COMMISSION STAFF WORKING DOCUMENT 2024 Country Report - Luxembourg Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Luxembourg
Date: 2024-06-19
Institutions: European Commission, Secretariat-General
Subjects: Luxembourg, budget policy, economic policy, economic recovery, economic reform, employment policy, energy policy, fiscal policy, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 19.6.2024  SWD(2024) 616 final  COMMISSION STAFF WORKING DOCUMENT 2024 Country Report - Luxembourg Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Luxembourg {COM(2024) 616 final} - {SWD(2024) 600 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

Luxembourg’s historically strong 
economy contracted in 2023 

Luxembourg’s growth pattern reflects its 
sensitivity to changes in the international 
environment,  unveiling  challenges  to  its 
competitiveness(1).  The  financial  sector, 
serving  as  Luxembourg’s  traditional  economic 
engine,  has  driven  the  country  to  the  highest 
income per head in the EU, also contributing to 
a robust labour market and sound government 
finances.  Yet,  the  country’s  historically  strong 
economy  has  grown  at  half  speed  since  the 
global  financial  crisis  and contracted in  2023. 
Luxembourg’s 
into 
international  capital  markets  exposes  the 
risks  associated  with  global 
country 
regulatory 
financial  fluctuations  and 
environments of other countries. 

integration 

deep 

the 

to 

the 
situation  and 
The  geopolitical 
in  monetary  policy  have 
tightening 
negatively  affected  Luxembourg’s  open 
economy. Economic activity declined by 1.1% 
in 2023, mainly driven by the financial sector. 
Heightened  uncertainty  and  the  tightening  of 
monetary policy impacted investment flows. In 
October  2023,  assets  under  management  by 
the fund management industry hit their lowest 
level since the peak reached in 2021 (see also 
Annex  18).  Since  the  global  financial  crisis, 
economic  growth  has  slowed  to  2.5%  on 
average  annually,  compared  with  4.8%  in  the 
previous  period,  and  on  six  occasions  it  has 
underperformed the euro area aggregate. Each 
time, activity in the financial sector decreased, 
most often linked to a decline in stock market 
valuations.  Real  GDP  growth  is  expected  to 
in  2024,  at  1.4%,  before 
remain 

low 

(1)  The  cut-off  date  for  the  data  used  to  prepare  the  27 

Country Reports was 15 May 2024. 

recovering  to  2.3%  in  2025.  The  below-
average  growth  in  2024  is  mainly  due  to 
weaker  net  exports  and  investment  amid 
adverse  financing  conditions  and  geopolitical 
uncertainty.  Furthermore,  a  drop  in  export  of 
services  linked  to  investment  funds  and  the 
lower  volume  of  transactions  in  the  financial 
sector  would  imply  a  negative  contribution 
from  net  exports 
(European  Commission, 
2024). 

Wages  have 
increased,  but  policy 
measures are keeping inflation below the 
euro area average.  The softening of energy 
and food prices has driven a gradual easing of 
inflation,  which  had  reached  a  peak  in  2022. 
Yet,  in  2023,  a  more  pronounced  slowdown 
was prevented by stronger wage growth – with 
real  average  labour  costs  increasing  by  3.8% 
(after  the  wage  indexation  mechanism  was 
exceptionally  activated  three  times  in  2023). 
Inflation  forecasts  for  Luxembourg  stand  at 
2.3% for 2024, when a single wage indexation 
is expected, further declining to 2.0% in 2025, 
mainly  as  energy  and  goods  prices  are 
expected  to  slow  significantly.  The  impact  of 
inflation  on  the  domestic  economy  has  been 
counteracted 
support 
measures (under the Solidaritéitspak) reducing 
the  number  of  wage indexations. However,  as 
per the Council recommendations addressed to 
Luxembourg in 2023, it remains important for 
the government to wind down these measures 
as soon as possible in 2024, or to ensure that 
any  new  emergency  measures  are  temporary 
and  targeted  at  vulnerable  households  and 
firms,  and  preserve  incentives  for  energy 
savings. 

government 

by 

debt, 

while 
public 
Luxembourg's 
comparatively  low,  has  tripled  since  the 
global  financial  crisis  and  presents 
long-term  challenges  to  public  finances. 
The  government  deficit  edged  up  to  1.3%  of 
GDP  in  2023  and  is  forecast  to  increase  to 
1.7%  of  GDP  in  2024.  This  uptick  is  primarily 

2 

 
 
 
 
due  to  ongoing  support  measures  under  the 
Solidaritéitspak to soften the impact of energy 
price hikes and bolster the construction sector. 
Government debt is expected to rise to 27.1% 
of GDP in 2024, up from 25.7% in 2023. The 
overarching  challenge  to  Luxembourg’s  public 
finances  is  to  ensure  long-term  sustainability, 
particularly  due  to  escalating  pension  costs 
(projected to increase by 8.3 percentage points 
to  reach  17.5%  of  GDP  by  2070),  and 
mounting  demands  for  long-term  care,  which 
are  expected  to  exert  substantial  upward 
in  the 
pressure  on  government  spending 
decades 
(see  also  European 
come 
Commission, 2024). 

to 

more  than  half  of  employers  cite  scarcity  of 
qualified  workers  as  a  primary  barrier  to 
economic  growth  and 
investment.  Despite 
good  overall  results  in  adult  education  and 
training,  participation  of  older  workers  and 
low-skilled  people  in  learning  programmes  is 
low.  The  issue  is  compounded  by  a  sizeable 
proportion of the workforce nearing retirement 
and a dependence on both cross-border (47% 
in  2023)  and  foreign-resident  (27%  in  2023) 
workers.  Historically,  the  influx  of  younger 
cross-border  and  foreign-resident  workers, 
attracted  by  the  country’s  comparatively  high 
wages  and 
living  standards,  has  helped 
Luxembourg  counteract  workforce  ageing. 

Box 1: 

Luxembourg’s competitiveness in brief 

Luxembourg’s financial sector has driven the country to one of the highest  levels of 
productivity  in  the  EU.  Its  international  financial  centre  accounts  for  over  30%  of  its 
GDP,  11%  of  employment  and  20%  of  direct  tax  revenues  annually,  with  even  much 
larger indirect effects. The economy has greatly benefited from the sector’s integration 
into global financial markets, with (mostly imported) intermediate inputs accounting for 
nearly 90% of its production, leading to an output per hour six times higher than that of 
the rest of the business economy.  

However, competitiveness challenges remain: 

•  the financial sector’s value added per worker declined by 15% between 2021 
and 2023, with a cumulative decline of 30% since 2007, which reflects a diminished 
capacity  to  harness  the  benefits  of  the  sector’s  integration  into  global  financial 
markets (see also Annex 5);   

•  Luxembourg’s share of business investment in GDP is one of the lowest in 
the  EU,  which  weighs  on  Luxembourg’s  productivity  and  on  its  cost  and  non-cost 
competitiveness (see also Annex 12); and 

•  shortages  of  workers,  one  of  the  main  barriers  to  investment,  which  could  be 
further  exacerbated  by  high  house  prices  and  road  congestion,  affecting 
Luxembourg’s  appeal  as  a  workplace.  Meanwhile,  the  recent  multiple  wage 
indexations  due  to  high  inflation  have  negatively  affected  firms’  competitiveness, 
especially  in  the  less  productive  non-financial  business  sectors  and,  if  persistent, 
could deter greenfield investment and affect firms’ relocation decisions.  

Luxembourg  faces  shortages  of  skilled 
workers  and  skills  mismatches,  which 
weigh on competitiveness. In 2023, despite 
the  decline  in  economic  activity,  employment 
rose by 2.2%, with a notable 3.3% increase in 
the  financial  sector.  However,  in  the  current 
juncture,  the pace  of  job  creation  has  slowed, 
and  the  shrinking  vacancy  rate  points  to  a 
tightening 
to 
Chamber  of  Commerce  surveys  (CC, 2023), 

labour  market.  According 

Nevertheless,  this  trend  is  waning,  calling  for 
strategies to cope with changes caused by an 
ageing  population  (LISER,  2023),  including 
increasing  the  very  low  employment  rate  of 
older  workers.  Projections  indicate  a  need  for 
approximately  300 000  new  workers,  or  a 
64% 
In 
response,  new  rules  adopted  in  September 
2023  aim  to  streamline  the  recruitment  of 
non-EU  nationals.  The  new  government 

increase,  by  2030  (UEL,  2023). 

3 

 
 
investment 

foreign  direct 

(FDI) 
outgoing 
expressed as a percentage of GDP. Most of the 
FDI stock in Luxembourg (60% of inward flows 
and 60% of outward flows of FDI in 2022) is 
held  through  special  purpose  entities  (SPEs). 
The  large  proportion  of  FDI  stocks  held  by 
SPEs  may  be  an  indication  of  aggressive  tax 
planning.  Luxembourg  is  a  major  conduit  of 
capital  flows,  the  recipient  of  16.8%  of  all 
dividends  received  by  the  EU-27,  and  the 
origin  of  16.9%  of  all  dividends  paid  by  the 
EU-27 (2022). It is also the recipient of 34.2% 
of all interests received by the EU-27 and the 
origin  of  27.2%  of  all  interests  paid  by  the 
EU-27  (2022).  These  flows  are  amongst  the 
highest in  the  EU,  and  disproportionately  high 
the  country’s 
the  size  of 
compared 
economy.  Of  particular  concern  is  the  lack  of 
withholding  taxes  on  interest  and  on  royalty 
payments to low- or zero-tax jurisdictions, that 
list  of  non 
are  not 
cooperative  jurisdictions  for  tax  purposes,  or 
measures with equivalent effect. 

included  in  the  EU 

to 

intends to continue developing a national skills 
strategy. There are still substantial difficulties 
related to the lack of affordable housing (see 
Annex  18),  traffic  congestion,  and  education 
(see Annex 15), hindering Luxembourg’s ability 
to attract the necessary workers with the right 
skills, which is especially crucial for succeeding 
in  the  green  and  digital  transitions  (see  also 
Annex 14). 

to  face  difficulties 

(European  Commission,  2023). 

Vulnerabilities  relating  to  high  house 
prices  and  high  household  debt  have 
recently increased but overall seem to be 
contained  and  are  expected  to  ease  over 
the  medium  term.  An  in-depth  review  on 
housing  under  the  macroeconomic  imbalance 
procedure  was  carried  out  for  Luxembourg  in 
2023 
It 
concluded  that  there  are  no  macroeconomic 
imbalances.  As  monetary  policy  tightened 
throughout  2023,  financial  risks  increased  in 
Luxembourg’s real estate market and for more 
heavily 
lower 
indebted  households,  with 
incomes  and  variable-rate  mortgages,  who 
continue 
in  meeting 
mortgage  obligations  because  of  the  higher 
interest rates. A study using 2021 data found 
that  around  30%  of  Luxembourg  households 
could  be  considered  financially  vulnerable. 
However,  indebted  households  in  this  group 
only  account  for  11%  of  the  number  of 
mortgage  contracts  and  9%  of  aggregate 
household  debt (2).  So  far,  there  has  been  a 
decrease in the ratio between non-performing 
loans  and  total  loans,  which  stood  at  0.7% in 
2023,  compared  with  1.2%  a  year  earlier.  It 
remains  below  the  EU  average.  Meanwhile, 
house  prices  have  declined  markedly  –  by 
9.1% in 2023 (OH, 2024). This has resulted in 
decreases  in  real  terms,  while  government 
measures  have  helped  to  ease  the  financial 
burden of housing on vulnerable households. 

evidence 

suggests 

that 
Economic 
Luxembourg’s  tax  rules  are  used  by 
companies  to  engage  in  aggressive  tax 
planning.  In  2022,  Luxembourg  continued  to 
have  the  EU’s  highest  stock  of  incoming  and 

(2)  Giordana  and  Ziegelmeyer,  June  2023,  Household 
indebtedness  and  their  vulnerability  to  rising  interest 
rates, BCL Working Papers, BCL.lu. 

4 

 
 
Box 2: 

UN Sustainable Development Goals (SDGs) 

Luxembourg  performs  relatively  well  on  several  SDG  indicators,  although  challenges 
remain in the area of environmental sustainability, where it is nonetheless improving 
(SDGs  2,  7,  12,  13).  In  this  area,  the  country  performs  well  on  sustainable  cities  and 
communities (SDG 11).  Luxembourg  performs  well  on  some  SDG  indicators  related  to  fairness, 
such as  good health and well-being (SDG  3),  gender equality (SDG 5) and  reduced inequalities 
(SDG  10).  As  regards  SDGs  on  productivity,  the  country  is  moving  away  from  the  targets  for 
quality  education  (SDG  4),  decent  work  and  economic  growth  (SDG  8)  and  industry,  innovation 
and  infrastructure  (SDG  9).  Finally,  Luxembourg  performs  very  well  on  SDG  indicator  16  on 
macroeconomic stability. 

