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On Thursday 18 April 2024, the European Commission adopted its opinion on Luxembourg's updated draft budgetary plan for 2024.
The draft budgetary plan, presented by the Luxembourg authorities on 6 March 2024, is an update, developed with unchanged policies, on that which the interim government presented back in October 2023. In its previous opinion, the Commission had invited Luxembourg to submit an updated draft budgetary plan for 2024, in line with recommendations issued by the Council of the European Union (on 14 July 2023), once the new government took office.
The latest Commission opinion concluded that the updated draft budgetary plan risks being inconsistent with the budgetary guidelines included in the Council recommendation; the Council had recommended that Luxembourg ensure a "prudent" fiscal policy, particularly by "limiting the nominal increase in nationally financed net primary expenditure in 2024 to not more than 4.8%". According to the Commission, projections indicate a 6.8% increase in net nationally financed primary expenditure in 2024, which would exceed the recommended maximum growth rate.
The Commission also recalled that the Council had recommended that Luxembourg "wind down" its emergency energy support measures "as soon as possible" in 2023 and 2024. Considering the updated draft budgetary plan, the Commission concluded that this was not expected to be the case. "Moreover, the related savings are not projected to be fully used to reduce the government deficit," and this also risks going against the Council recommendation, added the Commission.
The Council had also recommended that Luxembourg "preserve nationally financed public investment". On this point, the Commission found the updated draft budgetary plan to be in line with the Council's recommendation.
The Commission invited Luxembourg to take the "necessary measures" within the national budgetary process to ensure its 2024 fiscal policy is in line with the Council's recommendations. It also concluded that Luxembourg had made "limited" progress on the structural elements of the fiscal recommendations made by the Council and invited the country's authorities to "accelerate progress".
As part of the European Semester, the EU's economic policy coordination cycle, the Commission issues opinions each year on the draft budgetary plans of euro area member states.
It will now be up to the Eurogroup to discuss the Commission's opinion relating to the update of Luxembourg's draft budgetary plan. The national parliament should then take this discussion into account before adopting the budget for 2024, concluded the Commission.
