European Commission
Europe 2020

Country-specific Recommendations

The Country-specific Recommendations are documents prepared by the European Commission for each country, analysing its economic situation and providing recommendations on measures it should adopt over the coming 12 months. They are tailored to the particular issues the Member State is facing and cover a broad range of topics: the state of public finances, reforms of pension systems, measures to create jobs and to fight unemployment, education and innovation challenges, etc. The final adoption of Country-specific Recommendations prepared by the Commission is done at the highest level by national leaders in the European Council.

Proposed recommendations for Luxembourg 2012

Luxemburg's growth expectations are modest, with an average GDP growth slightly above 1% in 2012, followed by an acceleration to around 2% in 2013. Job creation is slowing down since the end of 2011. As a result, the unemployment rate started rising again, and is expected to reach a historic high of around 6% in 2013.

Luxembourg has announced a fiscal consolidation package of around 1.2% of GDP for 2013. The government also proposed a pension reform which is currently debated in the parliament. The application of the automatic indexation of wages has been limited between 2012 and 2014 and steps were taken to tackle the relatively high youth unemployment.

The commonly agreed indicator for long-term fiscal sustainability (S2) is among the highest in the EU, posing a pressing challenge which is largely due to the expected increase in pension expenditure. In order to remain competitive, unit labour costs will need to evolve more in line with developments in productivity and competitiveness. The heavy dependence of the economy and public finances on the financial sector is a structural risk for the country. The youth unemployment rate is relatively high in Luxembourg, when comparing to the low overall unemployment rate. Luxembourg’s education system faces specific challenges due to the multilingualism demands of the system, the high proportion of immigrants in the population, and the high demand for skilled workers on the labour market, which need to be tackled. Finally, Luxembourg does not appear to be on track to reach its Europe 2020 target for non-ETS greenhouse gas emission reduction.

Overview of recommendations

1. Preserve a sound fiscal position correcting any departure from a medium-term budgetary objective (MTO) that ensures the long-term sustainability of public finances, in particular taking into account implicit liabilities related to ageing. To this end, reinforce and rigorously implement the budgetary strategy, supported by sufficiently specified measures, for the year 2013 and beyond, including meeting the expenditure benchmark.
   More information on Luxembourg’s economy
2. Increase the impact of the proposed pension reform by accelerating the implementation of measures that curb age-related expenditure, take additional measures to increase the participation rate of older workers, in particular by reducing early retirement, and take steps to link the statutory retirement age to life expectancy, in order to ensure the long-term sustainability of the pension system.
   More information on pensions in the EU
3. Take further steps to reform, in consultation with the social partners and in accordance with national practice, the wage bargaining and wage indexation system, with a view to preserve the competitiveness of the Luxembourg economy in the longer term, as a first step by maintaining the current one-year indexation interval beyond 2014 and by reducing the impact of energy and other volatile items on the reference index.
   More information on wage and unit labour costs
4. Continue efforts to reduce youth unemployment by reinforcing stakeholders’ involvement, and by strengthening training and education measures, in particular for those with low education levels, with the aim of better matching young people's skills and qualifications to labour demand.
   More information on the EU youth strategy
5. Ensure that the targets for reducing greenhouse gas emissions from non-ETS (Emissions Trading System) activities will be met, in particular by greening the taxation system.
   More information on the Emissions Trading System

See how Luxembourg compares with other EU Member States in key areas

European Semester Documents

National Reform Programme

All Member States have committed to the Europe 2020 strategy. However, each country has different economic circumstances and translates the overall EU objectives into national targets in its National Reform Programme – a document which presents the country's policies and measures to sustain growth and jobs and to reach the Europe 2020 targets. The National Reform Programme is presented in parallel with its Stability/Convergence Programme, which sets out the country's budgetary plans for the coming three or four years.

Macroeconomic indicators

Europe 2020 targets – State of play