On Tuesday, Minister of Finance Yuriko Backes gave a presentation regarding her first 600 days in office. The beginning, entitled “Challenges between War and Energy Crisis”, focused on the amount of uncertainty that Backes faced since taking on her role in the administration. Since then, inflation has increased and economic growth has stagnated.
Minister Backes explained that diverse measures, including gas and electricity price caps or subsidies, were implemented to support people’s purchasing power since the beginning of the war in Ukraine. Officials acknowledged that these measures did not have the desired effects during the first few months of the year. “Nevertheless, they still had an impact on inflation”, noted the Democratic Party (DP) politician in an effort to defend the government’s efforts.
Major tax reform was promised in the coalition agreement but not implemented in the current legislative period. However, tax rates will, as of next year, be adjusted to the equivalent of 2.5 wage indexations, which is expected to cost the government €300 million.
Minister Backes also highlighted the importance of the financial sector for the Grand Duchy, which employs around 67,000 people. Yearly revenue in the sector amounts to €4 billion, making up a quarter of the country’s GDP. Minister Backes further argued that the low rate of the state debt, currently at 24.7% of GDP, as well as the coveted ‘Triple A’ status, are of crucial importance.
According to the Ministry’s calculations, the state debt would be lower (at 20%) if not for the multiple crises of recent years. She also stated that the administration had managed to bring state finances back into balance after having inherited them in a bad state from the previous administration.
Luc Frieden, member of the previous administration and now lead candidate for the Christian Social People’s Party (CSV), chose not to comment on Backes’ presentation when contacted by RTL.
Gary Diderich, spokesperson for The Left, criticised the Minister’s assertion that recent crises made tax reform impossible, noting that single parents in particular would be subject to discrimination. He further questioned the timing of the review: “It is rather late and no figures have been included. The election campaign has actually started already, a strange moment to present such a review.”
According to Diderich, people have noticed that much of the government’s financial aid has gone to businesses rather than households - meaning that the government paid for the wage indexation. He further argued that the state debt limit should be the subject of discussion and that now is the time to invest in renewable energy and housing.