Out  of  the  17  indicators,  Luxembourg  is  performing  below  the  EU  average  on  five 
indicators.  Besides 
to  environmental  sustainability  highlighted  above, 
Luxembourg is moving away from the targets for decent work and economic growth (SDG 8). 

related 

those 

Overall,  the  social  situation  is  good  in 
Luxembourg,  but 
inequalities  persist 
between  different  segments  of  the 
population,  as  reflected  by  the  risk  of 
poverty  and  social  exclusion.  The  Social 
Scoreboard  underpinning  the  European  Pillar 
of  Social  Rights  highlights  that  the  share  of 
people  at  risk  of  poverty  and  social  exclusion 
decreased  in  2022  (19.4%),  remaining  below 
the  EU  average  (21.6%).  However,  people  not 
born  in  the  EU  are  more  likely  to  experience 
(38.3%)  and 
in 
poverty 
educational 
(33.4%). 
Luxembourg 
attainment 
and 
the 
work-intensity (3) of the household are factors 
influencing  the  risk  of  poverty  and  in-work 
poverty  (see  Annex  14).  Additionally,  the 
impact of social transfers on poverty reduction 
decreased  from  34.2%  in  2021  to  33.7%  in 
2022 (below the EU average of 35%). In-work 
poverty remains especially high in Luxembourg 
(12.9%,  against  an  EU  average  of  8.5%), 
highlighting  the  challenges  still  faced  by 
specific groups in the labour market. 

The 
composition 

in-work  poverty 

and 

(3)  Work  intensity  is  defined  by  the  ratio  between  the 
number of months that household members of working 
age  (persons  aged  18–64  years,  with  the  exclusion  of 
dependent  children  aged  18–24)  worked  during  the 
income reference year and the total number of months 
that could theoretically have been worked by the same 
household  members.  For  persons  who  declared  that 
they worked part-time, the number of months worked in 
full-time  equivalent  roles  is  estimated  on  the  basis  of 
the number of hours usually worked at the time of the 
interview (Eurostat, 2022).  

5 

 
 
 
IMPLEMENTATION OF KEY REFORMS AND 
INVESTMENTS USING EU INSTRUMENTS 

growth 

Cohesion  policy  funding  helps  tackle 
Luxembourg’s 
and 
competitiveness challenges and to foster 
social  and  territorial  cohesion.  In  the 
2014-2020  cohesion  policy  programming 
period,  support  focused  on  energy  efficiency, 
research,  and  social  inclusion.  In  the  current 
2021-2027  programming  period,  cohesion 
to 
policy  will  provide  a 
Luxembourg’s  competitiveness,  to  the  green 
and  digital  transition,  and  to  social  cohesion, 
improving  people’s 
living  and  working 
conditions.  More  than  10%  of  the  cohesion 
to  energy 
policy  allocation 
efficiency 
deep 
renovation  of  buildings.  In  2021-2027,  the 
European  Regional  Development  Fund  will 
finance equipment for research and innovation 
and  further  boost  the  creation  of  research 
jobs. 

further  boost 

is  dedicated 

investments, 

targeting 

Boosting energy efficiency and  
renewable energy 

and 

renewable 

Making  effective  use  of  various  funding 
sources,  Luxembourg  has  taken  steps  to 
improve  the  energy  efficiency  of  its 
public  transportation  system  and 
its 
buildings. 
public 
residential 
increase  the 
Investments  are  planned  to 
country’s 
production 
capacity  to  200 MWh/year.  Luxembourg’s  Just 
totalling 
Transition 
EUR 9.2 million  – will be invested in the south 
of the country and will help reduce greenhouse 
the  energy 
gas  emissions  by 
performance  of  housing,  by  increasing  the 
number  of  environmentally  friendly  public 
transport  vehicles,  and  by 
improving  the 
energy efficiency of public buildings. 

improving 

allocation 

energy 

Fund 

– 

Funding from the Recovery and Resilience 
Facility (RRF) and cohesion policy funding 
is  mutually  reinforcing  Luxembourg’s 
efforts  to  boost  its  competitiveness  and 
foster  sustainable  growth.  In  addition  to 
the EUR 83 million of RRF funding described in 
Annex 3, cohesion policy provides Luxembourg 
with  EUR 38.9 million for 
the  2021-2027 
period.  Combined  support  from  these  two 
instruments represented  around 0.15% of the 
country’s  2023  GDP,  compared  to  an  EU 
average of 5.38% (see Annex 4).  

Under  its  recovery  and  resilience  plan 
(RRP),  Luxembourg  has  launched  major 
policy  measures  that  are  expected  to 
improve the country’s competitiveness. In 
particular,  the  RRP  envisages  reforms  in  the 
areas  of  healthcare,  innovation,  sustainable 
reskilling  and  upskilling,  and 
transport, 
housing.  Luxembourg  has  also  invested  in 
lowering  the  administrative  burden  on  people 
of 
and  businesses 
include 
digitalisation  measures. 
developing 
for 
a  mobile 
administrative tasks, modernising employment 
agency  operations  to  facilitate  smoother  job 
transitions  and  ensure  workers’  skills  are 
aligned  with  labour  market  demand,  and 
creating  an  online 
registry  of  health 
professionals  to  optimise  staff  deployment 
during  emergencies  and  plan  for  future 
healthcare roles. 

These 
interface 

through  a 

range 

request, 

submitted 

Luxembourg 

implementation  of  Luxembourg’s 
The 
is  well 
recovery  and  resilience  plan 
one 
underway. 
payment 
to  26 
milestones and targets in the plan resulting in 
an overall disbursement of EUR 20.2 million on 
16  June  2023.  Beyond  the  payment  request, 
the  implementation  of  the  plan  is  broadly  on 
track (see Annex 3). 

corresponding 

6 

 
 
 
Box 3: 

Combined action for more impactful EU funds 

The RRP reform ‘Naturpakt’ creates a framework under which municipalities can receive financial 
support  for  measures  to  protect  nature  and  prevent  biodiversity  loss.  More  than  80 
municipalities have signed the ‘Naturpakt’ contract. Through the  European Agricultural Fund for 
Rural  Development,  the  strategic  plan  of  the  common  agricultural  policy  supports  various 
measures  enabling  farmers  to 
improve  biodiversity.  A  premium  for  sustainable  and 
environmentally friendly agriculture and viticulture is granted to farmers who commit to fulfilling 
24  conditions,  including  training,  landscape  upkeeping,  and  prohibitions  of  some  phytosanitary 
products. Together, these projects help prevent biodiversity loss in Luxembourg. 

of 

terms 

reinforcing 
of  mutually 
In 
measures, the RRP includes a reform that 
promotes 
public 
electrification 
transport.  As  part  of  this  reform,  a  new  law 
specifies  the  minimum  percentage  of  clean 
vehicles  procured  through  public  contracts. 
This applies to public buses and other vehicles. 
Luxembourg  as  a  contracting  authority  plans 
to fully electrify the fleet of buses operated by 
the  public  transport  operator  (RGTR)  by  2030. 
This reform is complemented by two European 
Regional Development Fund projects that help 
implement  it:  purchasing  electric  buses  used 
for  urban  public  transport  and  installing  the 
charging infrastructure. One of these projects, 
which  receives  REACT-EU  funding,  concerns 
the  regional  RGTR  network,  and  another  one 
co-finances  13  buses  and  two  charging 
stations for buses in the capital city. 

Making the job market more 
accessible 

To  boost  economic  growth  and  maximise 
the  productivity  and  competitiveness  of 
Luxembourg’s  workers,  the  European 
Social  Fund  Plus  will  support  access  to 
employment  for  jobseekers.  This  initiative, 
with  a  budget  of  around  EUR 4.7 million,  will 
mostly focus on skills development. Moreover, 
EUR 1.7 million  will  promote  lifelong  learning 
to  upskill  and  reskill  employees  in  line  with 
skills  needs,  and  EUR 2.9 million  will  help 
disadvantaged  groups, 
in  particular  via 
integrated pathways to work, including training 
and  workshops  for  social  and  professional 
reintegration.  The  RRP  skills  reform,  which 
involves 
situation 
analyses 

and 

the 

stakeholders, helps better target upskilling and 
reskilling investments. The unemployed people 
investment 
benefitted 
‘FutureSkills’ 
under  the  RRP,  and  then  by 
‘Skills4Job‘ 
supported by the European Social Fund Plus. 

from 

Climate protection and biodiversity 

The  RRF  and  cohesion  policy  funds 
support measures that aim to protect the 
environment  and  make  Luxembourg’s 
society  and  economy  more  sustainable. 
Cohesion  policy  funds  help  bring  about  a 
greener and fairer Europe and achieve the UN 
Sustainable  Development  Goals  (SDGs) 
in 
Luxembourg, in particular SDG 8 (Decent work 
and economic growth), SDG 1 (No poverty) and 
(Affordable  and  clean  energy). 
SDG  7 
Luxembourg’s RRP puts a strong focus on the 
green transition. Specific measures include an 
investment  of  EUR 30.5 million  to  enlarge  the 
network of charging points for electric vehicles 
across  the  country.  The  RRP  also  allocates 
EUR 6 million  to  the  ‘Naturpakt’,  under  which 
municipalities can receive financial support for 
measures  to  protect  nature  and  prevent 
biodiversity loss. 

7 

 
 
 
FURTHER PRIORITIES AHEAD 

Luxembourg  faces  additional  challenges 
related to the long-term sustainability of 
public  finances,  aggressive  tax  planning, 
house  prices  and  household  debt, 
inequality 
in  education,  and  green 
transition. Tackling these challenges will help 
increase 
long-term 
Luxembourg’s 
competitiveness  and  ensure  the  resilience  of 
its  economy.  It  will  also  help  make  further 
progress  in  achieving  the  UN  Sustainable 
Development Goals.  

is 

important  that  the 

identified 
It 
challenges  are  addressed  at  both 
national  and  local  level  to  reduce  local 
disparities 
the 
administrative  and  investment  capacity 
in a balanced way across the country.  

improve 

and 

to  ensure 

the  system 

to  protect 

Without  policy  adjustments,  the  reserve 
the  pension 
designated 
system’s  financial  health  is  projected  to 
fall  below  the  legal  threshold  by  the 
early  2040s.  This  threshold  is  the  minimum 
reserve  amount  required  to  avoid  mandatory 
reforms 
remains 
operational. Projections suggest that once this 
limit is  breached,  the  reserve  will  be  depleted 
within  5  or  6  years.  This  timeframe  leaves 
very little opportunity for a gradual, phased-in 
reform.  This  implies  that  more  abrupt  and 
changes  may  be 
potentially  disruptive 
necessary 
system’s 
ensure 
sustainability,  with  the  looming  increase  in 
pension spending, which is expected to double, 
as  a  share  of  GDP,  by  2070.  This  spike  in 
expenditure  puts  at  risk  not  just  the  financial 
Luxembourg’s 
sustainability 
pension 
of 
system,  but  also 
its  ability  to  maintain 
intergenerational fairness. 

the 

to 

Strengthening the long-term 
sustainability of public finances 

is 

term, 

Luxembourg’s  pension  system,  currently 
in  a  favourable  position  for  the  short  to 
facing  significant 
medium 
long-term challenges due to demographic 
changes.  The 
system  operates  on  a 
pay-as-you-go  basis,  historically  buoyed  by 
surpluses  from  contributions  made  by  young 
people settling in the country and cross-border 
workers. These surpluses have been saved in a 
reserve  in  an  independent  investment  fund. 
Despite this prudent management, the system 
is  projected  to  encounter  financial  strain  (see 
also  the  2024 ageing  report),  as  pension 
spending  is  projected  to  exceed  the  income 
from  contributions  in  the  second  half  of  the 
2020s,  with  this  deficit  steadily  widening 
subsequently.  This  imbalance  can  be  largely 
attributed 
increasing  number  of 
pensioners  per  worker,  a  consequence  of  an 
ageing  population,  which  leads  to  a  higher 
old-age dependency ratio. 

to  an 

this 

challenge 

Addressing 
requires 
decisive  action  through  a  combination  of 
several  measures,  including  raising  the 
effective  retirement  age.  These  measures 
would  have  to  significantly  counteract  the 
financial  pressures  on  the  pension  system  by 
decreasing spending and stimulating economic 
growth.  Encouraging  longer  working  lives  and 
increasing  participation  rates  among  older 
workers  would  help  increase  both  the  supply 
of  workers  and  consumption  levels,  due  to 
increased 
Increasing  the 
employment  rate  among  older  workers  would 
also  require  targeted  activation  measures. 
Starting 
reforms  early  would  enable  a 
smoother  transition,  gradually  implementing 
changes  to  improve  the  pension  system’s 
intergenerational 
financial 
fairness. 

resilience  and 

lifetime 

income. 

