Fayot raised concerns about the direction of the coalition negotiations between the CSV and DP, especially highlighting the public statements made by Luc Frieden, who is tasked with forming the new government. According to Fayot, the signals coming from these negotiations suggest that the incoming government is poised for a path of “austerity” or, at the very least, a commitment to “austerity measures.” In this context, Fayot specifically referenced the CSV and DP’s firm commitment to safeguard Luxembourg’s Triple A rating, no matter the cost.
“Luxembourg is neither a housewife nor a househusband,” Fayot remarked, underlining his belief that the government should not exclusively focus on fiscal figures. He argued that, given the current circumstances, it is crucial to prioritise long-term investments in areas such as infrastructure, the energy transition, education, and research over the next five to ten years. The politician from the Luxembourg Socialist Workers’ Party (LSAP) is convinced that, in that case, the rating agencies “would not fixate solely on the 30% public debt.”
Fayot also expressed regret regarding the fact that the CSV’s inclusion in the future government is based on their electoral promise of “boosting purchasing power for all,” as the CSV “is now acting as if the economic crisis it currently highlights was not already on the radar.” In addition, Fayot contested Frieden’s theory that tax cuts are self-financing through the economic growth they stimulate, characterising it as “a lie” and noting that this theory had been discredited by several international institutions.
According to Fayot, the prevailing economic downturn is a “European trend.” Fayot’s remarks came in response to the recent release of economic data by the National Economic and Financing Committee, which were presented to Luc Frieden. These statistics indicate that Luxembourg is not immune to the prospect of a recession this year. Fayot attributes this recession primarily to the European Central Bank’s deliberate interest rate hikes, aimed at curbing inflation and stabilising the economy. The Acting Minister of the Economy noted that Luxembourg’s status as a prominent financial hub particularly exposes it to the fluctuations of international markets.
Fayot further acknowledged the efforts of the outgoing government in supporting the economy and households throughout the pandemic, as well as during the energy and inflation crises. Despite the challenges posed by the deterioration of public finances, Fayot asserted that Luxembourg maintains a degree of flexibility and is not in a state of economic distress. He remains optimistic about the nation’s economic resilience, foreseeing a forthcoming turnaround, even as the present economic climate remains far from ideal.
