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Local Government Indebted-ness and Debt Management in Switzerland – Causes and consequences

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  • Melly, Christian

Abstract

The indebtedness of local governments has the potential to be highly detrimental at both local and central government levels. The objective of the present case study is to present the indebtedness and subsequent restructuring of the municipality of Leukerbad, highlighting the causes leading to the debt, problem management, legislative actions taken in response to the matter and the evaluation of the effectiveness of these measures. The reasons for the indebtedness of Swiss local governments were the soft legal framework and non-adherence to various fundamental statutory regulations. A restructuring concept was developed to set-tle the debt, according to which the municipality – through an enterprise established for this very purpose – pays 22 per cent of accumulated debt to creditors and holds out the prospect of repaying a further 11 per cent. The majority of creditors ultimately accepted this restructuring concept. Legislators reviewed the Local Government Act of 1980 and drafted a new Act in 2004, as a result of which the financial situation of municipalities of the Canton of Valais improved considerably.

Suggested Citation

  • Melly, Christian, 2012. "Local Government Indebted-ness and Debt Management in Switzerland – Causes and consequences," Public Finance Quarterly, Corvinus University of Budapest, vol. 57(2), pages 164-172.
    • Handle: RePEc:pfq:journl:v:57:y:2012:i:2:p:164-172
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    File URL: https://unipub.lib.uni-corvinus.hu/8985/
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    References listed on IDEAS

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    1. Duc Hong Vo, 2010. "The Economics Of Fiscal Decentralization," Journal of Economic Surveys, Wiley Blackwell, vol. 24(4), pages 657-679, September.
    2. Oates, Wallace E., 2008. "On the Evolution of Fiscal Federalism: Theory and Institutions," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(2), pages 313-334, June.
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    Cited by:

    1. Katarina Valaskova & Tomas Kliestik & Dominika Gajdosikova, 2021. "Distinctive determinants of financial indebtedness: evidence from Slovak and Czech enterprises," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 16(3), pages 639-659, September.

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    More about this item

    Keywords

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    JEL classification:

    • H39 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Other
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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