The  government  is  expected  to  propose 
potential  avenues  for  the  necessary 
reform in the current parliamentary term. 
The  new  government  has  acknowledged  the 

8 

 
 
 
not fall within the scope of Pillar 2 and are not 
taxed  or  taxed  at  a  low  level  in  the  recipient 
jurisdiction.  In  2021,  Luxembourg  adopted  a 
non-deductibility  measure (4)  for  interest  and 
royalties paid to jurisdictions on the EU list of 
non-cooperative  jurisdictions  in  tax  matters. 
However,  the  scope  of  this  measure  is  too 
narrow  to  address  aggressive  tax  planning 
to  outbound  payments  by 
risks 
Luxembourg. Currently, there is no measure in 
Luxembourg’s  tax  system  that  sufficiently 
addresses  the  issue  of  non-deductibility  of 
outbound payments of interest and royalties.  

linked 

in 

the 

force 

impact 

2  Directive’), 

Recent  and  upcoming  EU  legislation  on 
minimum  corporate  taxation  rates  and 
harmonisation  of  transfer  pricing  rules 
should  have  a  positive 
in 
Luxembourg.  Directive  (EU)  2022/2523  (the 
since 
‘Pillar 
1 January 2024,  has  introduced  a  minimum 
rate  of  effective 
taxation  of  15%  for 
multinationals active in EU Member States. By 
limiting the race to the bottom in corporate tax 
rates  and 
for 
lowering 
to  shift  profits 
businesses 
low-tax 
jurisdictions, 
it  will  help  to  address  the 
outbound  payment  issue.  However,  the  scope 
of  these  rules,  which  have  been  implemented 
in  Luxembourg  already,  is  limited  to  the 
largest  multinationals 
of 
EUR 750 million  of  annual  revenue)  and  there 
are certain sectoral exemptions. In this regard, 
in September 2023, the Commission presented 
a  proposal  for  a  directive  on  transfer  pricing, 
to  harmonise  transfer  pricing  rules  in  the  EU 
and  ensure  a  common  approach  to  transfer 
pricing  problems,  which,  if  adopted,  could 
contribute to eventually addressing the issue. 

incentive 
to 

(threshold 

in 

the 

its  coalition 
issue 
relevance  of 
agreement, which contains the priorities to be 
addressed in the current parliamentary term. It 
has launched a round of consultations with the 
reach  a 
main  stakeholders,  aiming 
consensus  about  a  reform,  which  would  help 
its  future  implementation.  However,  specific 
proposals  are  yet to  be  agreed  with  the main 
to 
stakeholders  before  being  submitted 
Parliament. 

to 

To address fiscal challenges, independent 
fiscal  institutions  could  be  strengthened. 
In  Luxembourg,  the  National  Council  of  Public 
Finances  (CNFP)  analyses  the  reliability  and 
compliance  with  the  EU  fiscal  framework  of 
the  government’s  budgetary  projections  and 
the  underlying  macroeconomic  scenarios 
published by the National Institute of Statistics 
(STATEC). The scope of its monitoring could be 
strengthened,  in  particular  by  improving  its 
access  to  more  detailed  information  beyond 
the  aggregates  published  by  STATEC  and  the 
budgetary legislative texts. 

Tackling aggressive tax planning 

fair 

to  a 

Based  on  the  available  economic  data, 
aggressive tax planning continues to be a 
challenge  in  Luxembourg.  Tackling  it  is 
essential, since it distorts fair competition and 
constitutes  an  obstacle 
tax 
environment  in  the  EU,  with  an  impact  on 
taxpayers  and  government  finances.  More 
than  other  Member  States’ 
tax  system, 
Luxembourg’s tax system continues to present 
certain  aspects  that  can  facilitate  aggressive 
tax planning practices, such as the absence of 
withholding  taxes  or  allowing  transfer  pricing 
mismatches  (see  Annex  19).  Furthermore, 
Luxembourg has adopted limited measures to 
address  this  issue,  particularly  in  comparison 
with  other  Member  States  facing  similar 
challenges. 

lack  of  withholding 

taxes  on 
The 
interest  payments  and  on 
outbound 
royalties 
Luxembourg-based 
companies  to  non-EU  jurisdictions,  could 
still lead to  little  or  no  taxation.  This  will 
in particular be the case if these payments do 

from 

(4)  For  instance,  Luxembourg  tax  system  provides  an 
exemption  allowing  securitisation  entities  to  continue 
deducting  from  their  tax  base  interests  payable  from 
intragroup borrowing, which violates anti-tax avoidance 
Directives.  

9 

 
 
 
 
housing supply  – including through the supply 
of  affordable  and  social  housing  targeted  to 
those most in need – for example by speeding 
up  and  prioritising 
the  adoption  and 
implementation  of  recent  measures,  including 
recurrent  taxes  to  increase  the  supply  of 
buildable  land  and  non-occupied  properties, 
combined with the ongoing reform of land-use 
planning  In  addition,  reducing  the  mortgage 
interest  deductibility,  which  was  significantly 
raised  again  in  the  beginning  of  2024,  would 
reduce  the  fiscal  incentives  to  borrow,  which 
supports high house prices.  

Addressing inequality in the  
education system 

The 

gap 

15). 

and 

basic 

skills 

Annex 

round  of  PISA 

overall 
Pupils’ 
performance 
largely  depend  on  their 
socio-economic and linguistic background. 
While  Luxembourg  did  not  participate  in  the 
for 
(Programme 
latest 
International  Student  Assessment  of 
the 
Organisation  for  Economic  Co-operation  and 
Development),  the  results  of  2018  showed 
that the average skills levels at the age of 15 
were  significantly  lower  than  the  EU  average 
(see 
between 
disadvantaged  students  and  their  peers  is 
bigger  in  Luxembourg  than  in  any  other  EU 
country.  Pupils  learn  to  read  and  write  in 
German  and  all  subjects  (except  for  French) 
are  taught  in  German.  This  constitutes  a  very 
high  demand  for  language  skills  in  a  country 
where  only  around  5%  of  first  graders  speak 
speak 
German 
one 
its 
Luxembourgish  at  home.  To  adapt 
schooling  to  its  diverse  student  population,  in 
September 2022, Luxembourg launched a pilot 
project  in  four  primary  schools,  where  pupils 
can  start  learning  first  in  French  and  then  in 
German,  and 
the  number  of 
European  public  schools with  free  access  for 
pupils. 

increased 

three 

and 

in 

Addressing the persistent housing  
shortage and high residential  
real estate prices 

Strong  population  growth  combined  with 
restricted supply have pushed up demand 
for  housing  over  the  years preceding  the 
energy  crisis.  In  2023,  historically  high 
consumer  prices  and  interest  rates  continued 
to  exacerbate  vulnerabilities  relating  to  high 
house prices and high household debt, as was 
flagged in the 2023 in-depth review. Increased 
mortgage loans, supported by fiscal incentives, 
have  further  pushed  up  demand  for  housing 
over  the  years  preceding  the  energy  crisis, 
while supply has been restricted by the limited 
land  available  for  construction  and  by  land 
hoarding.  The  widening  gap  between  housing 
demand  and  supply  had  resulted  in  strong 
house  price  increases  with  growing  risks  of 
house  price  overvaluation,  and  deteriorating 
affordability. The increasing lack of affordable 
housing further aggravates the risk of poverty 
for  the  most  vulnerable  groups.  House  prices 
started to decline in late 2022 and decreased 
by  9.1%  in  2023),  mainly  driven  by  a  fall  in 
existing house prices, while the prices of newly 
built  houses  and  land  for  construction  have 
declined  significantly  less,  and  only  since  Q3-
2023. The number of housing transactions and 
building  permits  has  also  declined  sharply, 
impacting  the  real  estate  and  construction 
sector. 

firms’ 

A further sharp correction in house prices 
is not expected as incomes are holding up 
well  and  the  supply  shortage  continues, 
with  large  developers  reportedly  holding 
back  sales.  However,  the  resulting  activity 
slowdown  had  an  impact  on  the  construction 
sector, triggering a set of support measures to 
protect 
liquidity.  Household  debt 
remains  high  in  terms  of  disposable  income, 
although it decreased in 2023, while mortgage 
trend. 
borrowing  continued 
Households’ 
also 
substantial,  indebtedness  increases  towards 
the  higher  levels  of  income  and  wealth,  and 
the  banking  sector  is  sound,  which  overall 
counteracts macro-financial risks. Luxembourg 
could  take  additional  policy  action  to  boost 

its  downward 
are 

financial 

assets 

10 

 
 
 
The green transition and fossil  
energy dependence 

Luxembourg  is  expected  to  submit  the 
REPowerEU  chapter  of  its  recovery  and 
resilience  plan,  which  should  improve 
security  of  supply  and  foster  affordable 
energy.  As  for  other  Member  States,  this 
specifically  entails:  (i)  continuous  action  to 
reduce  dependence  on  fossil  fuels;  (ii)  taking 
measures  to  diversify  away  from  Russian 
fuels;  and  (iii)  continue  action  to  reduce 
demand  through  more  structural  measures, 
such  as  energy  efficiency  and  deploying 
renewables. 

is  a  structural 
Energy  dependence 
Luxembourg’s 
of 
characteristic 
landlocked  territory.  Luxembourg  imports 
91% of its energy consumption. The country is 
highly  reliant  on  fossil  fuels,  which  accounted 
for 77% of the energy mix in 2022. The share 
of  renewable  energy  in  gross  final  energy 
consumption  is  growing  but  remains  among 
the lowest in the EU. Luxembourg is continuing 
to  make  progress  in  deploying  renewable 
energy production. The total installed capacity 
has  increased  by  13.5%  in  comparison  to 
2021,  as  described  in  Annex  7.  Planned 
measures  include  legislation  speeding  up  of 
permitting  procedures  for  decarbonisation 
projects  and  purchase  of  renewable  energy 
through statistical transfers. 

its 

with 

energy 

increases 

Luxembourg  maintains  a  reliable  supply 
of  electricity  and  natural  gas,  bolstered 
strategic  partnerships  and 
by 
interconnections 
neighbouring 
countries.  The  nation’s  current  infrastructure 
demands.  However, 
meets 
its 
in  electricity 
anticipating  future 
consumption,  Luxembourg  has  laid  out  plans 
to  strengthen  its  electricity  grid  and  improve 
interconnections  with  Germany  by  2040. 
Despite being engaged in regional cooperation, 
Luxembourg  has  not  yet  participated  in  any 
projects  of  common 
the 
Trans-European  Energy  Network  Regulation, 
offering  potential  for  further  integration  into 
continental energy networks. 

interest  under 

Luxembourg made significant progress in 
reaching  the  2030  EU  targets  for  energy 
efficiency. The best results are in the services 
sector,  while  the  residential  sector  still  needs 
to  catch  up.  To  fulfil  its  energy  savings 
obligation,  Luxembourg  relies  on  the  energy 
efficiency  obligation  scheme,  but  more  action 
will  be  needed  to  achieve  the  2021-2030 
target.  

Luxembourg  took  significant  action  to 
counteract  the  impact  of  energy  price 
hikes  and  to  support  households.  Any 
prolongation  of  the  ongoing  aid  measures 
expiring  in  2024  (under  the  Solidaritéitspak), 
or  any  new  action  should  be  temporary  and 
targeted, and should preserve the energy price 
signal.  Aid  measures  should  not  hinder  the 
green 
transition,  promote  greater  energy 
consumption or increase inflation.  

points, 

charging 

Luxembourg’s  transition  to  sustainable 
transport is progressing, and it must keep 
In  2022,  3.3%  of 
up  the  momentum. 
passenger  cars  in  Luxembourg  were  battery 
electric  vehicles  (above  the  EU  average).  In 
2023, 
the  country  had  2 120  publicly 
providing 
accessible 
1 charging point for every 13 e-vehicles, while 
the  EU  average  is  1  charging  point  for  every 
10  e-vehicles.  However,  further  investments 
are needed to increase the share of passenger 
and  freight  transport  by  rail,  as  road  is  used 
for  86%  of  passenger  and  freight  transport 
(see  Annex  6).  The 
is 
to 
Luxembourg’s 
greenhouse gas emissions and remains key to 
decarbonisation.  Luxembourg  has  higher 
vulnerabilities  than  the  rest  of  the  EU  in 
respect  of  CO2  emissions  from  road  transport 
(see Annex 5). 

transport  sector 
contributor 

largest 

While  Luxembourg  has  a  high  recycling 
rate and eco-innovation, the performance 
of  circular  economy  is  affected  by  high 
waste  generation,  material  footprint  and 
(see  Annex  9). 
import  dependence 
Intensive  agriculture,  urban  development  and 
expanding 
cause 
biodiversity  loss.  More  action  is  needed  on 
pollution  control,  targeting  key  sectors  and 
further  promoting  the  ‘polluter  pays’  principle 
(see Annex 6).   

infrastructure 

transport 

11 

 
 
sustainable 

in  electric 

transport  and 

On  the  green  transition,  in  recent  years, 
Luxembourg  has  experienced  increased 
skills  shortages  in  key  sectors.  These 
shortages  are  creating  obstacles  to 
the 
transition  to  a  net-zero  economy.  Upskilling 
and reskilling programmes with a focus on the 
green transition increased in number. The Just 
Transition  Fund  includes  investments  in  skills, 
in 
especially 
construction  and 
renovation. 
However,  skills  mismatches  persist,  and 
shortages of workers keep growing. Therefore, 
to  help 
additional 
Luxembourg  reach  its  national  target  of  at 
least  62.5%  of  all  adults  participating  in 
education  and  training  every  year  by  2030. 
Upskilling and reskilling workers for the green 
transition, 
including  those  who  are  most 
affected  by  the  transition,  and  promoting 
inclusive  labour  markets  are  essential  policies 
to  speed  up  the  transition  to  net-zero  and 
ensure its fairness (see Annex 8). 

is  needed 

support 

industry 

is 
financial  centre  makes 

Luxembourg’s financial centre represents 
both  a  risk  and  an  opportunity  for 
Luxembourg,  especially 
in  relation  to 
climate finance. The complexity of the global 
facilitated  by 
that 
financial 
Luxembourg’s 
it 
challenging  to  adapt  to  the  priorities  of  the 
green  transition.  Furthermore,  large  parts  of 
the  country’s  finance-based  growth  model 
depend on decisions taken by foreign financial 
institutions  and  investors,  which  might  not  be 
aligned  with  the  priorities  of  the  green 
transition  or  its  inclusive  approach.  Without 
structural  reorientation  towards  finance  for 
sustainable  development,  the  main  driver  of 
Luxembourg’s  economy  remains vulnerable  to 
climate  risks:  investments  in  stranded  assets 
may  become  unsustainable  in  the  long  term 
and  jeopardise  future  economic  growth  and 
competitiveness.  Yet,  the  sheer  size  of  the 
finance  sector  also  represents  an  opportunity 
for  Luxembourg  to  have  a  significant  impact 
on  climate  action  both  nationally  and  abroad 
(OPC, 2023). 

