Luxembourg communes are warning that their finances will deteriorate over the coming years after interior minister Taina Bofferding on 4 June said the financial situation of the country’s municipalities was better than expected.
The government had anticipated financial losses for communes worth €420m at the start of the pandemic, for example because of losses in tax revenue. This estimate has been revised downward to €210m.
“Even if 2020 can be described as an exceptional year, the overall situation of municipal finances–after a year of pandemic–is much better than initially feared,” Bofferding said during a press conference.
The minister launched a new dashboard, which will collect monthly data from Luxembourg’s 102 communes and trigger an alert if their finances reach worrisome levels. No commune is currently in a difficult financial situation, Bofferding said.
Some 21 communes sought support from financial advisors at the ministry last year to discuss their finances.
Loans grew from €52m in 2019 to €143.8m (+143.8%) last year as investments grew from €1.13bn to €1.23bn (+8.7%).
Syvicol, an interest group representing the country’s cities and communes, however, shot back at the minister in a statement published following the press conference.
“Syvicol does not contest these observations,” it said about the better-than-expected financial results. “If it remains concerned, however, it is because the effect of the crisis will not be limited to fiscal year 2020.”
Expected revenue for the coming years is lower than anticipated before the pandemic, with Syvicol warning of a €1bn shortfall over the coming years.
In addition, costs in several areas, for example municipal construction projects, are increasing, the organisation said.
“If revenues for the next few years remain below expectations, municipalities will either have to reduce their investment programmes proportionately or resort to borrowing,” Syvicol said.