Finance Minister presents loss-making 2013 budget
(CS/jw) Finance Minister Luc Frieden presented the 2013 budget on Tuesday morning, with a deficit of 1.3 billion euros, the equivalent of 2.8 percent of GDP, expected for the coming year.
Expenses of 14.2 billion euros are foreseen faced with only 12.9 billion euros of income.
“The budget reflects the difficult economic situation in Luxembourg as well as in Europe,” Frieden said at its presentation. “Things are worse than we expected and the government is trying to save where it won't hurt economic development,” he added.
Still, the government is facing rising costs in almost all areas. State spending will increase by 1.8 percent, for example in public transport ( +15 million), childcare (+66 million) and the University of Luxembourg (+40 million). Interest burden will also be high at 22 million euros.
Overall, Europe is facing a period of negative growth, with Luxembourg's growth outlook limited for the next year.
Tax income lower than expected
Meanwhile, tax income is decreasing in the Grand Duchy. In 2012, tax income was lower than predicted in the budget by around 270 million euros. Meanwhile spending in 2012 was higher by 230 million euros. Wage tax brought in 250 million euros less than expected in the 2012 budget.
The Finance Minister presented a series of measures aimed at decreasing the deficit. These include raising bus and train fares, which will create an additional six million euros in income. The Car-e benefit for environmentally friendly cars will be discontinued, except for fully electric cars, saving around 12 million euros.
Additionally, pensions will not be adjusted to wage increases, saving around 75 million euros. The so-called “Mammerent”, a special pension for stay-at-home parents, will only be given to people who benefit from no other pension, making a further saving of seven million euros.
Authorisation for 4.5 billion euro loan sought
The government also plans to increase excise tax of alcohol and tobacco, creating an income of 35 million euros. Meanwhile, the state will be spending more on health insurance, costing 52 million euros more than the previous year.
The minister also announced that the next index tranche, after that introduced in pay packets for this month, will not be paid until October 2013, as had been previously foreseen in the new index regulations.
Frieden closed the presentation of the budget with the demand for authorisation of loans worth 4.5 billion euros. This would include two billion euros to re-finance the old debt, and 2.5 billion euros to cover new debt. Of the latter, 1.5 billion will be used to cover the deficit and one billion euros will go into EU measures battling the eurozone crisis, such as the ESM.