Productivity and business  
investment 

Labour  productivity  in  Luxembourg  is 
extremely  high,  but  growth  is  among  the 
lowest in the EU. Eurostat figures show that 
labour  productivity  in  Luxembourg  is  much 
higher  than  the  EU  average,  although  it  is 
declining.  Productivity  growth  has  been  weak 
over the past decade, in particular in financial 
services.  Whereas  labour  productivity  in  ICT 
services  has  increased  strongly  over  the  past 
decade, Luxembourg’s largest services sectors 
(finance  and 
insurance)  have  seen  their 
productivity  decline.  Both  labour  productivity 
and  total  factor  productivity  have  grown 
slowly  over  the  past  decade,  in  particular 
compared to other EU countries.  

has 

towards 

Luxembourg is lagging behind in business 
investment,  including  in  R&D,  partly  due 
to  its  sectoral  composition.  While  the 
economy 
higher 
shifted 
productivity  sectors  and  the  proportion  of 
high-skilled  workers  is  relatively  high,  the 
country is lagging behind in terms of business 
investment. 
investment 
In  2022,  business 
represented 8.2% of GDP (see Annex 12). This 
share  is  among  the  lowest  in  the  EU  (EU 
average: 13.7%). Business expenditure on R&D 
has  continued  to  decline  and  fell  to  0.5%  in 
2022, against an EU average of 1.48%. While 
this is partly due to Luxembourg’s strong focus 
less 
on 
research-intensive than the industrial sector, it 
nevertheless 
Luxembourg’s 
hampers 
productivity gains. 

services,  which 

typically 

is 

Against  the  backdrop  of  geopolitical 
upheaval  and  turmoil  in  global  financial 
markets,  Luxembourg’s  financial  centre 
appears  resilient.  Yet,  data  indicate  that 
while  nominal  GDP  remains  robust  (+2.3%  in 
2023),  real  GDP  sends  mixed  signals  (-1.1%). 
Furthermore, national income (GNI) seems not 
to  have  kept  pace  (-1.7%),  suggesting  a 
disconnect  between  the  economic  activity 
within the country and the income accruing to 
its  residents.  This  discrepancy  has  widened 
over 
the  global 
financial crisis, pointing to systemic changes in 

time,  particularly  since 

12 

 
 
Box 4: 

The mid-term review of cohesion policy funding for Luxembourg 

The mid-term review of  cohesion policy funding is  an opportunity to assess cohesion 
policy  programmes  and  tackle  emerging  needs  and  challenges  in  EU  Member  States 
and their regions. Member States are reviewing each programme taking into account,  among 
other  things,  the  challenges  identified  in  the  European  Semester,  including  in  the  2024 
country-specific  recommendations.  This  review  forms  the  basis  for  a  proposal  by  the  Member 
State for the definitive allocation of 15% of EU funding included in each programme.   

Luxembourg  has  made  some  progress  in  implementing  cohesion  policy  programmes  and  the 
European  Pillar  of  Social  Rights,  but  challenges  remain  as  outlined  in  this  report,  including  in 
Annexes  14  and  17.  In  particular,  Luxembourg  continues  to  have  significant  socio-economic 
disparities  between  cities,  towns,  suburbs  and  non-urban  areas.  Against  this  background,  it 
remains important to  continue  to implement  the  planned  priorities, with particular attention to: 
(i)  the green and digital transitions; (ii) investments in skills to facilitate career transitions and 
professional  mobility  in  line  with  labour market  needs,  with  specific  attention  to  older  workers 
and people with low qualifications; (iii) activation and social integration of vulnerable people,  in 
particular those with a migrant background; and (iv) the European Child Guarantee, in particular 
by taking measures promoting the integration of disadvantaged pupils through quality education 
and training.   

Luxembourg could also benefit from the opportunities available under the Strategic Technologies 
for  Europe  Platform (5)  initiative  to  support  the  transformation  of  industry,  in  particular  by 
investing  in  strategic  value  chains  like  net-zero  industry,  decarbonisation  of  energy-intensive 
industries and digital innovation.  

structures  or,  alternatively, 

market 
the 
potential  effects  of  multinationals’  activities 
on  national  statistics.  The  financial  sector, 
despite  contributing  significantly  to  GDP,  has 
seen  a  notable  decline  in  productivity,  which 
raises questions about the actual performance 
the 
of 
effectiveness of traditional economic metrics. 

Luxembourg's 

economy 

and 

decline 

financial 

sector 
The 
in 
coincides  with  a 
productivity  also 
widening  gap  between  GDP  and  GNI.  This 
gap  is  estimated  at  30%  of  GDP.  These 
developments  might  well 
indicate  deeper 
structural  shifts  in  global  trade  and  financial 
networks  or,  alternatively,  it  could  be  an 
artefact  of  financial  optimisation  practices  by 
multinationals  (CNP,  2023).  The  uncertainty 
regarding these scenarios presents challenges 
in  interpreting  Luxembourg’s  economic  health 
standard 
through 
growth 
that  while 
suggest 
Data 
measures. 
multinationals  bolster  GDP, 
their  profit 
repatriation does not equally contribute to GNI, 
impacting  domestic  wealth  distribution  and 
inequality,  with  a  potential 
exacerbating 
impact on productivity and long-term growth. 

productivity 

to 

resilient  and  benefits 

sector’s  productivity  points 

Preserving its status as a global financial 
hub while ensuring the domestic economy 
its 
remains 
residents,  constitutes  a  major  challenge 
for Luxembourg. The continued decline in the 
financial 
to 
counteract 
strategies 
diversification 
potential  risks  associated  with  global  trade 
and  financial  shifts.  Taxation  and  investment 
policies could be recalibrated to incentivise the 
retention of profits and align GNI more closely 
with  GDP.  Additionally,  developing  more 
sophisticated  economic  indicators  that  can 
capture 
in 
Luxembourg  might  be  crucial  to  crafting 
policies  that  drive  equitable  economic  growth 
and stability. 

value  generated 

true 

the 

(5)  Regulation (EU) 2024/795)  

13 

 
 
 
 
KEY FINDINGS 

Luxembourg’s  recovery  and  resilience 
plan  (RRP)  includes  measures  to tackle  a 
series of structural challenges, in synergy 
with  other  EU  funds,  including  cohesion 
policy funds: 

•  Measures  to  help  decarbonise  transport 
and support the electrification of the public 
transport  fleet,  and  a  financing  scheme  to 
expand  the  network  of  charging  points  for 
electric vehicles;  

•  Digitalisation 

public 
of 
administration,  including  online  solutions 
for  people  and  businesses,  as  well  as 
digitalisation of the health sector. 

the 

•  A  reform  to  develop  a  national  skills 

strategy; 

•  Vocational 

training 

to 
address  the  skills  mismatch  in  the  job 
market and to promote inclusive growth; 

programmes 

for  a 
Continued  efforts  are  key 
successful 
implementation  of  all  the 
measures  of  Luxembourg’s  recovery  and 
resilience  plan,  including  the  REPowerEU 
chapter once adopted, by August 2026.  

Beyond  the  reforms  and  investments  in 
the  cohesion  policy 
the  RRP  and 
programmes,  Luxembourg  would  benefit 
from: 

•  Improving the long-term sustainability 
of the pension system to maintain sound 
government  finances  and  fairness, 
in 
particular  by  increasing  the  rate  of  older 
people who are working or looking for a job; 

•  Strengthening action to effectively tackle 
aggressive  tax  planning,  which  would 
prevent  distortion  of  competition  between 

14 

treat  EU 

firms, 
safeguard government finances; 

taxpayers  fairly  and 

investment, 

in  particular 

•  Boosting  productivity  by  supporting 
in 
business 
innovation,  and  pursuing 
research  and 
diversification  strategies 
to  counteract 
potential risks associated with global trade 
and financial shifts potentially affecting the 
financial sector’s competitiveness; 

•  Reducing  the  impact  of  pupils’  linguistic 
and  socio-economic  background  on  their 
performance  in  education  and  basic 
skills; 

is  an  obstacle 

•  Addressing  the  persistent  shortage  of 
housing  –  which 
to 
investment  and  growth  in  the  medium 
term,  and  may  become  a  competitive 
the  economy  –  by 
disadvantage  for 
increasing  the  housing  supply, in  particular 
the  adoption  of  a 
by  accelerating 
comprehensive 
land  use  policy  and  a 
property tax reform, and by prioritising the 
development of large-scale district projects 
on government-owned land, which will help 
reduce 
the 
attractiveness of the country for workers; 

inequality  and 

improve 

investing 

transition, 

the  green 

•  Reducing  reliance  on  fossil  fuels  and 
accelerating  the  green  transition,  in 
particular  by  promoting  the  skills  needed 
for 
in 
renewable  energy,  and  promoting  energy 
efficiency,  especially  in  buildings  (including 
the  residential  sector  but  also  businesses 
and 
the  support 
for  which 
schemes  are  rather  limited)  and  transport; 
and  tackling  growing  traffic  congestion,  a 
in  Luxembourg  with 
major  challenge 
economic, 
environmental 
social 
consequences. 

industry, 

and 

 
 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

Cross-cutting indicators 

A1.  Sustainable Development Goals 

A2.  Progress in the implementation of country-specific recommendations 

A3.  Recovery and resilience plan – implementation 

A4.  Other EU instruments for recovery and growth 

A5.  Resilience 

Environmental sustainability 

A6.  European Green Deal 

A7.  Energy transition and competitiveness 

A8.  Fair transition to climate neutrality 

Productivity 

A9.  Resource productivity, efficiency and circularity 

A10.  Digital transformation 

A11.  Innovation 

A12.  Industry and single market 

A13.  Public administration 

Fairness 

A14.  Employment, skills and social policy challenges in light of the European Pillar of Social Rights 

A15.  Education and training 

A16.  Health and health systems 

A17.  Economic and social performance at regional level 

Macroeconomic stability 

A18.  Key financial sector developments 

A19.  Taxation 

A20.  Table with economic and financial indicators 

A21.  Debt sustainability analysis 

LIST OF TABLES 

A2.1. 
A3.1. 

