At the beginning of the legislative period, Finance Minister Gilles Roth repeatedly pointed out with relish the apparently disastrous state of state finances that the black and blue party had found. The “Note au formateur” that was presented to CSV and DP during the coalition negotiations shows a deficit of more than three billion euros, assuming the same policies. Thanks to the austerity measures and the positive economic dynamics of the new right-wing coalition, there is now a “positive scissor effect,” it was said in speeches by the Finance Minister and his colleagues until the beginning of 2025.
In fact, tax revenue was initially bubbling, due to extraordinary income from a handful of companies in the post-Covid upswing. But that is now over, as Statec director Tom Haas said in the Tageblatt interview on June 1, 2026: The shock caused by the Iran war will once again have negative effects on growth and thus on government finances. There are no more extraordinary winnings.
Voodoo economics
It was already clear beforehand: the CSV-DP government’s “Méi Netto vum Gross” policy was not having any effect. After the crisis-related recession of -1.1% GDP in 2023, people were eagerly waiting for the black-blue economic miracle in 2024. In vain, because after the predicted +1.5%, there was ultimately a meager 0.4% growth, with rising unemployment figures and a surplus from the post-Covid past of 0.8 billion euros.
For the year 2025, it can be seen that the economy grew slowly by +0.6%, but this was with a whopping deficit of 1.8 billion euros for the state as a whole – the “Apel fir den Duuscht” was eaten up by tax gifts in the second year of the government. The unemployment rate also continued to rise to 6.2%. It is no longer the case that Luxembourg is outperforming the growth rate of the Eurozone, financial center or not.
CNFP President Romain Bausch summed it up in the RTL interview on June 1, 2026: “I think it’s a good idea for the economy, a lot of things, that I’m interested in the economy, because it’s not worth it, so it’s not worth it laanscht d’Lëtzebuerger economy.” In other words: the trickle-down of the CSV-DP is “voodoo economics”! The only thing that is hair-raising is that there is no insight or change of course from this government, which is apparently so close to the economy.
To person
20250919, Conférence de presse, Sanctions à l’encontre d’Israël, Franz Fayot Photo: Editpress/Fabrizio Pizzolante
Franz Fayot is an LSAP MP and former economics minister
Just kidding, give up…
Even though the finance minister always deals with his past statements as finance spokesman for the opposition party CSV in a sporty and humorous way when he is confronted with them, the current trend in public finances can make you laugh.
In fact, the minister’s tone is very different today. At the recent presentation of the current 2026 budget as of March 31, 2026, which already shows a deficit for the first trimester of 278 million euros, the minister said laconically: “That’s just it…”
When asked about the sustainability of his policy (in the Finance and Budget Control Committee on April 28, 2026), the minister emphasized that he does not think that revenues are structurally weak: 25-30% of revenues come from the financial sector, and the results will remain good, even in 2025 and 2026. Interest rates will remain high and the banks will continue to do good business – so the operating tax will not go down. And with the new index tranches, more wage tax would be flushed into the state coffers due to the cold progression. So no more talk of “tax theft”!
With assets in the fund business of 8,400 billion euros, the “taxe d’abonnement” would also yield a lot – it is after all a volume business – and excise duties and VAT on tobacco are expected to amount to 1.53 billion euros. A tax policy that is based on inflation, the stock market and smoking!
And it seems very optimistic, because in reality things look bleak on the revenue side: the extraordinary tax revenues of some large companies that were still recorded in 2024 and 2025 will not materialize. They will not increase any further in the coming years if the economic downturn continues. On the contrary: the government wants to reduce the business tax rate by at least another percentage point. The wage tax was structurally reduced through a series of purchasing power measures, and the individualization reform, including accompanying measures in the school and family sectors, will cost a whopping 1,300 billion euros per year.
Added to this are the 460 million euros over two years from the Tripartite. Mind you, the whole thing is done without counter-financing from other tax revenues, for example on assets or real estate income, or through higher tax rates on high incomes. Our tobacco tax (1.5 billion in 2025) is under attack at European level as part of the negotiations on the future European budget from 2028, the MFF. And the taxe d’abonnement and other tax revenues from the financial sector correlate with a stock market that will continue to be very volatile and vulnerable given the international context.
On the expenditure side, Statec now calculates a deficit of a whopping 1.756 billion euros for 2025. According to Romain Bausch from the CNFP, spending is completely out of control because the deficit is around a billion higher than the already high deficit of 700 million planned for 2025.
Not only the CNFP, but also the International Monetary Fund had already warned in its “Article IV” report on Luxembourg on May 6, 2026 about the negative trend in the economy and the risk of an imbalance in public finances if the government policy remained unchanged.
In the new European financial architecture, Luxembourg remains in the “volet préventif”. This means: As long as we respect the Maastricht criteria of a maximum of 60% debt and 3% deficit in GDP figures, we will continue to fly under the radar of the European Commission. But at the current rate we will quickly feel turbulence, because Statec’s negative scenario with an ongoing war in Iran envisages a deficit of up to 3% of GDP.
To person
Photo: Editpress/Didier Sylvestre
Max Molitor is a member of the LSAP parliamentary group and an alderman for the municipality of Kehlen
Short-term pain relief
The very problematic thing about this policy is its inconsideration towards future generations: The CNFP also fears that this financial policy derailment will deprive the country of the necessary fiscal leeway, which will be sorely needed to address the major challenges facing our country: housing policy, defense, pensions and of course decarbonization and ecological transition. All of these are structural reforms that are essential!
Particularly in the case of the “ecological transition” – in reality nothing more and nothing less than saving our livelihood on this planet – any postponement of investments in the energy transition, in our biodiversity, in the adaptation of our societies to climate deregulation will cost us very dearly, as was emphasized recently at the “Luxembourg Climate Finance Initiative” organized by the Ministry of the Environment. Investments in a radical transformation of our economy, our construction, our mobility and our agriculture must be addressed urgently and ambitiously. The costs will be enormous, but they also hold enormous opportunities and will form the basis for a new, sustainable society and economy.
How long can we “oppose things that are going badly”, as Romain Bausch puts it – i.e. use state resources to cushion successive crises that will not be avoided in the future? Of course, the government must provide social support, especially to the ecological transition. But it must also be prepared for the fact that shortages like those currently occurring as a result of the Iran war are only the harbingers of the end of the fossil fuel age, as many energy experts predict. It would therefore be wise to break away from our dependence on fossil energy as quickly as possible and to understand that our gross national product, which is 1:1 correlated with fossil energy sources, will no longer grow at past rates of over 3% if the world runs out of oil.
It is time to develop a plan for a sustainable Luxembourg in which people are protected from crises by relying on strong public services – be it through a good and solidarity-based healthcare system, future-adapted education for our children, affordable housing, healthy nature, culture, transport, and so much more. Instead of giving them the illusion that they can protect themselves against any further crisis through more individual purchasing power and consumption.
note
The Tageblatt values exchange with its readers and offers space for different perspectives on this site. The opinions expressed on the forum page are intended to stimulate social discussion, but do not necessarily reflect the views of the editorial team.
