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Luxembourg to spend its way out of the crisis
Economics

Luxembourg to spend its way out of the crisis

14.03.2012 From our online archive
Spending money to make money is the principle at the heart of the 2012 draft budget, which was today unveiled by finance minster Luc Frieden.

(JB) Spending money to make money is the principle at the heart of the 2012 draft budget, which was today unveiled by finance minster Luc Frieden.

The minister explained that he hoped to stimulate the economy by increasing the purchasing power of residents in Luxembourg.

As such, there will be no tax increase and the crisis tax, set at 0.8%, will be abolished. The aim, he says, is to see better growth in 2012 than in 2011.

The minister's strategy places an emphasis on stimulating employment opportunities. He hopes to reserve 35% of the budget for social projects.

200 million euros will be allocated to projects and bodies aimed at improving employment levels. Mr Frieden has called for a recruitment push by the government, to hire some 180 teachers and 40 more police officers. Within the government administration itself, he also calls for a further 200 staff to be appointed.

Mr Frieden reassured employers' groups that agreements made during the bipartite meetings this year would be respected. Employers will be compensated for the minimum wage rise and the government will subsidise ongoing training of staff to the tune of 80 million euros.

If the minister's calculations are correct, the country's deficit will reach .7% in 2012, keeping Luxembourg within the criteria of the Stability Pact, which sets a deficit limit of -3%.

Despite this, the country is still some way off from achieving its goal of a zero deficit. The 2012 budget draft would leave Luxembourg with a shortfall of 1.14 billion euros when considering the cost of social security and communal expenses. As a result, the government plans to borrow 500 million euros to plug the gap.

Deputies have until December to analyse the 608 page budget tome before they vote on the text.