Finance Minister Pierre Gramegna (DP), accompanied by Deputy Prime Ministers François Bausch (Déi Gréng) and Dan Kersch (LSAP), detailed the new aid measures decided by the government on Wednesday May 20th. Again a very ambitious program.
A new stage has been passed and that requires a change of scenery. The one in the press conference room of the European Convention Center in Luxembourg, featuring a map of Luxembourg and, above all, a slogan: “Neistart Lëtzebuerg” (a new beginning for Luxembourg). With three even more marked priorities: quality of life, solidarity and stability.
Lack of growth requires action
Thanks to the good figures of the health authorities, a new beginning starts after a hard phase of confinement, which severely put the homes and businesses of the country to the test. On Wednesday May 20th the Government Council decided new subsidy, which Prime Minister Xavier Bettel had already announced to a large extent. And that complements the other measures taken in recent weeks. Finance Minister Pierre Gramegna (DP), accompanied by Deputy Prime Ministers Dan Kersch (LSAP) and François Bausch (Déi Gréng), gave the details.
Firstly, he recalled through a macroeconomic analysis that, in the context of the recovery, “Luxembourg is better placed than the others. Especially since their public finances are healthy. We have more room for maneuver.”. The financial center, which “represents 30% of the country’s wealth”, remained active.
This also offers a significant attack force: this new subsidy, estimated at between 700 and 800 million euros, combined with the previous ones, represents 5.5% of the national GDP, or 3,000 million euros. Belgium and France only made an effort at 2% and Germany at 4.6%. “We will not have growth for two years, so we must act“, insists Pierre Gramegna. This is strengthening the liquidity of households and the economy.
A call was also made for everyone to play the game: individuals to pay their bills, business, VAT or other taxes, for example, “to create a virtuous circle“.
Recovery fund and flat-rate aid
While the Minister of Tourism Lex Delles (DP) will detail the subsidy dedicated to this sector on Friday, the Minister of Finance returned for the first time to the recovery and solidarity fund for companies. It will be aimed at the most affected companies (in the restaurant, tourism, fitness, events, etc. sector) that have not yet been authorized to reopen on May 20th. They will have to demonstrate a loss of turnover of at least 25% in June 2020 compared to June 2019. The aid will be 1,250 euros per employed employee, 250 euros per temporarily unemployed employee, with maximum limits: Maximum 10,000 euros per month for companies with less than 10 employees, € 50,000 per month for companies with less than 50 employees and € 100,000 per month for companies with more than 50 employees. This assistance will be available from July 1st for a period of six months.
Other lump-sum aid will be awarded to retail and personal care companies: € 1,000 per employee in June, € 750 in July and € 500 in August, up to a limit of € 50,000 per month. This measure is limited to SMEs.
As previously announced, a tax exemption of double the reduction granted to a tenant in commercial leases, up to a maximum of 15,000 euros, will be possible. Rent increases on private leases will be frozen until the end of the year.
On Friday, the Minister of Economy Franz Fayot (LSAP) will give details “on other measures“, said Pierre Gramegna: special help to increase the energy efficiency of companies, expansion of the reimbursable advances provided for in the stabilization pact of May 15th to September 15th and aid for investments in the field of digitization. Certain grants can go up to 800,000 euros. Also supporting lawyers and apprentices with a 10% revaluation of legal aid fees, doubling the cost of living subsidy, the sustainability of the family support license, etc.
“The good use of partial unemployment has helped maintain social cohesion“. said Dan Kersch, Deputy Prime Minister and Minister of Labor.
For the Minister of Labor, Dan Kersch, the correct use of partial unemployment has avoided a disaster. “In the United States, like us, they had 5% unemployment. Now we believe they will reach 25%”, he said.
The measure has cost 725 million, 32,000 requests have been made, and 325,000 wages have been paid through it. “Partial or temporary unemployment has been the instrument to maintain social cohesion“, says Dan Kersch.
Partial unemployment maintained until the end of 2020
The partial unemployment measures will continue until the end of the year and the advance system will continue. Short-term conjunctural unemployment due to Covid-19 will evolve towards structural partial unemployment, which will be simplified, because “nobody can pretend that companies do not face changes“.
The plan proposes guaranteeing access to simplified structural partial unemployment to companies affected by the pandemic crisis and that have benefited from partial unemployment due to “force majeure due to Covid-19“, starting in July. Therefore, it follows that companies must present a recovery plan, or even a job retention plan, authorizing layoffs in the structural system of partial unemployment, but that should be avoided as much as possible. Keep in mind that companies will benefit from a simplified, even ultra simplified, digital procedure. This will allow them to reorganize to gradually adapt to the post-Covid-19 situation.
Finally, the economic recovery will also require an ambitious state. “We are not going to reduce public spending, it would be a very bad idea. On the contrary, they will increase 6.3% in 2021. No other country is doing this in Europe”, says François Bausch.
Measures aimed at sustainability
Convinced that, more than ever, it is necessary to go in the direction of sustainability, Minister Déi Gréng detailed a list of ecological measures:
- The Prime House for energy modernization of buildings increased by 50% for contracts signed from March 20th to March 21st, 2021, work can be done until the end of 2022.
- An “25% increase in the subsidy” if you replace your heating with a renewable energy based system.
- A 25% bonus for replacing the boiler.
- Aid for photovoltaic installations above 30kW will now be accessible to everyone.
- A subsidy program for private electric charging stations is being developed, complementary to the Chargy Network, aimed at users who want to charge their vehicle at home.
- A network of fast charging stations will be developed.
“These are measures that will be beneficial for the construction sector” at the same time as for the planet.
These ambitious measures are “essential” for the government. Of course, it can be reviewed in the event of a resumption of the epidemic. A working group is studying this situation that nobody wants. Because, as François Bausch pointed out when looking at Pierre Gramegna, “we cannot allow a confinement every three months“.