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One in five municipalities "bankrupt"

One in five municipalities “bankrupt”

The financial situation is not good for many of Sweden’s municipalities. Suffering from high debts, they face a difficult future according to a report by Ekot. One in five municipalities have declared “bankruptcy”.

By – Brünnhilde

The economic situation in many of Sweden’s municipalities has started to become truly “serious”, as Sweden’s Radio expresses it.

Debts are quickly growing and one in five municipalities are “bankrupt”.

“Should it have been a company, one in five municipalities would have been declared already bankrupt,” explains Greger Gustafson, business manager for public affairs in Skandia, to Ekot.

This is based on the municipality’s solidity, also known as the ability to pay off its debts in the long run. The municipalities suffer heavily from negative equity and the liabilities are now greater than the assets.

The reason that the bubble has not dropped is due to the low interest rates so far. But once the day arrives that they rise, things will quickly get worse.

According to Greger Gustafson, the municipalities have been able to borrow money free of charge, but when the interest rate rises to 4-5 percent, it will cost “many millions”.

He believes these costs will impact negatively by future generations.

In addition, it is not only about municipal bank loans, but also about large future pension payments to municipal employees. According to Ekot, the municipalities’ pension debt is a total of SEK 235 billion.

First, the people in their 40’s will retire, working since the 50’s and 15 years later “the Great Group” will happen with people in their 60’s, Greger Gustafson points out.

According to SKL’s chief economist Annika Wallenskog, the debt is due to the population increase, which requires extensive investments in schools and pre-schools. The investment amount is around 160 billion – per year. She does not think, however, that one should be so worried, although welfare may noticeably deteriorate.
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Read more:  From  2018/03/08
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