On 10 April 2010 the Luxembourg government proposed an austerity package which the unions refused. Following the mobilization of the unions before and after the summer, some of the austerity measures have been withdrawn with the agreement of 29th of September. However some inacceptable measures still remain.
General information and figures
On 10 April 2010 the Luxembourg government proposed an austerity package which the unions refused. Following the mobilization of the unions before and after the summer, some of the austerity measures have been withdrawn with the agreement of 29th of September. However some inacceptable measures still remain.
Unemployment rate (June 2010): 4.9%
GDP (bn euro – 2010): 38.39
General Government debt (2009 - % GDP): 14.5
Public deficit (2009 - % GDP) : 0.7
Source: Eurostat
Cuts in social benefits
Children allowance and the bonus for children from the age of 21 years have been abolished and replaced by a system of student grants and loans. These measures concern all young people attending secondary school. While residents’ children are entitled to compensation through the system of grants and loans, the children of cross-border workers and the children of migrant workers who remained in their home countries, are not entitled to any compensation.
Eligibility for the subsidy "Mammerent" (€86.54 per month per child granted to the parent who devotes him/herself to raising a child(ren)) will be increased from 60 to 65 years of age.
Pension reforms
The government wanted to freeze pension levels till 2014. Following the unions’ mobilization the adjustment foreseen for 2011 is split in two parts (0,95% in 2011 and 0,95% on the 1st of January 2012): a solution that the unions consider regrettable.
Cuts in public services, transfers and public investments
Cut in government subsidies to companies by 10%.
The government wants to reduce state participation for the construction of a municipal sewage treatment plant from 90% to 75%.
Collective bargaining and labour reform
The tax rate on salaries will no longer be adjusted to inflation till 2014.
Tax changes
The solidarity tax (Contribution to employment Fund) payed by individuals increases from 2.5% to 4%. Beyond a taxable income of €150,000 in tax classes 1 and 1a or €300,000 in class 2, the rate rises to 6%.
For companies, the solidarity tax increases from 4% to 5%.
An emergency tax of 0.8% was introduced for 2011 and 2012, called "contribution due to the crisis". This temporary contribution is levied on all income. Under the 29th of September agreement, the unions insured that this tax is not automatically collected over two years, but only in 2011. The need to implement this measure during the year 2012 will depend on the evolution of the economic situation and will be discussed again.
The maximum tax rate shift is 38% to 39% for annual taxable income exceeding €41,793. The maximum rate of 42%, originally planned for high revenues, has not been introduced.