Pierre Gramegna

Budget 2021: A budget of solidarity and for a sustainable recovery!

“The 2021 budget is an extraordinary budget for extraordinary times”, said Finance Minister Pierre Gramegna during the presentation of the budget in October.

Thanks to the forward-looking fiscal policies in recent years, public debt has been gradually re-duced despite record investments. And without the corona crisis, the debt would have even gone down to the level of 2011.

Luxembourg was financially well prepared for this crisis

In contrast to most other EU Member States, Luxembourg therefore had the necessary financial leeway when the pandemic struck.

This allowed the government to draw up a stabilization and recovery plan to help the people, busi-nesses and independents during these difficult times.

The budget for 2021 is a budget of continuity with regards to the measures that have been taken in the fight against the Covid-19 crisis. New measures will be implemented to get through this crisis faster and to make our economy more resilient and sustainable in the future.

This budget is therefore marked by solidarity and the efforts for a sustainable recovery. Further measures are planned for the coming year, which will ensure a more qualitatively oriented development and consistent investments in terms of solidarity, housing, sustainability and infra-structural attractiveness.

The 2021 budget provides for investments of 2.8 billion euros. That is more than last year’s ordi-nary investments. Maintaining investment at a high level is the right decision to secure jobs and help businesses as well as the self-employed through the crisis and accelerate economic recovery.

Focus on social cohesion

In these uncertain times, the DP wants to protect especially the most vulnerable.

Accordingly, the “cost-of-living” allowance will be increased by 10% this year – and that after it already having been doubled during the COVID crisis. The REVIS will also be raised in this con-text.

On 1rst January of this year, the minimum wage was increased by 2.8% on the basis of the evolution of salaries in 2018 and 2019, as is the case on a regular basis every two years.

For businesses that are most affected by the crisis – and for which therefore an additional burden in the shape of an increased minimum wage will be difficult to bear – a new aid of 500 € per employee has been introduced by the Ministry of the Middle Classes. Some 40,000 people from the HORE-CA, retail and event sector will benefit from it.

Pierre Gramegna
Pierre Gramegna

Securing jobs

In addition to the extension of the aid schemes following the restart plan Neistart Lëtzebuerg, the budget provides for an extension of the part-time regime until the middle of the year. Partial unem-ployment is an important measure to maintain jobs. Without this regime, unemployment would have doubled according to the STATEC.

The Ministry of Housing, meanwhile, will receive 11% more funding and the special fund for the creation of affordable housing will be doubled by 2024.

As with many other countries, a CO2 tax has been introduced for the fight against climate change. According to the polluter pays principle, the tax will increase from 20 to 30 euros a ton by 2023. In concrete terms, this means that petrol and diesel have become 5 cents more expensive this year.

The CO2 tax is not an ordinary tax. With a socially equitable tax credit of 96 Euros per year, this tax is being compensated for the more socially disadvantaged households.

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