With a hit to GDP of minus 1.3%, the pandemic has been less consequential for the Grand Duchy than the financial crisis of 2007–2008. Nevertheless, state finances still experienced a hefty blow and declined by 19 to 20%.
CNFP president Marc Wagener noted: “This is due to the fact that the economy was forced into a sudden halt and could not operate for a few weeks.”
Back in Autumn 2020, CNFP had an even grimmer prediction, with GDP expected to decline by 6%. Wagener thus emphasised that even though it currently looks as though the crisis is being averted, state finances still struggled under the pressure.
Over the course of the crisis, the government accumulated a €3.3 billion debt, which helped guarantee that the economy kept on rolling. Wagener commented: “It is unprecedented and will take some years to be resolved again.”
In comparison with other European countries, the Luxembourgish economy managed to prevail with the help of the government. Wagener further emphasised that, fortunately, the country’s extensive financial service sector suffered less under the consequences of the pandemic, and even managed to record a 2% gain.
The Christian Social People’s Party (CSV) argues that both remote work and digitalisation need to be expanded, given that these two measures allowed the country’s economy to keep rolling.
At the same time, party officials believe that the government needs to reassess its debt and how it plans on reducing it over the coming years.
In response, MP André Bauler from the Democratic Party (DP) emphasised that the government took a conscious decision to invest in a green and sustainable transition, which is why a €1.5 billion loan was taken up in the first place. The goal is to make the economy even more resilient with these targeted investments, MP Bauler concluded.
