Luxembourg's Minister of Finance, Yuriko Backes; Credit: Chamber of Deputies

On Wednesday 15 June 2022, the Chamber of Deputies (Luxembourg's parliament) adopted the bill transposing the main measures of the "Solidaritéitspak" (solidarity pact), resulting from the tripartite agreement of 31 March 2022.

The bill, approved by a large majority of MPs, provides for the postponement to April 2023 of the wage indexation currently planned for July 2022. At the same time, the bill introduces the new energy tax credit, a socially targeted measure that will compensate the loss of purchasing power of less well-off households due to the shift in the index bracket and the increase in the CO2 tax on 1 January in 2022 and 2023 respectively.

In the same vein, an equivalent tax credit will be introduced for recipients of social inclusion income (REVIS) and for each recipient of the severely disabled allowance (RPGH). To ensure that the automatic adjustment of family allowances is not affected by the shift in the index brackets, the bill also introduces a sliding scale of family allowances.

Moreover, the bill will implement the revaluation from the 2022/23 academic year of state financial aid for higher education, by granting an additional budget of €10 million.

Finally, the bill transposes a rent freeze until 31 December 2022.

Luxembourg's Minister of Finance, Yuriko Backes, commented: "I welcome the passing of this essential law, which constitutes a key step in the implementation of the 'Solidaritéitspak'. The latter in no way calls into question the system of automatic wage indexation, which constitutes a pillar of the Luxembourg social model. It faithfully transposes the tripartite agreement, which sets the principle of a single index tranche over twelve months, and provides that if an additional index tranche to that of July is triggered, the government will bring together a new tripartite [meeting]. The tripartite agreement is therefore maintained in its entirety".

Franz Fayot, Minister of the Economy, added: "Today we are living in a unique time. The consequences of the conflict in Ukraine and the effects of the pandemic on the global economy have led to an unprecedented rise in energy prices. Inflationary trends are at their highest for forty years. It is in a spirit of solidarity that the tripartite was able to reach an agreement between the social partners on a package of measures which will make it possible, in a socially fair way, to preserve the purchasing power of households. At the same time, thanks to the deferral of an index bracket, we give companies predictability regarding their wage costs. I am delighted that this tripartite spirit is now reflected in a law which consolidates the maintenance of the automatic wage indexation system in Luxembourg".

The other provisions of the "Solidaritéitspak" provided for in the framework of the tripartite agreement, such as the early introduction and adaptation of the rent subsidy as well as various business aid schemes, such as aid in the form of a guarantee or that in favour of companies particularly affected by the rise in energy prices, are currently following the course of the legislative procedure, in the form of separate bills.