In response to yesterday’s announcement from the National Economic and Financing Committee (CEFN), the Green Party’s Sam Tanson said the Grand Duchy’s economy was “going in the direction we actually expected”. The CEFN report predicts an 0.8% fall in GDP, as well as a looming recession.
The LSAP’s Mars Di Bartolomeo describes the situation as the most “unfavourable” scenario foreseen for the economy, while Fernand Kartheiser of the ADR said it was unsurprising that an exposed economy such as Luxembourg would suffer the same as other countries.
The Pirates’ Sven Clement is less concerned by the fact a recession is in the cards and more worried about the fact that the National Statistics Office’s figures failed to indicate the matter until now. “In April, the Monetary Fund halved its forecasts, compared to Statec. The stability and growth programme (PSC), however, used figures twice as high as those supplied by Statec,” Clement noted. He said the methods used by Statec to make their predictions were not transparent, and the resulting figures were out of sync with the OECD, the International Monetary Fund, and the European Commission.
Neither the LSAP, Greens or the Pirates are in agreement that the CSV’s election promises of lower taxes for all can be implemented, particularly based on the latest projections. “So far, just one person has succeeded in miraculously ‘feeding the multitudes’,” commented Di Bartolomeo. Tanson said a number of parties described the situation in abstract terms during the run-up to the elections in order to resonate with voters.
But the looming recession is unlikely to change the CSV’s mind, as formateur Luc Frieden told the press after his audience with the Grand Duke this week. “The note [from the CEFN] has not made any fundamental changes to our positions in the coalition agreement,” Frieden said, after delivering the latest update on the ongoing government negotiations on Wednesday.
The ADR’s Fernand Kartheiser said he did not agree with acting economy minister Franz Fayot’s recent comments warning of the incoming government’s potential for austerity policies. Kartheiser said this lacked investment ambition: “It is irresponsible to say we could continue as we have been acting,” the ADR MP commented, adding that the economy needed to be rebuilt and the State budget needed to be balanced.
The opposition parties all agreed that austerity policies should be avoided at all costs, and Luxembourg’s investments should be maintained even in the face of a worsening economic situation. Even plans for tax reform should be maintained. “This must be relieved punctually, instead of driving across the country with a watering can in the hope something will sprout,” said Clement.
Frieden emphasised that both the CSV and the DP agreed that Luxembourg’s economic activity should be stimulated, and that residents’ purchasing power should be strengthened.
Recession and deficit risks increase for Luxembourg’s economy (8.11.23)
