Luxembourgish Parliament Debates 2024 Budget, Focusing on Economic Stability and Growth

The Luxembourgish Parliament is currently debating the 2024 budget, with a focus on plans and projections for the upcoming year. On Wednesday, Finance Minister Gilles Roth and Economy Minister Lex Delles presented the 2024 budget, the multi-year budget for 2023-2027, the Stability and Growth Programme (SGP), and the National Reform Programme (NRP) to the parliament.

During the debate, deputies discussed various topics, including poverty prevention, rent control, diesel pricing, social housing, credit scoring, and government spending. Minister Roth committed to providing tax relief for taxpayers in class 1A, mostly divorced or widowed people, over the next year. However, measures to cushion the rise in energy prices, including the price cap, will expire in 2025 as per demands from the EU Commission and the European Central Bank.

Minister Delles said the tripartite measures from before the parliamentary elections would be prepared for expiry. Roth also defended the measures to stimulate the housing market and announced Prime Minister Luc Frieden's plans to convene a housing roundtable.

Why this matters: The 2024 budget debate in Luxembourg has significant implications for the country's economic stability and growth in the coming years. The decisions made during these discussions will impact various sectors and the lives of Luxembourgish citizens, making it a critical event for the nation.

Roth stated that the central government's budget deficit would not be as high as anticipated earlier this year, largely due to increased state revenue and lower expenses than recent years. He proposed a 'debt brake' where the state could only spend as much as it recouped from taxes or other revenues, in line with the new European budget rules, but clarified that Luxembourg would not be putting itself in a 'corset' and that it was a matter of responsibility.

The government forecasts national debt to rise to €22.2 billion by the end of 2024, representing 26.5% of GDP, but this is below the previously set 30% threshold. The amount the state spends on repaying current loans will continue to rise, from €125 million to €500 million in 2027.

The financial sector remains critical to Luxembourg's economy, with over 64,000 people working directly or indirectly in banks, funds, and insurance companies, and an additional 135,000 jobs dependent on the sector. To further diversify the economy, the government is considering investing in fintech legislation, the space sector, and drone manufacturing. Attracting skilled workers to the financial sector is a challenge, and tax incentives for single workers are proposed as a solution. Cybersecurity and collaboration between the financial sector and higher education, especially in AI, are also priorities.

On Thursday, the deputies will vote on the 2024 budget and the multi-year budget, as well as adopt the accounts for the 2022 fiscal year for the State, the Chamber of Deputies, and its affiliated bodies. Minister Roth presented the state's financial situation as of March 31, 2024 to the Finance Committee and the Parliamentary Committee for controlling budget implementation. The rating agency Creditreform Rating confirmed Luxembourg's 'AAA' rating with a 'stable' outlook on April 20, 2024.

Key Takeaways

• Luxembourg debates 2024 budget, with focus on tax relief, housing, and diversifying economy.
• Government forecasts national debt to rise to 26.5% of GDP by 2024, below 30% threshold.
• Financial sector remains critical, with plans to invest in fintech, space, and drone manufacturing.
• Attracting skilled workers to financial sector is a challenge, with tax incentives proposed.
• Luxembourg maintains 'AAA' credit rating with 'stable' outlook, as confirmed by Creditreform Rating.