State of Nation Address Focuses on Ukraine War, Inflation, Affordable Housing, Press Pluralism

On the afternoon of Tuesday 11 October 2022, Luxembourg's Prime Minister Xavier Bettel delivered his traditional State of the Nation address for the new parliamentary session.

Prime Minister Xavier Bettel began his speech by acknowledging that Luxembourg as well as the whole of Europe is undergoing a series of crises, first the COVID-19 pandemic which started in March 2020 and now, since February 2022, Russian military aggression against Ukraine. Luxembourg also witnessed various waves of refugees, as well as a tornado and many flash floods in recent years. The war in Ukraine has led to historic inflation and energy shortages in Europe. He emphasised that during these uncertain and difficult times, it is the government's responsibility to look after the well-being of the nation and its citizens.

Recovery from COVID-19

Prime Minister Bettel underscored that the government managed the COVID-19 pandemic well, stating: "Almost no economy in Europe recovered as quickly from the lockdown as Luxembourg's did". He stated that it was because the government found "the right balance between guaranteeing liberties and protecting the vulnerable". He continued: "The government safeguarded social and political peace throughout all of these crises by helping people and businesses alike pull through".

Ukraine war

Prime Minister Bettel took note of the human suffering in Ukraine with many having had to flee their homes and many still dying every day. He emphasised: "It is our moral obligation to support the Ukrainian people in their fight for freedom. Because even we, Luxembourgers, live in freedom today, because other countries did not abandon us in the past". The Prime Minister felt particularly proud of the solidarity shown by Luxembourg residents, with more than 2,600 Ukrainian refugees out of a total of about 4,100 being accommodated by private households. He praised this as "an enormous act of solidarity and humanity".

Taking note of government support delivered to Ukraine, Xavier Bettel first clarified: "We support Ukraine in its right to defend its citizens and its territory. For the first time in Luxembourg's history, we have delivered heavy weapons to an active war zone". He elaborated that Luxembourg has sent €72 million worth of military equipment to Ukraine, which is about 16% of the total current defence budget. In addition, Luxembourg now aims to spend 1% of GDP on strengthening its defence by 2028, he added. Moreover, the entire army vehicle fleet will be replaced with the most modern armoured vehicles and the government is working on a Belgian-Luxembourg battalion.

Prime Minister Bettel also pointed out that even though Luxembourg is not at war with any country, a recent cyberattack on a major Luxembourg energy company reminded us that national cybersecurity is a priority. He thanked citizens and businesses who are participating in the energy-saving campaign.

Inflation

Taking stock of government support for residents and companies affected by high inflation, Luxembourg's Prime Minister asserted that the historic aid packages totalling €2.5 billion as part of the "Energiedësch" and the two tripartite agreements, and since the pandemic, €5.5 billion in direct and indirect aid, is unprecedented. He confirmed that payment of all wage indexations will be carried out next year. Prime Minister Bettel also emphasised that the unemployment rate of 4.8% is even below the pre-pandemic level. "The solidarity packs are a historic success", he stressed.

Minimum wage, REVIS

Prime Minister Bettel also announced that the social minimum wage and social inclusion income (Revenu d’inclusion sociale - REVIS) will increase by over 3% in January 2023.

Renewable energy

Xavier Bettel stated that renewable energy was an important part of climate protection and noted that the production of renewable energy has more than doubled in the past six years. To further support photovoltaic installations, the VAT rate will be reduced to 3% beginning 1 January 2023, he announced.

Moreover, the government will table a bill in 2023 to modernise the tax credit to encourage investment in the digital, energy or ecological transition, stated Xavier Bettel. Referring to electromobility, the Prime Minister stated that 88 SuperChargy terminals will be operational by the end of 2023, further supporting the climate-neutral electric vehicles and infrastructure in Luxembourg.

Supporting farmers is a priority as well for the government, according to the Prime Minister. He announced that over €800 million from the national and European budget will be allocated to agricultural businesses in the coming years and approximately 40% will be earmarked for climate and biodiversity support. "Luxembourg already invests about €1.1 billion per year in its climate policy", he confirmed.

Fiscal Policy

Prime Minister Bettel feared that national debt could reach 29.5% by 2026, much higher than the 24.6% currently, owing to the "Energiedësch" and solidarity packages. However, he remained assured that national debt was well invested in these times of crisis and public finances were under control. He affirmed: "Next year, public investment will be around €3.8 billion", aimed at maintaining people's quality of life. Furthermore, the government plans to make investments of almost €2 billion by 2026 for various digitalisation programmes.

Quality of life

Prime Minister Bettel said that the government remains committed to measures aimed at increasing the quality of life and work-life balance. He announced that 3,000 additional beds for the elderly will be made available in the coming years and the government will soon transpose a right to part-time work. He also noted an investment of €556 million in the reconstruction of the Centre Hospitalier de Luxembourg (CHL) as a state-of-the-art hospital. Mental health is another top priority for the government, said the Prime Minister, who announced that the government will adopt a comprehensive mental health plan by the end of the year, including psychotherapy to be covered by the national health insurance.

Affordable Housing

"Housing remains a theme for us this year", stressed Prime Minister Bettel. He confirmed that government spending on public housing had risen from €40 million in 2017 to €220 million in 2022, whilst with an additional investment of almost €1 billion, 3,500 housings will be built in the next few years. He called upon the State, the municipalities and the private sector "to ensure that housing in Luxembourg is affordable for all".

Press pluralism

Taking note of the fight against disinformation and with the aim of strengthening democracy, Prime Minister Bettel assured support for pluralism of the press. He cited that a total of eighteen publications from fourteen publishers benefitted from press subsidies equating €6.7 million in State aid in the first six months of 2022. Moreover, "the State has to respond to a journalist's request within 24 hours, if possible with the requested information, but at least with an indication of when the information will be available, or for what reasons the information may not be disclosed", clarified Xavier Bettel.

Concluding Remarks

"We will not abandon the citizens. We are taking extraordinary measures to help them through this extraordinary winter. We are doing everything possible to ensure that they and their children can count on good and secure jobs tomorrow", concluded Prime Minister Xavier Bettel.