3 questions for André Bauler
André, time and again we hear about Luxembourg’s triple A rating in the news. As the president of the parliamentary finance and budget commission, can you explain why this is so important for our country?
AB: What sounds like an empty phrase, has in fact a very big impact on Luxembourg’s public finances and the Luxembourgish financial center.
This evaluation, which is provided by independent credit rating agencies, assesses a country’s creditworthiness. The rating indicates the probability by which a country will be able to pay its debt or not.
This allows investors to know the financial and political risk of their investment – in this case in Luxembourgish sovereign bonds.
The higher the risk of not being able to pay the debt is, the worse the rating will be, and the more interest Luxembourg would have to pay.
Luxembourg has the best possible rating – the famous triple A – which only a handful of other countries in the world also have.
So, the triple A allows the government to borrow money at a low price?
AB: Yes, in order to finance the costs of the Covid-19 crisis, we were even able to borrow money at a negative interest rate! This means Luxembourg has to pay back less money than it originally borrowed. Thus, thanks to the triple A, the government can spend more on policies that benefit the citizens.
The triple A also contributes to our financial center’s attractivity. It’s not only the Luxembourgish government that benefits from the triple A when it borrows money on the international capital markets. The good rating also has a positive impact on the different actors from the financial sector.
We can say then, that Pierre Gramegna’s cautious budget planning during the last years bears fruit?
AB: Absolutely. Up until the beginning of the current pandemic the national debt was slightly decreasing in absolute terms, even though the investments in our country’s future were at an all-time high. For the first time for a long time, in 2018 and 2019 we had budgetary surpluses at the level of the central administrations. This gave us the financial room for maneuver that allows us today to help our businesses and freelance professionals in these difficult times.
The recent confirmation of our triple A is very good news and highlights the good health of our public finances.
The triple A is an important trump of our financial center and guarantees our country’s good reputation and creditworthiness in the world.
