykjavík: University of Iceland. Retrieved from http://www.hi.is/files/skjol/felagsvisindasvid/deildir/hagfraedi/2008_2009/Hagkerfib____ur_skipbrot.pdf
  • Gildi vísitölunnar. (2009, April 30). [A Stock Market Website]. Retrieved from http://www.m5.is/?gluggi=gjaldmidill&id=22
  • Grábók sveitarfélaga og hvítbók ríkisins. (2014, November 14). Retrieved October 15, 2014, from http://www.ruv.is/frett/grabok-sveitarfelaga-og-hvitbok-rikisins
  • Hagstofa Íslands. (2014). Mannfjöldi eftir kyni, aldri og sveitarfélögum 1998-2013 - Sveitarfélagaskipan hvers árs. Retrieved from hagstofa.is
  • Haraldsson, H. L. (2014). Úttekt á rekstri Reykjanesbæjar og tillögur. Reykjanesbær: HLH ehf. Retrieved from http://www.reykjanesbaer.is/files/skyrsla-hlh.pdf
  • Helstu hagstærðir sveitarfélaga 1980-2014. (2015). Retrieved July 27, 2015, from http://www.hagstofa.is/PageID=2602&src=https://rannsokn.hagstofa.is/pxis/Dialog/varval.aspma=THJ05311%26ti=Helstu+hagst%E6r%F0ir+sveitarf%E9laga+1980%2D2014++++++++%26path=../Database/thjodhagsreikningar/fjarmal_sveiarf/%26lang=3%26units=Millj%F3nir%20kr%F3na
  • Hlynsdóttir, E. M. (2002). Áhrif lýðræðisþátta á sameiningarferli í Skagafirði. Sveitarstjórnarmál, 3:62, 32–4.
  • IMF. (2008, October 25). Iceland: Request for Stand-By Arrangement - Staff Report; Staff Supplement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Iceland. International Monetary Fund. Retrieved from http://www.imf.org/external/pubs/cat/longres.aspx?sk=22513.0
  • Íslandsbanki. (2015). Íslensk sveitarfélög. Retrieved from https://www.islandsbanki.is/library/Skrar/sveitarfelog/Islensk Sveitafelog-skyrsla-2015.pdf
  • Kosningasaga. (2015). Retrieved from https://kosningasaga.wordpress.com/
  • Kristinsson, G. H. (2007). Íslenska stjórnkerfið (2nd ed.). Reykjavík: Háskóli Íslands.
  • Magnússon, M. Á., & Hlynsdóttir, E. M. (2014). From Post-Colonial to PostNPM: Development in Icelandic Local Administration and Service Provision. Presented at the COST WG 1, University of Potsdam.
  • Magnússon, M. Á. S. (2014a). Moving Iceland Forward – The fate of a government initiative to reform municipal cooperation in post-crisis Iceland. Presented at the Simplification of Local Administration in Europe : Levels and Dimensions, Bologna: Observatory of Local Administration.
  • Magnússon, M. Á. S. (2014b). Umbætur á sveitarstjórnarstigi og viðbrögð sveitarfélaga á Íslandi við efnahagshruninu, Opinion poll amongst mayors and municipal councillors in Iceland on the impacts of the economic crisis. Reykjavík: Bifröst University.
  • Matthíasson, T. (2009). Spinning out of Control, Iceland in Crisis.
  • Moody’s Investors Service. (2008). Moody’ issues annual report on Iceland. Retrieved from http://sedlabanki.is/lisalib/getfile.aspx?itemid=5762
  • Nordregio. (2014). State of the Nordic Region 2013 (Nordregio Report No. 1). Stockholm.
  • Organisation for Economic Co-operation and Development. (2013). Country statistical profile: Iceland (Country statistical profiles: Key tables from OECD). Paris. Retrieved from http://www.oecd-ilibrary.org/content/table/20752288-table-isl
  • Samband íslenskra sveitarfélaga. (2011). Hagræðingaraðgerðir sveitarfélaga; Fjárhagsáætlanir fyrir árið 2011. Reykjavík
  • Samband íslenskra sveitarfélaga. (2014). Flutningur málefna fatlaðs fólks frá ríki til sveitarfélaga; Afstaðaþjónustusvæða til faglegra og fjárhagslegra forsendna yfirfærslunnar. Retrieved from http://www.samband.is/media/thjonusta-vidfatlada/Flutningur2014.pdf
  • Samkomulag ríkis og sveitarfélaga um tilfærslu þjónustu við fatlaða. (2010). Retrieved from http://www.samband.is/media/felagsthjonusta/Heildarsamkomulag-um-tilfaerslu-thjonustu-vid-fatlada-endanl.pdf
  • Svar fjármála- og efnahagsráðherra við fyrirspurn frá Óla Birni Kárasyni um tekjur ríkissjóðs. 143. löggjafarþing 2013–2014. Þingskjal 611 — 104. mál. (2014, February 18). Retrieved from http://www.althingi.is/altext/143/s/0611.html
  • Sveitarstjórnarkosningar. (2015). Retrieved July 28, 2015, from http://hagstofa.is/Hagtolur/Kosningar/Sveitarstjornarkosningar/
  • Sveitarstjórnarlög, 2011 nr. 138. (2011, September 28). Alþingi. Retrieved from http://www.althingi.is/lagas/143a/2011138.html
  • Úrvalsvísitalan OMXI15. (2009, April 30). [A Stock Market Website]. Retrieved from http://m5.is/gluggi=visitala&visitala=13
There are 25 citations in total.

Details

Subjects Political Science
Journal Section Articles
Authors

Magnús árni Skjöld Magnússon This is me

Publication Date April 15, 2016
Submission Date February 7, 2017
Published in Issue Year 2016 Volume: 2 Issue: 3

Cite

APA Magnússon, M. á. S. (2016). Weathering The Storm – Icelandic Municipalities’ Handling of an Unprecedented Economic Crisis. Strategic Public Management Journal, 2(3), 25-42. https://doi.org/10.25069/spmj.290501

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