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Further reform of pension system needed, says EU
Luxembourg

Further reform of pension system needed, says EU

29.05.2013 From our online archive
The European Commission has issued its country-specific recommendations, and while Luxembourg remains in the good books of the EU some policy adjustments are needed to ensure a bright future.

(CS) The European Commission has issued its country-specific recommendations, and while Luxembourg remains in the good books of the EU some policy adjustments are needed to ensure a bright future.

EU Justice Commissioner Viviane Reding was in Luxembourg on Wednesday to present the recommendations issued by the Commission.

Even though Luxembourg this year implemented a pension system reform, the Commission warned that further reform was necessary to secure the pension fund. This is not the first time that the Commission has warned the Grand Duchy on this issue, as the last country-specific recommendations already pointed out the need for reform.

Clearly, the undertaken changes in the pension system are not far-reaching enough for the EU. Early retirement should be limited, Reding explained, and retirement age should take into account longer life expectancy.

Additionally, the health care services need to take into account higher life expectancy.

Reding pointed out that EU member states spend an average of 3 percent of GDP on old-age benefits. In Luxembourg, this rate is at 8.6 percent, the highest in the EU27.

Indexation, education and de-industrialisation

Meanwhile, the EU has refrained from recommending Luxembourg to abolish its indexation system. Luxembourg is the only country with wage indexation, by which wages are adjusted regularly to match inflation.

The index is frequently regarded as a reason for high labour costs, and recently voices have emerged asking for the capping of the index, which was already limited to once-yearly adjustments at the end of 2011.

Reding said that adjustments to the index should be agreed between the government and the social partners. However, the Commissioner added that the EU wants to warn Luxembourg of the possible consequences should the system get out of control.

Finally, the country-specific recommendations highlighted problems in the education system, saying that it does not meet the requirements of the job market. Additionally, the decline in industrial production was identified as a source of worry by the Commission.

On the whole though, Reding said that the Commission is not worried about Luxembourg, and that Brussels is not dictating reform but working in dialogue with member states and their governments.

Find out more about the country-specific recommendations here.

With reporting by Bérengère Beffort