Summary table on 2019-2023 CSRs 
Key facts of the Luxembourgish RRP 

17 

20 

20 

22 

26 

28 

31 

33 

33 

38 

43 

46 

46 

48 

50 

52 

56 

58 

58 

61 

63 

65 

67 

67 

69 

72 

73 

23 
26 

 
 
 
Support from EU instruments in Luxembourg 
Resilience indices across dimensions for Luxembourg and the EU-27 
Indicators tracking progress on the European Green Deal from a macroeconomic perspective 
Key Energy Indicators 
Key indicators for a fair transition in Luxembourg 
Circularity indicators 

A3.2.  Measures in Luxembourg's RRP 
A4.1. 
A5.1. 
A6.1. 
A7.1. 
A8.1. 
A9.1. 
A10.1.  Key Digital Decade targets monitored by the Digital Economy and Society Index indicators 
A11.1.  Key innovation indicators 
A12.1.  Single Market and Industry 
A13.1.  Public administration indicators 
A14.1.  Social Scoreboard for Luxembourg 
A14.2.  Situation of Luxembourg on 2030 employment, skills and poverty reduction targets 
A15.1.  EU-level targets and other contextual indicators under the European Education Area strategic framework 
A16.1.  Key health indicators 
A17.1.  Main socio-economic indicators by degree of urbanisation, Luxembourg, 2022 
A18.1.  Financial Soundness Indicators 
A19.1.  Taxation indicators 
A20.1.  Key economic and financial indicators 
A21.1  Debt sustainability analysis – Luxembourg  
A21.2  Heat map of fiscal sustainability risks - Luxembourg  

LIST OF GRAPHS 

Progress towards the SDGs in Luxembourg 
Luxembourg’s progress on the 2019-2023 CSRs (2024 European Semester) 
Total grants disbursed under the RRF 
Distribution of cohesion policy funding across policy objectives in Luxembourg 
Distribution of RRF funding by pillar in Luxembourg 
Greenhouse gas emissions from the effort sharing sectors in Mt CO2eq, 2005-2022 
Changes in livestock density and organic farming 
Environmental investment gap, annual average 
Luxembourg´s energy retail prices for households and industry & service 
Trends in electricity prices for non-household consumers (EU and foreign partners) 
Luxembourg's installed renewable capacity (left) and electricity generation mix (right) 
Fair transition challenges in Luxembourg 
Job vacancy rate in transforming sectors and mining and quarrying 
ETS emissions by sector since 2013 
Treatment of municipal waste 

A1.1. 
A2.1. 
A3.1. 
A4.1. 
A4.2. 
A6.1. 
A6.2. 
A6.3. 
A7.1. 
A7.2. 
A7.3. 
A8.1. 
A8.2. 
A9.1. 
A9.2. 
A11.1.  Business expenditure on R&D as % of GDP, 2011-2022 
A12.1.  Labour productivity (GDP per person employed, index 2010=100) 
A13.1.  Government effectiveness 
A13.2.  Adult education: a) participation rate in job-related employer-sponsored education and training (left side); b) average 

instruction hours spent by participants in education and training by sector (centre); c) share of women and men in 
management positions in the public administration 

A15.1.  Changes in writing comprehension in German in year 3 of primary school, depending on socio-economic status between 

2018 and 2020 

A16.1.  Life expectancy at birth, years 
A16.2.  Projected increase in public expenditure on healthcare over 2024-2070 
A18.1.  Evolution of credit activity 
A19.1.  Tax wedge for single and second earners as a % of total labour costs, 2023 
A19.2.  Financial activity risk in Luxembourg: dividend and interest flows, and the use of special purpose entities (SPEs) for foreign 

direct investment (FDI) 

27 
30 
31 
37 
42 
44 
47 
49 
51 
55 
57 
58 
59 
62 
64 
66 
68 
70 
72 
73 
73 

20 
22 
27 
29 
29 
33 
35 
36 
38 
39 
39 
43 
44 
46 
47 
50 
52 
56 

57 

61 
63 
63 
67 
69 

71 

18 

 
 
 
 
 
19 

 
 
CROSS-CUTTING INDICATORS 
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS 

the 

This  Annex  assesses  Luxembourg’s  progress 
on  the  Sustainable  Development  Goals 
(SDGs)  along 
four  dimensions  of 
competitive  sustainability.  The  17  SDGs  and 
their related indicators provide a policy framework 
under  the  UN’s  2030  Agenda  for  Sustainable 
Development.  The  aim  is  to  end  all  forms  of 
inequalities  and  tackle  climate 
poverty,  fight 
change  and 
the  environmental  crisis,  while 
ensuring that no one is left behind. The EU and its 
Member  States  are  committed  to  this  historic 
global  framework  agreement  and  to  playing  an 
active  role  in  maximising  progress  on  the  SDGs. 
The graph below is based on the EU SDG indicator 
set developed to monitor progress on the SDGs in 
an EU context.  

related 

While  Luxembourg  is  improving  on  the  SDG 
environmental 
indicators 
sustainability  (SDGs 2,  7,  12,  13)  and  is 
moving  away  from  the  targets  for  SDG  9 
(Industry,  innovation  and  infrastructure),  it 
performs  well  only  on  SDG 11  (Sustainable 

to 

In  contrast,  energy 

cities and communities). Luxembourg has made 
progress  in  particular  on  organic  farming  as  a 
percentage of utilised agricultural land. This edged 
up  from  3.5%  in  2016  to  5.2%  in  2021  but 
remains  below  the  EU  average  of  9.9%  (SDG 2) 
(see  also  Annex  6).  On  SDG 7  (Affordable  and 
clean  energy),  the  share  of  renewable  energy  in 
gross final energy consumption more than doubled 
(from  6.2%  in  2017  to  14.4%  in  2022;  EU 
average:  23.0%). 
import 
dependency  as  a  percentage  of  imports  in  gross 
available  energy  decreased  (from  95.6%  in  2017 
to  91.3%  in  2022)  but  remains  above  the  EU 
average  of  62.5%.  Energy  productivity,  measured 
in  euro  per  kilograms  of  oil  equivalent  (kgoe) 
(SDG 12), improved, increasing from EUR 11.6 per 
kgoe in 2017 to 14.7 in 2022 (well above  the EU 
average of 9.3). Luxembourg also improved on net 
greenhouse  gas  emissions  (SDG 13),  decreasing 
from  19.5 
to 
tonnes  per  capita 
14.4 tonnes in 2022. However, it is still above the 
EU  average  of  7.3  tonnes.  The  country  further 
improved  its  performance  on  the  recycling  of 

in  2017 

Graph A1.1: Progress towards the SDGs in Luxembourg 

For detailed datasets on the various SDGs, see the annual Eurostat report ‘Sustainable development in the European Union’; for 
details on extensive country-specific data on the short-term progress of Member States: Key findings – Sustainable development 
indicators - Eurostat (europa.eu). A high status does not mean that a country is close to reaching a specific SDG, but signals that it 
is doing better than the EU on average. The progress score is an absolute measure based on the indicator trends over the past 5 
years. The calculation does not take into account any target values as most EU policy targets are only valid for the aggregate EU 
level. Depending on data availability for each goal, not all 17 SDGs are shown for each country. 
Source: Eurostat, latest update of 25 April 2024. Data refer mainly to the period 2017-2022 or 2018-2023. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

20 

 
 
 
 
 
 
 
municipal  waste  as  a  percentage  of  total  waste 
generated (SDG 11) from 48.9% in 2017 to 54.6% 
in  2022,  well  above the  EU  average  (48.6%)  (see 
also  Annex  9).  Luxembourg’s 
recovery  and 
resilience plan (RRP) has the highest percentage of 
green measures (68.8%) of the 27 RRPs approved; 
these will help decarbonise transport in particular. 

Luxembourg  performs  well  on  some  SDG 
indicators related to fairness (SDGs 3, 5, 10), 
is  improving  on  SDGs  7,  and  moving  away 
from  the  targets  for  SDGs 1,  4  and  8.  The 
percentage of people with good or very good self-
perceived  health  aged  16  or  over  increased  from 
71.1%  in  2017  to  74.4%  in  2022  (EU  average: 
67.8%).  On  SDG 5  (Gender  equality),  Luxembourg 
improved  in  its  gender  employment  gap  (from 
8.0%  of  those  aged  20-64  in  2018  to  6.8%  in 
2023;  EU  average  10.2%).  Also,  positions  held  by 
women in senior management as a percentage of 
board members increased from 13.3% in 2018 to 
23.5%  in  2023  but  remained  below  the  EU 
average  of  33.8%.  The  percentage  of  people  at 
risk of poverty and social exclusion increased from 
19.3%  in  2017  to  19.4%  in  2022  (EU  average: 
21.6%)  and  the  percentage  at  risk  of  monetary 
poverty after social transfers went up from 16.4% 
in  2017  to  17.3%  in  2022,  now  above  the  EU 
average of 16.5% (SDG 1 - No poverty). On SDG 4 
(Quality 
educational 
attainment as a percentage of the population aged 
25-64  jumped  from  53.7%  in  2018  to  60.2%  in 
2023,  well  above  the  EU  average  of  43.1%. 
However,  the  number  of  early 
leavers  from 
education  and  training  as  a  percentage  of  the 
population aged 18 to 24 increased from 6.3% in 
2018  to  6.8%  2023  (EU  average  9.5%).  The  RRP 
includes  measures  to  strengthen  the  resilience  of 
the  health  system,  including  by  digitalising  the 
sector.  

education), 

tertiary 

On  productivity,  Luxembourg  performs  well 
on  SDG 9  but  is  moving  away  from  the 
targets  for  SDGs 4  and  8.  The  share  of 
households  with  a  high-speed  internet  connection 
jumped  from  57.2%  in  2017  to  93.3%  in  2022 
(SDG 9), well above the EU average of 73.4%. On 
SDG  8  (Decent  work  and  economic  growth),  real 
GDP  per  capita  remains  the  highest  in  the  EU, 
slightly decreasing from EUR 83 390 per capita in 
2018 
(EU 
average: EUR 28 940).  The  rate  of  young  people 
not in employment, education or training increased 
from 7.5% in 2018 to 8.5% in 2023, although this 
remains  below  the  EU  average  of  11.2%.  Adults 

EUR 83 320 

2022 

to 

in 

with  at  least  basic  digital  skills  decreased  from 
63.8% of individuals aged 16 to 74 to 60.1% (EU 
average:  55.6%)  (SDG 4).  The  RRP  envisages 
several  reforms  and  investments  to  promote  a 
data-based  economy  and  the  digitalisation  of 
public administration. It also includes measures on 
improving skills, and on upskilling and reskilling to 
help people join the labour market. As part of the 
RRP, 
targeted 
jobseekers,  with  special  attention  for  those  aged 
45 and above. 

training  under  Future  Skills 

Luxembourg  performs  very  well  on  SDG 16 
related  to  macroeconomic  stability,  but  is 
moving  away  from  the  targets  for  SDGs  8 
and 17. General government gross debt (SDG 17) 
increased from 20.9% of GDP in 2018 to 25.7% in 
2023  but  remains  very  low  compared  to  the  EU 
average  of  81.7%.  On  the  other  hand,  on  SDG 8, 
the  investment  share  of  GDP  decreased  from 
17.8% in 2017 to 17.5% in 2022, well below the 
EU  average  at  22.7%.  Also,  the  employment  rate 
of the population aged 20-64 went from 72.1% in 
2018  to  74.8%  in  2023,  although  it  remained 
below the EU average: 75.3%). Finally, on SDG 16, 
the  perceived  independence  of  the  justice  system 
(very good and fairly good) increased from 71% of 
the  population  in  2018  to  76%  in  2023,  much 
higher than the EU average of 53%. Luxembourg’s 
RRP  includes  measures  to  promote  a  transparent 
and  fair  economy.  This  includes  making  the  anti-
money  laundering  supervision  of  professionals 
that  provide  trust  and  company  services  more 
effective. Another measure, to increase the quality 
and transparency of the business register, will help 
the  ultimate 
the  authorities  better 
beneficiaries  of 
legal  entities.  This  should 
contribute to deterring criminals from using these 
entities to launder illicit money. 

identify 

As the SDGs form an overarching framework, any 
links  to  relevant  SDGs  are  either  explained  or 
depicted with icons in the other annexes. 

21 

 
ANNEX 2: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC 
RECOMMENDATIONS 

Graph A2.1: Luxembourg’s progress on the 2019-
2023 CSRs (2024 European Semester) 

Source: European Commission. 

(SDGs) 

The Commission has assessed the 2019-2023 
country-specific  recommendations  (CSRs) (6) 
addressed  to  Luxembourg  as  part  of  the 
European  Semester.  These  recommendations 
concern  a  wide  range  of  policy  areas  that  are 
related to  14  of  the  17  Sustainable Development 
Goals 
(see  Annexes  1  and  3). The 
assessment  considers  the  policy  action  taken  by 
Luxembourg to date (7) and the commitments in its 
recovery and resilience plan (RRP) (8). At this stage 
of RRP implementation, 64% of the CSRs focusing 
issues  from  2019-2023  have 
on  structural 
recorded  at  least  ‘some  progress’,  while  36% 
recorded  ‘limited  progress’  or  ‘no  progress’  (see 
Graph  A2.1).  As  the  RRP  is  implemented  further, 
considerable  progress  in  addressing  structural 
CSRs is expected in the coming years. 

(6)  2023 CSRs: EUR-Lex - 32023H0901(16) - EN - EUR-Lex 

(europa.eu) 

      2022 CSRs: EUR-Lex - 32022H0901(16) - EN - EUR-Lex 

(europa.eu) 

      2021 CSRs: EUR-Lex - 32021H0729(16) - EN - EUR-Lex 

(europa.eu)       

      2020 CSRs: EUR-Lex - 32020H0826(16) - EN - EUR-Lex 

(europa.eu) 
2019 CSRs: EUR-Lex - 32019H0905(16) - EN - EUR-Lex 
(europa.eu) 

(7)  Including  policy  action  reported  in  the  national  reform 
programme  and  in  Recovery  and  Resilience  Facility  (RRF) 
reporting  (published  twice  a  year,  reporting  on  progress  in 
implementing  milestones  and  targets  on  the  basis  of  the 
payment requests assessment). 

