PM Frieden outlines key policies in first 'State of the Nation' address

Lawmakers in the Chamber of Deputies will debate the speech on Wednesday while RTL has invited representatives from the seven parties in parliament for a special broadcast on Tuesday evening.

The Prime Minister outlined his government's main goals for the next 12 months as follows:

• Policies to adapt to the new geopolitical reality, protecting peace and freedom in Europe alongside partners and allies;
• Policies to simplify procedures and lay a foundation for building more housing quickly and efficiently;
• Social policies to care for those in need and to consistently address the issue of poverty;
• Fiscal, financial and economic policies to create jobs and generate prosperity in order to maintain Luxembourg's social model;
• Climate and energy policies to drive residents and businesses to a carbon-neutral future.

Luxembourg's future "lies in the EU"

Frieden began his speech by emphasising his goal to strengthen Luxembourg for the future. "We want to lead our country into the future in peace, freedom and prosperity. That remains our objective, the government works on this every day."

The PM then moved swiftly on to the recent European elections, praising the results for pro-European parties, but warning of growing Euro-scepticism in Luxembourg's neighbouring countries. Frieden established his position on Luxembourg's place in Europe, declaring that the Grand Duchy's future lies within the European Union, both in terms of security and in terms of the economy.

"The basis of our prosperity is the European single market. Prosperity only exists for us in a competitive EU that can keep up with the US and China," he said.

Luxembourg's government is well aware of citizens' concerns about the future and indeed, sympathises with them. Nevertheless, Frieden declared:  "the future is not fixed and it is not predetermined. The future does not happen, we create it."

He also emphasised that climate change could only be addressed through operating as part of the European Union.

On the topic of security, Frieden highlighted that Luxembourg's security would directly relate to the outcome of the war in Ukraine, and reaffirmed the country's commitment to support Ukraine, over two years after the war broke out. Luxembourg is well aware of the impact of crises and wars, he said, adding that the Grand Duchy is currently offering asylum to some 7,000 people.

Luxembourg is set to continue investment in defence, committing to spending 2% of its GDP on defence in accordance with NATO requirements. This target is likely to be reached by 2030. Frieden emphasised this was not in order to wage wars, but rather to avoid them.

The housing challenge

Finding affordable housing is a major concern for many Luxembourg residents. Frieden said the government has made this problem its first priority.

The Prime Minister said the following measures had already been taken to improve the country's housing market:

• short-term work to secure jobs in the construction sector;
• for tenants: rent allowances have been increased and made accessible to more people;
• a public purchase program was launched to stimulate the supply of housing;
• the cheap act for first-time buyers has increased and interest subsidies for loans have been raised; 
• to encourage private investment and more housing: new low-cost act for investors and amended law on bail à loyer
• Luxembourg banks have been brought on board.

Frieden went on to announce a "10-point action plan" to tackle housing over the coming months.

The government is seeking to reduce the wait times for general development plans (PAG) from 12 months to 8 months, and in new districts, to six months. In addition, a digital platform is under construction to speed up different procedures, and, in a bid to reduce environmental studies, the threshold will be increased from 2 to 4 hectares.

The country desperately needs more housing and quickly, Frieden admitted. Currently the construction boundary has space for over 100,000 new homes, and the land must be mobilised. The government is planning a mobilisation tax, with the new bill to be tabled in parliament later this year. As a result, the taxation of the added value on the sale of existing housing was reduced earlier this year.

Three pilot projects are in development to boost housing, with the government working alongside developers to build on government-owned land, as well as plans to help companies build houses for their employees, and more private sector construction on public land.

The affordable housing law will also have an amendment submitted to the Chamber before the end of the year.

Tax and cost of living

The new government reduced the tax table by 4 index tranches this year, which could give households €1,100 more in their pockets each year, depending on the composition of the family.

Frieden said there were more and more single-parent households in Luxembourg, leading to the proposal of a single tax bracket in the coalition agreement. Single parents should see some relief from 1 January 2025 onwards.

The tax table will also be adjusted from this date by 2.5 index instalments, in order to increase purchasing power. Corporate tax will be slashed from 1 January to adjust it to the international average, dropping from 17 to 16%.

A new joint package of measures will include the flexibility of maternity leave, parental leave, the organisation of working hours or even a new regulation of Sunday work, as was set out in the coalition agreement. Discussions will begin with employers to determine this framework over the coming months.

The electricity price cap is set to be maintained until 2025. Households will only take over half of the projected increase for 2025, while low-income households will receive targeted support. The state will also partially contribute to energy costs for nursing homes in 2025.

Frieden announced a €1,500 bonus for the purchase of secondhand electric vehicles, although subsidies for new cars will be reduced.

Social support and healthcare

Frieden has pledged to tackle child poverty in Luxembourg, saying it was unacceptable for around a quarter of the country's children (30,000) to be living at risk of poverty.

He said people often were not aware of their entitlement to social benefits. In order to promote social assistance, the government will create a new digital platform to provide an overview. Citizens would no longer need to seek out support themselves; instead, authorities will be able to cooperate with other administrations to determine whether a person is eligible for benefits, cutting through the bureaucratic "jungle".

In addition, the government is planning a universal healthcare pilot project to target the most vulnerable people in society and ensure everyone has access to doctors and medication.