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Talks agree only one more wage indexation this year
Cost of living

Talks agree only one more wage indexation this year

by Yannick HANSEN 23.03.2022 From our online archive
If a second collective pay hike to compensate for inflation is triggered, it would be paid out only next year
Prime Minister Xavier Bettel (far right) at the meeting on Wednesday
Prime Minister Xavier Bettel (far right) at the meeting on Wednesday
Photo credit: Chris Karaba

Trade unions and business lobbies agreed to hike wages to compensate for rapidly rising prices just one more time this year after employers called Luxembourg's system of automatic wage indexation in question last year.

The second and final automatic wage increase this year was likely to be triggered in August, but would only come into force next year, Prime Minister Xavier Bettel said after leading a two-day long meeting with the two sides as part of the country's tripartite negotiating system.

That would only leave one wage indexation for this year, likely in April, Bettel said. Any wage indexation next year would also be delayed.

The move to delay this year's second wage indexation is meant to take pressure off businesses that are already struggling with rising energy costs, Bettel said, though he vowed the system itself was not in question.

If inflation - which was at 5.8% in February - crosses a certain threshold in Luxembourg, wages and pensions automatically rise by 2.5%. 

Soaring fuel and gas prices have driven a sharp rise in inflation since the end of last year as a global recovery from the pandemic gathered pace. Price hikes have been exacerbated following Russia's invasion of Ukraine.

Instead of a second wage indexation, less well-off residents will receive tax breaks, Bettel said, while the government will also lower taxes on petrol and diesel by 7 cents per litre until 31 July, Bettel said. The government also proposed to freeze rents, a press release said. 

The proposals still have to be formally adopted next week.

(Additional reporting by Teddy Jans)

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