Independent research and analysis centre confirms: The Danish model for local government borrowing is strong

In a new report, the Danish independent research and analysis centre VIVE assesses that the Danish model for local government borrowing through KommuneKredit – the credit institution for local and regional authorities in Denmark – performs well in relation to the set considerations and criteria.

Danish local governments, i.e. municipalities and regions, undertake many important tasks in the Danish society. Therefore, it is of utmost importance that local governments enjoy a healthy economy, and that they experience a reliable supply when needing access to cost-effective financing. Financing that is today mainly provided by KommuneKredit.

The Danish independent research and analysis centre VIVE, which operates under the Ministry of the Interior and Housing and carries out research and analysis projects in all the major aspects of welfare and the welfare state, has published the report ’Local government borrowing and the role of KommuneKredit: An international comparative analysis’. Through comparison with four other countries the report analyses how said borrowing interrelates with fiscal policy management and economic policy, how it is regulated, as well as the rationale of the KommuneKredit set-up that through the association KommuneKredit provides its members – all Danish municipalities and regions – with funding at the lowest possible cost.

Main findings

• The current financial position of Danish local governments is strong and to a very high degree they are protected against local effects of economic fluctuations by the Danish state.
• The borrowing regulations of Danish local governments are more restrictive than in the countries chosen for comparison.
• The joint and several guarantee of local governments contribute to high security and is vital for the cost-effective financing of local government capital expenditure.
• The KommuneKredit set-up creates equal loan terms for local governments, and it ensures stability in times of financial fluctuation.

The Danish model with KommuneKredit-loans ensures good lending conditions for local governments

In connection with the publication of the report Chairman of the Board at KommuneKredit Lars Krarup says:

“It is with great interest that I have read VIVE’s report, which includes a thorough analysis of local government borrowing and the role of KommuneKredit.” He continues:

“I am pleased to note that the Danish model with KommuneKredit as the predominant credit provider to local governments is doing well – also from an international perspective. It is especially important to me, as VIVE also points out, that KommuneKredit offers access to financing on equal terms for all client – and at the lowest possible cost - regardless of size or geographical location. In this way, we help support local growth, development and not least sustainable transition”.

VIVE has initiated the report that has been sponsored by KommuneKredit.

Read an English summary of the VIVE report on ’Local government borrowing and the role of KommuneKredit: An international comparative analysis’ here.