Speaking on RTL Radio on Monday morning, Romain Bausch, president of the National Council of Public Finances (CNFP), explained that the CNFP's role is not to make political statements, but to assess whether public finances are developing coherently and in line with the European framework. He said he was surprised that public finances had not been addressed in PM Luc Frieden's recent State of the Nation address, particularly ahead of the tripartite meeting on 2 June.
In Bausch's view, up-to-date public finance figures should be clearly available for such discussions.
According to the most recent data analysed by the CNFP, public finances have developed less favourably than expected, Bausch explained. He added that STATEC figures for 2025 show a public-sector deficit of €1.8 billion, compared with a forecast of just over €700 million.
This represents a deterioration of around €1 billion compared with projections, he said.
Bausch also pointed to figures from the Ministry of Finance for the first quarter of 2026. He said that revenues rose by 4.5%, while expenditure increased by 8.6%, worsening the balance by €278 million compared with 2025.
In short, he said, public finances performed worse in 2025 and 2026 than had been budgeted.
The CNFP has recently warned in a report that expenditure is increasingly difficult to keep under control. While revenues are also somewhat weaker than in the past due to a less favourable economic environment, Bausch said the development on the expenditure side is particularly striking.
Under the new European framework, Bausch explained, Luxembourg had been given a trajectory for net primary expenditure, with spending growth expected to remain at 5.8% in 2025. In reality, spending rose by 8.1%, or 2.3 percentage points more than planned, he said.
Bausch stressed that not all expenditure is problematic. Some spending, he said, such as investment, is useful and necessary.
However, he pointed to several categories where increases have been particularly strong, including public-sector pay, recruitment policy, and current transfers.
He also warned against assuming that spending designed to boost consumption will necessarily benefit Luxembourg's economy. As Luxembourg is a very open economy, Bausch said, part of that money flows abroad, for example through travel or consumption outside the country.
Luxembourg still meets the Maastricht criteria, Bausch said, as the deficit remains below 3% of GDP and public debt below 60% of GDP. For that reason, the country remains in the preventive arm of the European framework rather than the corrective arm.
However, Bausch warned that several major challenges are not cyclical, but structural. He cited housing expenditure, defence spending, and pension costs linked to the ageing population as examples of pressures that will not simply disappear once short-term crises ease.
Bausch acknowledged that both the current and previous governments had taken measures to respond to crises such as the pandemic, the energy crisis, and geopolitical tensions. However, he argued that this should not distract from the long-term hurdles facing public finances.
On pensions, Bausch said the measures taken so far had essentially pushed the expected deficit of the pension system back by around three years. After that, he warned, the system would return to deficit and a further reform would be back on the table.
Bausch noted that the type of reforms required to keep public finances on track are often unpopular. He pointed to Germany as an example, where many of the reforms facing Chancellor Friedrich Merz are politically difficult but considered necessary.
Asked about a recent internal memo from Finance Minister Gilles Roth instructing ministries and administrations to limit spending increases, including in recruitment policy, to around 4.5%, Bausch said this would be a positive step if the same figure is reflected in the 2027 budget.
Luxembourg's public debt was also addressed, which could reach 30.2% of GDP next year according to recent European Commission forecasts. Bausch recalled that the 30% threshold often cited in Luxembourg is a political ceiling rather than a legal requirement.
The only binding Maastricht criterion is the 60% debt-to-GDP limit, he said.
However, Bausch argued that Luxembourg's specific economic structure should be taken into account. Because Luxembourg is a very open economy, GDP includes a large share of income that ultimately flows abroad, including to cross-border workers and foreign capital owners, he explained.
For that reason, Bausch said it would make sense to also look at public debt in relation to gross national income (GNI), which better reflects income generated by residents and domestic capital. In Luxembourg, as in Ireland, GNI is only around two thirds of GDP, he said.
Measured against GNI, Luxembourg's public debt would currently be closer to 40%, according to Bausch.
Bausch also addressed the government's tax reform and the promise of increasing net income from gross pay. The CNFP had previously regretted the lack of offsetting measures, apart from the fact that tax brackets are not being adjusted to inflation.
Bausch explained that not indexing the tax brackets does amount to a form of additional revenue for the state. However, this does not improve the official budget figures, because budgetary projections are calculated under unchanged legislation, he said.
In other words, the absence of indexation is already built into the baseline and cannot be counted as a new savings measure.
Bausch stated that the CNFP is primarily asking for more coherence and transparency in the presentation of public finances. The new European budgetary framework no longer requires the same annual spring update of multiannual financial planning as before, which he described as problematic.
Ahead of major discussions such as the tripartite talks on 2 June, Bausch said it is not ideal to rely on figures prepared during the previous budget cycle in September or October. The CNFP would like to see clearer, more up-to-date figures, according to Bausch.
As for the political popularity of possible measures, he said that is not the council's concern. Its role is to assess what is needed to keep public finances on track, Bausch concluded.