(8)  Member  States  were  asked  to  effectively  address  in  their 
RRPs  all  or  a  significant  subset  of  the  relevant  country-
specific  recommendations  issued  by  the  Council.  The  CSR 
assessment  presented  here  considers 
the  degree  of 
implementation of the measures included in the RRP and of 
those  carried  out  outside  of  the  RRP  at  the  time  of 
assessment.  Measures  laid  down  in  the  Annex  of  the 
adopted  Council  Implementing  Decision  on  approving  the 
assessment of the RRP, which have not yet been adopted or 
implemented but considered credibly announced, in line with 
the CSR assessment methodology, warrant ‘limited progress’. 
can 
Once 
to 
‘some/substantial 
implementation’, 
progress 
depending on their relevance. 

these  measures 
or 

implemented, 

lead 

full 

22 

No progress11%Limited progress25%Some progress50%Substantial progress6%Full implementation8% 
 
 
 
 
 
 
   
 
 
 
Table A2.1:  Summary table on 2019-2023 CSRs 

(Continued on the next page) 

23 

LuxembourgAssessment in May 2024*RRP coverage of CSRs until 2026**Relevant SDGs2019 CSR 1Limited progressIncrease the employment rate of older workers by enhancing their employment opportunities and employability.Limited ProgressRelevant RRP measures implemented as of 2021.SDG 8Improvethelong-termsustainabilityofthepensionsystem,includingby further limiting early retirement.No ProgressSDG 82019 CSR 2Limited progressReduce barriers to competition in regulated professional business services.Limited ProgressSDG 92019 CSR 3Some progressFocus economic policy related to investment on fostering digitalisation Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022, 2023 and 2024.SDG 9and innovation,Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022, 2023 and 2024.SDG 9stimulating skills development,Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022.SDG 4improving sustainable transport,Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022, 2023 and 2025.SDG 11and increasing housing supply, including by increasing incentives and lifting barriers to build.Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022, 2023, 2024 and 2025.SDG 82019 CSR 4Limited progressAddress features of the tax system that may facilitate aggressive tax planning, in particular by means of outbound payments.Limited ProgressSDG 8, 162020 CSR 1Some progressTakeallnecessarymeasures,inlinewiththegeneralescapeclauseoftheStabilityandGrowthPact,toeffectivelyaddresstheCOVID-19pandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuring debt sustainability, while enhancing investment. Not relevant anymoreNot applicableSDG 8, 16Improvetheresilienceofthehealthsystembyensuringappropriateavailability of health workers.Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022 and 2025.SDG 3 Accelerate reforms to improve the governance of the health system and e-health. Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022 and 2025.SDG 32020 CSR 2Substantial progressMitigate the employment impact of the COVID-19 crisis, with special consideration for people in a difficult labour market position.Substantial ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022.SDG 82020 CSR 3Some progressEnsure effective implementation of measures supporting the liquidity of businesses, in particular SMEs and the selfemployed. Full ImplementationSDG 8, 9Front-loadmaturepublicinvestmentprojects[tofostertheeconomicrecovery] Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022, 2023 and 2024.SDG 8, 16and promote private investment to foster the economic recovery. Limited ProgressSDG 8, 9Focusinvestmentonthegreenanddigitaltransition,inparticularonsustainable transport Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022, 2023 and 2025.SDG 11and buildings, Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022, 2023, 2024 and 2025.SDG 7, 8cleanandefficientproductionanduseofenergy,contributingtoaprogressive decarbonisation of the economy. Some ProgressRelevant RRP measures being planned as of 2022, 2023, 2024 and 2025.SDG 7, 9, 13Foster innovation [in particular in the business sector] Some ProgressRelevant RRP measures being planned as of 2022 and 2023.SDG 9and digitalisation, in particular in the business sector. Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022, 2023 and 2024.SDG 92020 CSR 4Limited progressEnsureeffectivesupervisionandenforcementoftheanti-moneylaunderingframeworkasregardsprofessionalsprovidingtrustandcompany services, and investment services. Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2023.SDG 8, 16Step up action to address features of the tax system that facilitate aggressive tax planning, in particular by means of outbound payments. Limited ProgressSDG 8, 16 
 
 
 
  
 
Table (continued) 

(Continued on the next page) 

24 

2021 CSR 1Not relevant anymoreIn2022,pursueasupportivefiscalstance,includingtheimpulseprovidedbytheRecoveryandResilienceFacility,andpreservenationally financed investment.Not relevant anymoreNot applicableSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term.Not relevant anymoreNot applicableSDG 8, 16At the same time, enhance investment to boost growth potential.Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticularinvestmentsupportingthegreenanddigitaltransition. Not relevant anymoreNot applicableSDG 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthecoverage,adequacyandsustainabilityofhealthand social protection systems for all.Not relevant anymoreNot applicableSDG 8, 162022 CSR 1Some ProgressIn2023,ensurethatthegrowthofnationallyfinancedprimarycurrentexpenditureisinlinewithanoverallneutralpolicystance,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Standreadytoadjustcurrentspendingtothe evolving situation.No ProgressNot applicableSDG 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseoftheRecoveryandResilienceFacilityandother Union funds.Full ImplementationNot applicableSDG 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachieving prudent medium-term fiscal positions.Full ImplementationNot applicableSDG 8, 16Improvethelong-termsustainabilityofthepensionsystem,inparticularbylimitingearlyretirementandbyincreasingtheemployment rate of older workers.No ProgressSDG 8Takeactiontoeffectivelytackleaggressivetaxplanning,includingbyensuringsufficienttaxationofoutboundpaymentsofinterestsand royalties to zero and low-tax jurisdictions.Limited ProgressSDG 8, 162022 CSR 2Proceedwiththeimplementationofitsrecoveryandresilienceplan,inlinewiththemilestonesandtargetsincludedintheCouncilImplementing Decision of 13 July 2021.Submitthe2021-2027cohesionpolicyprogrammingdocumentswithaviewtofinalisingtheirnegotiationswiththeCommissionandsubsequently starting their implementation.2022 CSR 3Limited progressReducetheimpactofinequalitiesonpupils’performanceandpromoteequalopportunitiesforallstudentsintheeducationalsystem.Limited ProgressSDG 4, 8, 102022 CSR 4Some progressReduce overall reliance on fossil fuelsSome ProgressRelevant RRP measures being planned as of 2022, 2023, 2024 and 2025.SDG 7, 9, 13by accelerating the deployment of renewables,Substantial ProgressRelevant RRP measures being planned as of 2022, 2023, 2024 and 2025.SDG 7, 9, 13electricity transmission capacity,Some ProgressSDG 7, 9, 13andinvestmentinenergyefficiencyinboththeresidentialandnon-residential sectors.Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022 and 2023.SDG 7Supportmunicipalitiesindevelopingdetailedlocalplansforthedeploymentofrenewableenergy,includingwindpowerandphotovoltaics, and for district heating and cooling systems.Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022 and 2023.SDG 7, 9, 10, 11, 13Furtherpromoteelectrificationoftransportandinvestinpublictransport networks and infrastructures.Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022, 2023 and 2025.SDG 11RRP implementation is monitored by assessing RRP payment requests and analysing reports published twice a year on the achievement of the milestones and targets. These are to be reflected in the country reports. Progress on the cohesion policy programming documents is monitored under the EU cohesion policy. 
 
 
  
 
Table (continued) 

Note: 
* See footnote (7). 
** RRP measures included in this table contribute to the implementation of CSRs. Nevertheless, additional measures outside the 
RRP may be necessary to fully implement CSRs and address their underlying challenges. Measures indicated as ‘being 
implemented’ are only those included in the RRF payment requests submitted and positively assessed by the European 
Commission. 
Source: European Commission. 

25 

2023 CSR 1Limited ProgressWinddowntheemergencyenergysupportmeasuresinforce,usingtherelatedsavingstoreducethegovernmentdeficit,assoonaspossiblein2023and2024.Shouldrenewedenergypriceincreasesnecessitateneworcontinuedsupportmeasures,ensurethatthesearetargetedatprotectingvulnerablehouseholdsandfirms,fiscallyaffordable, and preserve incentives for energy savings.Limited ProgressNot applicableSDG 8, 16Ensureprudentfiscalpolicy,inparticularbylimitingthenominalincreaseinnationallyfinancednetprimaryexpenditurein2024tonotmorethan4.8%(1).(1)Whichisestimatedtocorrespondtoanannualimprovementinthestructuralbudgetbalanceofatleast0.3% of GDP for 2024, as described in recital 24.No ProgresNot applicableSDG 8, 16PreservenationallyfinancedpublicinvestmentandensuretheeffectiveabsorptionofRRFgrantsandotherEUfunds,inparticularto foster the green and digital transitions.Some ProgressNot applicableSDG 8, 16Fortheperiodbeyond2024,continuetopursueamedium-termfiscalstrategyofgradualandsustainableconsolidation,combinedwithinvestmentsandreformsconducivetohighersustainablegrowth, to achieve a prudent medium-term fiscal position.Full ImplementationNot applicableSDG 8, 16Reducerisksrelatedtothehousingmarket,inparticularbyreducingmortgageinterestdeductibility,andbytakingmeasurestoincreasethe supply of buildable land.Limited ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022, 2023, 2024 and 2025.SDG 8Addressthelong-termsustainabilityofthepensionsystem,inparticularbylimitingearlyretirementoptionsandincreasingtheemployment rate for older workers.No ProgressSDG 8Increaseactiontoeffectivelytackleaggressivetaxplanning,inparticularbyensuringsufficienttaxationofoutboundpaymentsofinterest and royalties to zero/low-tax jurisdictions.Limited ProgressSDG 8, 102023 CSR 2ProceedwiththesteadyimplementationofitsrevisedrecoveryandresilienceplanandswiftlyfinalisetheREPowerEUchapterwithaviewtorapidlystartingtheimplementationthereof.Proceedwiththeswiftimplementationofcohesionpolicyprogrammes,inclosecomplementarity and synergy with the recovery and resilience plan.2023 CSR 3Limited ProgressImprovetheperformanceoftheschooleducationsystemandpromoteequalopportunitiesforallstudents,inparticularbyadaptingteachingtotheneedsofdisadvantagedstudentsandthosefromvarious linguistic backgrounds.Limited ProgressSDG 42023 CSR 4Some ProgressReduce reliance on fossil fuelsLimited ProgressRelevant RRP measures being planned as of 2022, 2023, 2024 and 2025.SDG 7, 13byacceleratingthedeploymentofrenewableenergy,increasingelectricity transmission capacity, easing permitting procedures andSubstantial ProgressRelevant RRP measures being planned as of 2022, 2023, 2024 and 2025.SDG 7, 9, 13investinginenergyefficiencyinboththeresidentialandnon-residential sectors.Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022 and 2023.SDG 7, 9, 13Supportmunicipalitiesindevelopingdetailedlocalplansfordeployingrenewableenergy,includingwindpowerandphotovoltaics, and for district heating and cooling systems.Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022 and 2023.SDG 7, 9, 13Furtherpromotetheelectrificationoftransportandinvestinpublictransport networks and infrastructure.Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022, 2023 and 2025.SDG 7, 9, 13Stepuppolicyeffortsaimedattheprovisionandacquisitionofskillsand competences needed for the green transition.Some ProgressRelevant RRP measures being implemented as of 2021.Relevant RRP measures being planned as of 2022.SDG 7, 4RRP implementation is monitored through the assessment of RRP payment requests and analysis of the bi-annual reporting on the achievement of the milestones and targets, to be reflected in the country reports. Progress with the cohesion policy is monitored in the context of the Cohesion Policy of the European Union. 
 
  
 
ANNEX 3: RECOVERY AND RESILIENCE PLAN – IMPLEMENTATION 

This  Annex  provides  a 
snapshot  of 
Luxembourg’s implementation of its recovery 
and  resilience  plan  (RRP),  past  the  mid-way 
point  of 
the  Recovery  and  Resilience 
Facility’s  (RRF)  lifetime.  The  RRF  has  proven 
central  to  the  EU’s  recovery  from  the  COVID-19 
pandemic,  helping  speed  up  the  twin  green  and 
digital  transition,  while  adapting  to  geopolitical 
and  economic  developments,  and  strengthening 
resilience  against  future  shocks.  The  RRF  is  also 
helping 
Sustainable 
Development  Goals  and  address  the  country-
specific recommendations (see Annex 2).   

implement 

the 

UN 

The  RRP  paves  the  way  for  disbursing  up  to 
EUR 83  million  in  grants  under  the  RRF  over 
the  2021-2026  period, representing  0.1% of 
Luxembourg’s GDP (9). As of mid-May 2024, EUR 
32.37  billion  has  been  disbursed  to  Luxembourg 
under the RRF. 

Luxembourg  still  has  EUR  50.7  million 
available  in  grants  from  the  RRF.  This  will  be 
disbursed  after  the  assessment  of  the  future 
fulfilment  of  the  remaining  34  milestones  and 
targets (10)  included  in  the  Council  Implementing 
Decision (11)  (CID),  ahead  of  the  2026  deadline 
established for the RRF.  

is  recorded 

Luxembourg’s  progress  in  implementing  its 
plan 
in  the  Recovery  and 
Resilience Scoreboard (12). The scoreboard gives 
an overview of the progress made in implementing 
the RRF as a whole. Graph A3.1 shows the current 
state of play as reflected on the Scoreboard. 

Luxembourg  has  submitted  a  REPowerEU 
chapter to be added to its RRP, to phase out 
its  dependency  on  Russian  fossil  fuels, 
diversify  its  energy  supplies  and  produce 
more  clean  energy  in  the  coming  years.  The 

(9)  GDP information is based on 2023 data. Source: 

https://ec.europa.eu/economy_finance/recovery-and-
resilience-scoreboard/index.html?lang=en 

(10)  A milestone or target is satisfactorily fulfilled once a Member 
State  has  provided  evidence  to  the  Commission  that  it  has 
reached  the  milestone  or  target  and  the  Commission  has 
assessed it positively in an implementing decision. 

