Luxembourg Finance Minister Presents Key Points of First CSV-DP Coalition Budget

On Tuesday, Luxembourg's Finance Minister Gilles Roth presented the key points of the first budget from the CSV-DP coalition government. The budget, which was the focus of three days of parliamentary debates, outlined the government's financial plans and priorities for the coming years.

According to Roth, public debt is forecast to rise to €22.2 billion by the end of 2024, equivalent to 26.5% of GDP. However, the pace of rising debt is expected to slow to 27.3% of GDP by 2027, still below the previously set 30% threshold. The amount the state spends on repaying current loans will continue to increase, from €125 million to €500 million in 2027.

The finance minister emphasized the vital role of the financial sector in Luxembourg's economy. Over 64,000 people work directly or indirectly in banks, funds, and insurance companies, with another 135,000 jobs dependent on the financial sector. To further diversify the economy, the government aims to focus on the potential impact of technology, including investments in tackling cybercrime, defending against hacking, and introducing innovative legislation for fintech companies.

Roth also announced plans to strengthen cooperation between the financial sector and higher education, especially in the field of artificial intelligence. The government intends to develop the space sector through an 'ambitious investment policy'.

Why this matters: The first budget from the CSV-DP coalition government sets the tone for Luxembourg's financial priorities and economic direction in the coming years. The focus on diversifying the economy through technology and strengthening the financial sector highlights the government's commitment to ensuring Luxembourg's long-term economic stability and growth.

During the parliamentary debates, CSV MP and budget rapporteur Diane Adehm also addressed the government's plans to relieve 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.

Roth defended measures to stimulate the housing market and announced plans for a housing roundtable. He claimed the central government's budget deficit would not be as high as anticipated earlier this year, due to increased state revenue and lower expenses. The finance minister proposed a 'debt brake' where the state could only spend as much as it recouped from taxes or other revenues, stating that "Luxembourg would not be putting itself in a 'corset' under the new European budget rules."

Key Takeaways

• Luxembourg's public debt forecast to reach 26.5% of GDP by 2024, slowing to 27.3% by 2027.
• Financial sector critical to Luxembourg's economy, with 64,000 direct/indirect jobs and 135,000 dependent.
• Government aims to diversify economy through technology, including cybersecurity and fintech legislation.
• Plans to strengthen finance-higher education cooperation, especially in artificial intelligence and space sector.
• Measures to relieve taxpayers in class 1A, but energy price cap to expire in 2025 per EU demands.