These include the impact of the crisis on Luxembourg’s economy, European Affairs, and telework. Eighteen people, among them economists and researchers, tried to find answers to these questions in a new book.
The global Covid-19 pandemic and its consequences have been very challenging for many people. Compared to other countries, Luxembourg’s economy has managed the crisis rather well, according to the Idea Foundation. This is mainly due to the key role of the country’s financial centre, which was also not affected by an economic crash. In addition, Luxembourg is one of the few countries where the labour market continues to grow. Nevertheless, inequalities increased due to the crisis.
In its latest publication, Idea analyses the short- and medium-term consequences of the pandemic and presents suggestions for the way out.
Michel-Edouard Ruben, economist at Idea, explains that 18 different authors have looked at topics ranging from state aid, Luxembourg’s ability to fend off the crisis, inequalities, impact on housing, fiscal policy, the role of culture, to telework. Ruben states that every author agreed that the crisis has amplified problems that were already there before the pandemic took hold. In his eyes, the book is “a reflection on the crisis that we live and on the challenges that we have faced and are still facing”.
Telework worked well in the most important sectors of Luxembourg’s economy. This was one of the factors that helped the country to handle the crisis better than its neighbours. The fiscal agreements on cross-border workers have also been advantageous for the Grand Duchy.
Another factor was state aid. The government’s decision to impose a nationwide lockdown led to an economic crisis. According to Vincent Hein, economist at Idea, it is “only normal” that support mechanisms for the economy were thus put into place.
Hein thinks that the investment plans announced at the European level will allow for the implementation of an exit strategy based on digital economy and ecological transition.
The aid prevented a spike in unemployment and a deterioration of the dynamic on Luxembourg’s labour market. Luxembourg is even one of the few countries where the employment rate continues to increase, even if the increase is not as substantial as expected before the start of the crisis.
In 2020, the EU introduced a financial aid package funded by a joint debt issue to help those member states that have been hit particularly hard by the pandemic to modernise their infrastructure. To that end, a total of €750 billion was green-lit by the EU’s heads of state and government in summer 2020.
However, despite these positive developments for the economy, it must not be forgotten that the pandemic has also substantially amplified social problems and inequalities, according to Muriel Bouchet, director of Idea.
Bouchet explains that while it is still difficult to assess the extent of these negative consequences, it is a problem that must not be overlooked.
The crisis also showed that certain types of products, such as masks, have so far not been manufactured in Europe. While Idea’s economists stress that this is not a reason to question globalisation as a whole, they acknowledge that the concept must be adapted, with a greater importance to be placed on regional production.
The Idea Foundation was created in 2014 as an initiative by the Chamber of Commerce.
