Luxembourg's Finance Minister Gilles Roth has floated the idea of shifting investment priorities to bolster defence spending, balancing fiscal responsibility with international commitments amid growing geopolitical tensions.
The current geopolitical tensions around Ukraine's uncertain future have led to calls from numerous European governments to increase defence spending, with Luxembourg being no exception to this push. Speaking to RTL on Tuesday, Finance Minister Gilles Roth of the Christian Social People's Party (CSV) thus floated the idea of a "reorientation" of investment spending.
While welcoming the move towards debt issuance for defence funding through the relaxation of rules by the EU Commission, the minister voiced his scepticism against the feasibility of financing defence only through this process. Roth explained his concern over debt issuance for the specific case of Luxembourg, stressing the importance of the financial centre and the Triple A rating granted to the Grand Duchy by credit-rating agencies such as Moody's, Standard & Poor's, and Fitch, which may be negatively impacted by heavy indebtedness.
Despite the current international context, Roth wants to go forward with a tax reform that prioritises higher net income for all. He underscored that this is a "balancing act" as Luxembourg must fulfil its international commitments, maintain social cohesion in the country, all while keeping a budget that fulfils these criteria to some extent.
Asked about the possibility of levying a tax on benefits linked to the war in Ukraine, Roth stated that he's currently open to any idea.
As a sign of Luxembourg's commitment, Roth is currently in the Baltic states to ascertain whether Luxembourg can financially contribute to certain projects – provided that these investments are counted as defence spending by NATO.