(11)  https://data.consilium.europa.eu/doc/document/ST-10155-

2021-ADD-1/en/pdf  

(12)  https://ec.europa.eu/economy_finance/recovery-and-

resilience-scoreboard/country_overview.html 

Commission  is  now  assessing  the  chapter  and 
once  adopted,  it  will  contribute  to  ensuring  the 
supply  of  affordable,  secure,  and  sustainable 
energy.  

The  plan  has  a  strong  focus  on  the  green 
transition, dedicating 68.8% of the available 
funds  to  measures  that  support  climate 
objectives  and  29.6%  of  its  total  allocation 
to support the digital transition. It also retains 
a  strong  social  dimension  with  social  protection 
measures, especially related to affordable housing.  

Table A3.1:  Key facts of the Luxembourgish RRP 

Source: RRF Scoreboard 

With  one  payment 
request  completed, 
Luxembourg’s  implementation  of  its  RRP  is 
well  underway.  The  Commission  gave  a  positive 
assessment of Luxembourg’s payment request on 
28  April  2023,  taking  into  account  the  opinion  of 
the Economic and Financial Committee. This led to 
EUR  20.2  million  being  disbursed  in  financial 
support  on  16  June  2023 (13).  The  related  26 
milestones  and  targets  covered  reforms  and 
investments  such  as 
the 
digitalisation of the public sector, for example with 
the  development  of 
the  mobile  application 
‘MyGuichet.lu’,  which  also  covers  the  entry  into 
force  of  a  legal  framework  setting  a  minimum 
percentage of clean vehicles in public procurement 
others in the areas of skills. 

related 

those 

to 

(13)  When requested payments are disbursed, the pre-financing 
is cleared proportionally. The net amounts are quoted here.   

26 

Initial plan CID adoption date13 July 2021Scope Revised plan with REPowerEU chapter under assessmentLast major revision17 January 2023Total allocation EUR 83 million in grants (0.1% of 2023 GDP)Investments and reforms 12 investments and 8 reforms Total number of milestones and targets60Fulfilled milestones and targets26 (43.3% of total) 
 
 
 
     
 
 
 
 
Graph A3.1: Total grants disbursed under the RRF 

As  of  15  May  2024,  Luxembourg  is  working 
towards  its  second  payment  request.  Table 
A3.2  highlights  some  relevant  measures  achieved 
so far, and some that will be implemented before 
2026  to  keep  making  Luxembourg’s  economy 
greener, more digital, inclusive, and resilient.  

Table A3.2:  Measures in Luxembourg's RRP 

Note: This graph displays the amount of grants, including pre-
financing, disbursed so far under the RRF. Grants are non-
repayable financial contributions. The total amount of grants 
given to each Member State is determined by an allocation 
key and the total estimated cost of the respective RRP. 
Source: RRF Scoreboard 

Source: FENIX 

27 

EUR 32.4million (39%)Total allocation: EUR 83millionReforms and investments implemented• "Gesondheetsdësch"• Housing Pact 2.0 to increase the supply of affordable housing• "FutureSkills"Upcoming reforms and investments• Investment in electric vehicle charging points• The "Naturpakt" program to protect biodiversity• Digitalisation of the health system 
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
 
 
 
ANNEX 4: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

EU funding instruments provide considerable 
resources for recovery and growth to the EU 
Member  States.  In  addition  to  the  EUR 82.7 
million  of  Recovery  and  Resilience  Facility  (RRF) 
funding  described  in  Annex  3,  EU  cohesion  policy 
funds (14) provide EUR 38.9 million to Luxembourg 
for the 2021-2027 period (15). Support from these 
two 
instruments  combined  represents  around 
0.15%  of  the  country’s  2023  GDP,  compared  to 
the  EU  average  of  5.38%  of  GDP (16).  Cohesion 
policy  supports  regional  development,  economic, 
social 
and 
competitiveness  through  long-term  investment  in 
line  with  EU  priorities  and  with  national  and 
regional strategies. 

convergence, 

territorial 

and 

During  the  2014-2020  programming  period, 
cohesion  policy  funds  boosted  Luxembourg’s 
competitiveness,  with  tangible achievements 
notably  in  energy  efficiency,  research  and 
social  inclusion.  Over  the  whole  period,  which 
financed 
investments  until  December  2023, 
cohesion  policy  funds (17)  had  made  EUR 182.4 
million  available  to  Luxembourg (18),  of  which 
EUR 153.4 million has been disbursed since March 
2020,  when  the  COVID-19  pandemic began (19). 
The  achievements  of  cohesion  policy  funds  over 
the  programming  period  included  the  creation  of 
107  full-time  equivalent  jobs  for  researchers 
working 
facilities, 
improved  cooperation  between  111  businesses 
and  research  institutions  and  a  reduction  in  the 
primary energy consumption of public buildings of 
321 300  Kw/Year.  During  the  same  period,  over 
70 000 people participated in initiatives funded by 

infrastructure 

research 

in 

(14)  In 2021-2027, cohesion policy funds include the European 
Regional Development Fund and the European Social Fund 
Plus. 

(15)  European  territorial  cooperation 

excluded  from 
investment, 
EUR 90.2 million. 

the  figure. 
including  national 

In  2021-2027, 

(ETC)  programmes  are 
total 
to 

financing,  amounts 

the 

the  European  Social  Fund  (ESF)  in  Luxembourg, 
including some 7 300 migrants. It funded support 
measures  to  help the most  vulnerable,  notably  to 
integrate  support  services  for  disadvantaged 
people  and 
cooperation  and 
partnerships  with  the  business  community  with  a 
view to sustainable professional integration. 

to  develop 

In  the  current  programming  period,  cohesion 
policy  will  provide  a  further  boost  to 
Luxembourg’s  competitiveness,  to  the  green 
and  digital  transition  as  well  as  to  social 
cohesion,  improving  the  living  and  working 
conditions  of  Luxembourg’s  people.  In  2021-
2027,  the  European  Regional  Development  Fund 
(ERDF)  will  finance  equipment  for  research  and 
innovation  and  further  boost  the  creation  of 
researcher jobs. Investments are planned to create 
additional renewable energy production capacity to 
reach 200 MWh/year. The Just Transition Fund will 
invest  in  the  south  of  the  country  and  will 
contribute  to  reducing  greenhouse  gas  emissions 
in that area by improving the energy performance 
of  housing  and  by  increasing  the  capacity  of 
environmentally  friendly  rolling  stock  for  public 
transport. 

around 

EUR 4.7  million 

The  European  Social  Fund  Plus  (ESF+)  will 
jobseekers  access  employment  by 
help 
investing 
in 
Luxembourg,  mostly  in  skills  development.  It 
allocates  EUR 1.7  million  to  promote  lifelong 
learning  to  upskill  and  reskill  employees  to  meet 
skills  needs.  EUR 2.9  million  will  provide  support 
for  disadvantaged  groups,  notably  by  investing  in 
integrated  pathways  to  work,  including  training 
and  workshops 
for  social  and  professional 
reintegration.  With  this  work,  cohesion  policy 
substantially  contributes  to  achieving  the  UN 
in 
Sustainable  Development  Goals 
Luxembourg, in particular SDG 8 (Decent work and 
economic growth), SDG 1 (No poverty) and SDG 7 
(Affordable and clean energy). 

(SDGs) 

(16)  RRF  funding 

loans,  where 
includes  both  grants  and 
applicable. The EU average is calculated  for cohesion policy 
funds excluding ETC programmes. GDP figures are based on 
Eurostat data for 2022. 

(17)  In 2014-2020, cohesion policy funds included the European 
Regional  Development  Fund  and  the  European  Social  Fund. 
REACT-EU allocations are included but ETC programmes are 
excluded. 

(18)  In  2014-2020,  the  total  investment,  including  national 

financing, amounted to EUR 230.4 million. 

(19) Cut-off date: 14 May 2024. 

Through combined action, cohesion policy and 
the recovery and resilience plan (RRP) have a 
mutually  reinforcing  impact  in  Luxembourg. 
For  instance,  Luxembourg's  RRP  plan  for  the 
‘decarbonisation of transport’ includes a reform to 
promote  electrification  of  the  fleet  of  contracting 
authorities  and  entities,  and  of  public  transport. 
Under  this  reform,  a  new  law  specifies  the 
minimum  share  of  clean  vehicles  procured  by 
public  contract.  This  applies  to  public  buses  and 
certain  other  vehicles.  Luxembourg  State  as  a 

28 

 
 
 
 
 
contracting  authority  plans  to  fully  electrify  the 
bus fleet operated by the public transport operator 
RGTR  by  2030.  This  reform  is  complemented  by 
two  ERDF  projects  that  help  implement  it:  one  to 
purchase  electric  buses  used  for  urban  public 
transport and one to instal the infrastructure. One 
project  under  REACT-EU  concerns  the  regional 
RGTR  network,  and  another  co-finances  13  buses 
and  2  charging  stations  for  Luxembourg  city 
buses.  Luxembourg's  RRP  component  on  skilling, 
reskilling  and  upskilling  includes  a  national  skills 
reform to better target investment under the ESF+ 
to  increase  the  availability  of  skilled  workers.  The 
‘FutureSkills’ 
investment  under  the  RRP  has 
complemented projects to provide  support for the 
unemployed  under  the  ESF.  It  was  followed  by 
‘Skills4Job” supported by the ESF+ since 2023.  

The  contribution  of  cohesion  policy  and  RRP 
funding by different policy objectives is illustrated 
by Graphs A4.1 and A4.2. 

Graph A4.1: Distribution of cohesion policy funding 
across policy objectives in Luxembourg 

other  EU  instruments,  including  those  listed  in 
Table A4.1. 

Graph A4.2: Distribution of RRF funding by pillar in 
Luxembourg 

(1) Each RRP measure helps achieve the aims of two of the 
six policy pillars of the RRF. The primary contribution is shown 
in the outer circle while the secondary contribution is shown in 
the inner circle. Each contribution represents 100% of the RRF 
funds. Therefore, the total contribution to all pillars displayed 
on this chart amounts to 200% of the RRF funds allocated to 
Luxembourg. 
Source: European Commission 

Source: European Commission 

in 

its 

invest 

The Technical Support Instrument (TSI) helps 
Luxembourg 
public 
administration  and  create  a  better  enabling 
environment for EU and national investment. 
The  TSI  has  funded  projects  in  Luxembourg  to 
design  and  implement  growth-enhancing  reforms 
since  2018.  The  support  provided  to  Luxembourg 
in  2023  helped  identify  links  between  people 
management 
public-sector 
performance. This enables the public authorities to 
build  capacity  to  design  and  implement  staff 
surveys  and  to  strengthen  the  links  between 
evidence  (survey  results  and  other  data)  and  civil 
service reforms. The project was not linked to the 
RRP,  but  it  contributed  to  building  the  capacity  of 
the public administration and so it had an indirect 
and  positive 
implementation. 
Luxembourg  also  receives  funding  from  several 

impact  on  RRP 

policies 

and 

29 

PO1 Smarter EuropePO2 Greener EuropePO4 Social EuropePO8 JTF specific objectiveGreen transitionDigital transformationSmart, sustainable andinclusive growthSocial & territorial cohesionHealth & resilience 
       
      
 
Table A4.1:  Support from EU instruments in Luxembourg 

(1) RRF implementation period is 2021-2026. 
(2) The public sector loan facility’s programming period is 2021-2025 and the amount reflects the national share in its grant 
component reserved until the end of the period.   
(3) Common agricultural policy programming periods are 2014-2022 and 2023-2027.   
(4) EMFF – European Maritime and Fisheries Fund, EMFAF – European Maritime, Fisheries and Aquaculture Fund. 
(5) Data on the Connecting Europe Facility covers transport and energy and has a cut-off date of 15 May 2024. 
(6) Data on Horizon Europe (2021-2027) has a cut-off date of 13 May 2024. 
(7) 2021-2027 data on the LIFE programme has a cut-off date of 15 May 2024. 
(8) The amount of the EU guarantee signed under the EFSI Infrastructure and Innovation Window was derived based on the 
signed amount of the operations and the average internal multiplier, as reported by the EIB (cut-off date is 31 December 2023). 
(9) The amount of the EU guarantee and of the volume of operations signed under InvestEU includes the EU compartment as well 
as the Member State compartments (cut-off date is 31 December 2023). 
Source: European Commission 

30 

Amount 2021-2027 (EUR million)Cohesion policy38.9RRF grants (1)82.7Public sector loan facility (grant component) (2)0.7Common agricultural policy (3)225EMFF/EMFAF (4)-Connecting Europe Facility (5) 6.5Horizon 2020 / Horizon Europe (6) 151.1LIFE programme (7) 6.8Volume of operations (EUR million)European Fund for Strategic Investment 2015-2020 (8) 111.8InvestEU 2021-2027 (9) 9.3 29.6 9.3-51.5 201.64.6EU guaranteesEU Guarantee (EUR million)400EU grantsAmount 2014-2020 (EUR million)182.40-- 
 
  
 
ANNEX 5: RESILIENCE 

Table A5.1:  Resilience indices across dimensions for Luxembourg and the EU-27 

(1)  The synthetic indices aggregate the relative resilience situation of countries across all considered indicators. For an indicator, 
each country’s relative situation in the latest available year is compared with the collection of values of that indicator for all 
Member States and all years in the reference period. 
Source: Resilience Dashboards - version spring 2024, data up to 2022 

resilience 

This  Annex  uses  the  Commission’s  resilience 
dashboards  (RDB) (20)  to  show  Luxembourg’s 
relative 
and 
vulnerabilities (21)  that  may  be  of  relevance 
for  societal,  economic,  digital  and  green 
transformations, and for dealing with future 
shocks and geopolitical challenges. (22) 

capacities 

and 

medium 

According  to  the  RDB’s  set  of  resilience 
indicators,  Luxembourg  has  high  resilience 
capacities 
resilience 
vulnerabilities  overall,  with  no  major 
changes  since  2023  RDB.  Only  Luxembourg’s 
green  and  geopolitical  vulnerabilities  have 
improved.  Above  60%  of  vulnerability  indicators 
are medium to low, and close to 80% of  capacity 
indicators are medium to high.   

