Public finances

Public finances: Responsible budgetary policy in the interest of the coming generations

The DP is committed to a responsible and forward-looking budgetary policy. Since coming to power in 2013, the DP has steadily restructured the state’s finances. Especially in the crisis years, these efforts paid off: The state remained able to act in the midst of the crises and was able to use the financial leeway to provide extensive support to people and businesses.

Within the framework of the “Energiedësch” and the three Tripartites, the DP-led government has adopted historical aid packages that include an amount of 2.5 billion euros for the years 2022 and 2023. These aid packages are also impressive by international standards.

The scale of these numerous acts of support has inevitably led to a strain on state finances. In the medium term, we want to bring public finances back into balance without increasing the tax burden on citizens or foregoing necessary investments.

In this context, we will continue to pursue a responsible and balanced budgetary policy that promotes social and generational justice as well as sustainable growth.

This year, public investments amount to about four billion euros. The DP remains true to its course of an ambitious investment policy and will continue to set the course for a successful and sustainable future for Luxembourg. Our goal is to safeguard the high quality of life for current and future generations. In this context, we want to continue to maintain a high level of investment in the areas of environmental and climate protection, mobility, affordable housing, health, and education.

Since 2013, the DP-led Ministry of Finance has successfully restructured public finances, always keeping the future viability of our country in mind. We will remain true to this approach and continue to work to limit public debt to a necessary and sustainable level.

Luxembourg is a pioneer in financing sustainability. We were the first country in Europe to publish a sustainability bond framework that enables the issuance of green, social or sustainable bonds and sets clear criteria for project selection. The DP will continue to use this instrument to work towards achieving the national climate targets.

The continuous confirmation of the AAA credit rating is not a matter of course, but the result of well-founded political decisions. High creditworthiness is a cornerstone of our country’s economic attractiveness and is therefore a guarantee for sustainable growth and employment. The DP is committed to ensuring Luxembourg’s triple A credit rating in the future through responsible and sustainable fiscal policies.

Our European neighbours do not necessarily finance large infrastructure projects through the state budget or with taxpayers’ money. Luxembourg could also gain additional financial leeway by making greater use of alternative financing methods for public investments. Examples include public-private partnerships (PPP) or citizens’ funds, as well as innovative financing instruments on the financial markets.

The DP will also develop an overall strategy to additionally involve the various state funds as well as businesses in which the state holds shares in the financing of the country’s energy and digital transition.

Luxembourg is an important hub in the region, especially in the working world. To help enable a good coexistence, important issues must therefore be addressed together with our neighbouring countries. However, joint projects within the border region, especially with regard to mobility, also entail the question of financing. The DP is of the opinion that Luxembourg should also participate financially in cross-border projects to improve the daily situation of those affected. However, the DP is critical of lump-sum cash payments to neighbouring regions or states.

During the crisis years, the Stability and Growth Pact (SGP), which regulates European budget rules, was suspended for a period of three years by using the so-called “general escape clause”. A reform of the SGP is currently being discussed at European level. Given the central importance of sound public finances for the development of the Luxembourg economy, the DP will advocate for a responsible and realistic budgetary policy – today and in the long term. Forward-looking and sustainable fiscal policy must be adapted to the new realities and take into account, among other things, the challenges of financing climate neutrality, digitisation, demographic change and an adapted defence policy. Budgetary rules should be interpreted, in Luxembourg and in Europe, in such a way that they meet these demands and continue to promote the creation of financial room for manoeuvre in a preventive manner.

In the next legislative period, the DP will fundamentally review the budget legislation and initiate a reform in cooperation with Parliament. The findings of recent years show that the current 1999 framework law should be revised and modernised. This also includes the creation of a uniform accounting method that combines the national and the European calculation system (ESA 2010) and meets the current requirements even better.