Luxembourg's financial supervisor told lawmakers it could revoke its approval of Israeli bonds if sanctions are imposed on Israel, as MPs declared the matter a foreign policy decision for the government.

Following the Financial Sector Supervisory Commission's (CSSF) approval of Israeli government bonds on European markets on 1 September, members of the Parliamentary Finance Committee concluded on Tuesday that the matter is now a political decision for Foreign Minister Xavier Bettel.

During the committee meeting, CSSF Director Claude Marx reportedly clarified that the authorisation could be revoked if European or national sanctions were imposed against Israel. This explanation led MPs from across the political spectrum to assert that the responsibility now lies with the government.

Green Party (Déi Gréng) MP Sam Tanson described the situation as a "new moment," while MPs from the Alternative Democratic Reform Party (ADR) and Pirate Party, Tom Weidig and Sven Clement, concurred that the path forward is a political one for the government and Chamber of Deputies to decide. The general consensus was that the CSSF had followed procedure correctly.

Opinions on the decision itself varied. MP Franz Fayot of the Luxembourg Socialist Workers' Party (LSAP) stated he could understand the CSSF's move, though he believed other legal grounds existed to deny the authorisation, citing statements and reports from the UN, NGOs, and the International Criminal Court. He characterised Foreign Minister Bettel's previous statement distancing himself from the decision as a "political abdication."

Left Party (Déi Lénk) MP David Wagner welcomed public mobilisation against the bonds as having "borne fruit," arguing that while the CSSF gave the matter considerable thought, it was insufficient. He contended that the supervisor's decisions are "binding" on Luxembourg in terms of international law.

André Bauler, an MP from the Foreign Minister's own Democratic Party (DP), reiterated that the CSSF had no alternative but to approve the bonds, though he acknowledged that future "developments" were possible. MP of the Christian Social People's Party (CSV) and Finance Committee President Diane Adehm stated that the committee is now seeking a date to invite Foreign Minister Bettel to answer questions.

Letter sent to Ministry of Foreign Affairs two weeks after decision

In a further development, the committee learned that the CSSF had sent a letter to the Ministry of Foreign Affairs the previous day – approximately two weeks after its initial decision to approve the bonds.

When questioned on whether this communication should have occurred prior to the 1 September authorisation, Adehm declined to comment, stating she could not "judge" the CSSF's internal timing.

Finance Minister Gilles Roth also offered his perspective. He affirmed that he "fully and completely" stood behind the financial regulator's independence. However, he acknowledged he could understand the demands being placed on the government, arguing that matters of international law fall outside the CSSF's purview and are a governmental responsibility.