The report, issued last week, is aimed at the council president and constitutes a 'recommendation for a council recommendation' on Luxembourg's 2019 national reform and stability programmes.
The report includes several points of strength, such as Luxembourg's government debt-to-GDP ratio. Crucially however, the report also outlines several areas of concern.
The report notes that "in spite of recent reforms, Luxembourg's age-related spending ... is expected to increase markedly in the long term." This includes spending on healthcare, pensions, and long-term care costs. The report notes that if no changes are made to Luxembourg's current system, this could put the sustainability of public finances at risk.
It's also noted that recommendations were made on 2011 to improve the viability of the system, but that "limited progress has been made to date." The report states that Luxembourg's 2018 reform is "expected to ensure financial viability until 2030," but that its impact on viability beyond that is unclear.
This is another area of concern noted in the report,which states that "the employment rate is stagnating and specific groups still face particular difficulties in the labour market." Specific attention is paid to older people, whose involvement in the labour market remains low. This is coupled with 'widespread' early retirement, "with 57.5% of newly attributed pensions being early old-age pensions in 2017." Indeed, the report states that the problem in part stems from older people being disincentivised to work.
The report therefore recommends further measures in the form of a comprehensive strategy to help people remain active in the workforce for longer.
Luxembourg's notorious lack of housing also features in the report, which it says "may negatively affect Luxembourg's attractiveness." It puts the shortage down partly to high demand, and partly "a lack of incentives for landowners to build new housing or to sell." The report recommends significant investment to "alleviate rising tensions" in the market.
The report describes a "fight against aggressive tax planning" as essential to make the system more efficient and fair. It does note, on the positive side, that Luxembourg has taken certain measures against the aggressive tax planning for which it is known, but also that "the high level of dividend, interest, and royalty payments as a percentage of GDP suggests that the country's tax rules are used by companies that engage in aggressive tax planning."
For further details of these and other points covered, see the full report below.