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.
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.
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.