(20)  Https://ec.europa.eu/info/strategy/strategic-

planning/strategic-foresight/2020-strategic-foresight-
report/resilience-dashboards_en. Resilience is defined as the 
ability  not  only  to  withstand  and  cope  with  challenges  but 
also  to  undergo  transitions,  in  a  sustainable,  fair,  and 
democratic  manner.  2020  Strategic  Foresight  Report: 
Charting  the  course  towards  a  more  resilient  Europe 
(COM(2020) 493). 

(21)  Vulnerabilities  describe  features  that  can  exacerbate  the 
negative  impact  of  crises  and  transitions,  or  obstacles  that 
may  hinder  the  achievement  of  long-term  strategic  goals, 
while  capacities  refer  to  enablers  or  abilities  to  cope  with 
crises and structural changes and to manage transitions. 

(22)  This  Annex  is  linked  to  Annex  1  on  SDGs,  Annex  6  on  the 
green  deal,  Annex  8  on  the  fair  transition  to  climate 
neutrality,  Annex  9  on  resource  productivity,  efficiency  and 
circularity,  Annex  10  on  the  digital  transition  and  Annex  14 
on the European pillar of social rights. 

31 

In  the  social  and  economic  dimension, 
Luxembourg has medium-high resilience, with 
some  very  weak  vulnerability  indicators.  The 
variation  in  academic  performance  explained  by 
students’ socio-economic status, the specialisation 
of the economy and the non-financial  corporation 
debt  to  GDP  ratio,  are  the  highest  in  the  EU,  and 
on  the  capacity  side,  intangible  investment  is  the 
lowest in the EU.  

In  the  green  dimension,  Luxembourg  has 
higher vulnerabilities than the rest of the EU, 
slight 
but  better  capacities.  Despite  a 
improvement in green vulnerabilities from high to 
medium-high  level,  the  country  maintains  higher 
vulnerabilities  than  the  rest  of  the  EU  in  CO2 
emissions  in  road  transport,  GHG  emissions  per 
capita, its consumption footprint per capita, and its 
waste generation rate (see also Annex 9). In terms 
of capacities, Luxembourg is behind the rest of the 
EU  in  terms  of  renewable  energy  in  final  energy 
consumption 
environmental 
protection  expenditures,  but  it  performs  well  in 
terms of CO2 absorption by forests, insured losses 
from  extreme  climate  events,  and 
resource 
productivity. 

national 

and 

remained  below 

In  the  digital  dimension,  capacities  remain 
medium-high on par with the EU average and 
the  EU 
vulnerabilities 
average 
Luxembourg 
outperforms  other  EU  countries  in  terms  of  the 
collaborative  economy  and  the  value  of  e-
commerce  sales.  It  is  also  among  the  top  5  EU 
countries  in  terms  of  cybersecurity,  but  it  has  a 

(medium-low). 

LULUEU-272023 RDB2024 RDB2024 RDBHighMedium-highMediumMedium-lowLowHighMedium-highMediumMedium-lowLowDimensionDistribution of indicators by vulnerabilities and capacitiesOverall resilienceVulnerabilities0.500.520.50Capacities0.810.800.67VulnerabilitiesSocial and economicVulnerabilities0.680.770.47Capacities0.660.660.670.780.740.65GreenVulnerabilities0.170.240.44Capacities0.860.830.70CapacitiesGeopoliticalVulnerabilities0.390.380.41Capacities0.910.900.65DigitalVulnerabilities0.720.700.52Capacities0%20%40%60%80%100%Vulnerabilities(57 indicators)Capacities(62 indicators) 
 
 
 
 
   
 
 
of 

number 

cybersecurity 

high 
incidents 
experienced  by  individuals.  The  expenditure  in 
research  and  development  in  information  and 
communication  technology  (ICT)  sector  business, 
and master graduates in ICT are still below the EU 
average. 

indicators  such  as  Luxembourg’s 

Luxembourg’s  geopolitical  vulnerabilities 
in  the  medium-high  range,  while 
stay 
capacities remained high. Of particular concern 
are 
import 
dependence  in  energy  materials,  its  concentration 
its  military 
of  value  chain  partners,  and 
expenditure below 2% of GDP. Luxembourg’s high 
capacities are reflected in several trade indicators, 
with  some  remaining  concerns  about  forward 
participation  in  global  value  chains  (GVC)  and 
armed forces personnel. 

32 

 
ENVIRONMENTAL SUSTAINABILITY 
ANNEX 6: EUROPEAN GREEN DEAL 

Luxembourg has made progress in the green 
transition,  with  more  action  needed 
in 
several  areas,  including  on  its  energy  efficiency 
target,  on  biodiversity  and  on  ecosystem 
protection.  This  Annex  provides  a  snapshot  of 
climate,  energy,  and  environmental  aspects  of 
the transition in Luxembourg (23). 

draft 

updated 

Luxembourg’s 
national 
energy  and  climate  plan  (NECP)  provides  a 
wealth  of  information  on  the  investment 
needs  and  funding  sources  to  achieve  its 
2030  climate  and  energy  targets.  The  plan 
details  the  investment  needs,  with  a  yearly 
breakdown  of  investment  needed  over  the  next 
decade  in  transport,  energy  production,  buildings 
and  industry.  It  estimates the  cumulative  overall 
additional 
the 
transition  between  2023-30  for  the  energy 
sector, transport, industry, and buildings (24). 

investment  needs 

fund 

to 

Graph A6.1: Greenhouse gas emissions from the 
effort sharing sectors in Mt CO2eq, 2005-2022 

Source: European Environment Agency 

the 

Luxembourg  is  projected  to  reach  its  2030 
effort sharing target, provided it adopts and 
implements 
additional  measures 
planned (25).  Luxembourg’s 2022 greenhouse gas 
emissions  from  these  sectors  are  expected  to 
come in at 30% below 2005 levels. The additional 
policies  planned  in  Luxembourg’s  draft  updated 
NECP  are  projected  to  reduce  these  emissions  by 
57.8% from 2005 levels. This results in reductions 
of  7.8  percentage  points  beyond  Luxembourg’s 
effort  sharing  target,  a  50%  reduction.  Current 
policies  are  projected  to  reduce  its  effort  sharing 
emissions  by  35.1%  from  2005 
levels  by 
2030 (26).  This  highlights 
importance  of 
implementing  the  full  range  of  policies  and 
measures 
updated  NECP. 
Luxembourg’s  commitment  to  achieve  climate 
neutrality by 2050 is enshrined in legislation (27).  

draft 

the 

the 

in 

There  is  scope  for  increasing  Luxembourg  
target  for  energy  efficiency  in  its  final 
updated  NECP (28). 
efficiency 

energy 

Its 

(25)  The national greenhouse gas emission reduction target is 
laid down in Regulation (EU) 2023/857 (the Effort Sharing 
Regulation). The aim is to align action in the sectors 
concerned with the objective to reach the EU-level economy-
wide target of greenhouse gas reductions of at least 55% 
compared to 1990 levels. The target also applies to the 
sectors outside the current EU Emissions Trading System, 
notably buildings (heating and cooling), road transport, 
agriculture, waste, and small industry (known as the effort 
sharing sectors). 

(26)  The effort sharing emissions for 2022 are based on 
approximated inventory data. The final data will be 
established in 2027 after a comprehensive review. 
Projections on the impact of current policies (‘with existing 
measures’, WEM) and additional policies (‘with additional 
measures’, WAM) as per Luxembourg’s draft updated NECP. 

(27)  Climate Law of 15 December 2020. 

(28)  The EU target set out in the revised Renewable Energy 

Directive is to have 42.5% of gross final energy consumption 

(23)  This Annex is complemented by Annex 7 on energy transition 

and competitiveness, Annex 8 on the fair transition to 
climate neutrality, Annex 9 on resource efficiency, circularity, 
and productivity, and relevant topics in other annexes to this 
country report. 

(24)  See the Commission’s (2023) assessment of the draft 
national energy and climate plan of Luxembourg. 

33 

02468101220052022MtCO2eWasteSmall industryAgricultureBuildings (under ESR)Domestic transport (excl. CO2 from aviation) 
 
 
 
          
 
 
 
 
contribution  of  3.5  Mtoe 
in  primary  energy 
in  final  energy 
consumption  and  3.05  Mtoe 
consumption  for  2030  set  in  the  draft  updated 
NECP  are  less  ambitious  than  the  contribution 
required  under  the  Energy  Efficiency  Directive. 
Luxembourg’s renewable energy contribution set in 
its  draft  updated  NECP,  37%  by  2023,  is  in  line 
with the required contribution. 

to 

transition 

sustainable 
Luxembourg’s 
transport  is  taking  off,  and  it  must  keep  up 
the  momentum (29).  In  2023,  5.6%  of  its  car 
passenger fleet were battery electric vehicles, one 
of  the  highest  shares  in  the  EU.  In  2023,  it  had 
2 120  publicly  accessible 
charging  points, 
providing  one  charging  point  for  every  13  e-
vehicles (EU average 1:10). 97% of its rail network 
is  electrified  -  the  highest  share  in  the  EU  –  but 
only  4%  and  7%  of  passenger  and  freight 
transport respectively is by rail. Roads are used for 
86% of passenger and freight transport. 

Luxembourg’s  actions  to  increase  carbon 
removals  through  land  use,  land-use  change 
and  forestry  (LULUCF)  are  becoming  more 
ambitious.  Luxembourg  achieves  net  carbon 
removals  through  effective  forest  management. 
To  reach  its  2030  LULUCF  target,  additional 
carbon  removals  of  27 kt CO2eq  are  needed (30). 
The  country  is  currently  on  track  to  meet  the 
target (31). 

Luxembourg  has  relatively  well-developed 
institutional  arrangements 
climate 
adaptation. Climate change affects many sectors 
including  agriculture,  forestry, 
in  Luxembourg, 
water  management  and  health.  Climate  hazards 

for 

coming from renewable energy sources by 2030, with the 
aspiration to reach 45%. The formula in Annex I to Directive 
(EU) 2023/1791 sets the indicative national contribution for 
Luxembourg at 2.8 Mtoe for primary energy consumption. 
The Commission communicated a corrected national 
contribution of 2.80 Mtoe in final energy consumption for 
2030 in accordance with Article 4(5) of the Energy Efficiency 
Directive to increase the contribution towards the Union’s 
binding energy efficiency target. See the Commission 
Recommendation of 18.12.2023 to Luxembourg. 

(29)  Unless otherwise indicated, data in this section refer to 
2021. See European Commission, 2023, EU transport in 
figures, transport.ec.europa.eu. 

(30)  National  LULUCF  targets  of  the  Member  States  in  line  with 

Regulation (EU) 2023/839. 

(31)  Projections  submitted 

in  Luxembourg’s  draft  updated 

national energy and climate plan, 2023. 

impacting  wheat 

may  give  rise  to  floods,  droughts  and  heatwaves, 
with adverse effects on health and changes in the 
vegetation  period, 
crops, 
winegrowing  and  other  sectors.  Luxembourg’s 
climate  protection  gap (32)  is  low.  Luxembourg’s 
national  adaptation  strategy  and  plan  (2018-
2023) covers all relevant climate risks and links its 
actions (33). 
vulnerabilities 
Luxembourg is currently updating the strategy and 
plan in line with its climate law (from 2020), and 
sets 
planning, 
requirements 
implementing and governing adaptation measures. 
Stakeholders  are  involved  locally  via  the  climate 
and nature pact. 

risks  with 

binding 

and 

for 

The  ecological  and  chemical  status  of 
Luxembourg’s  water  bodies  is  still  cause for 
concern. The efficient use of water resources can 
be  measured  by  water  productivity (34).  In  2021, 
Luxembourg generated EUR 2 339 per cubic meter 
of  water  abstracted,  among  the  highest  water 
productivity rate in the EU. Although water scarcity 
and  productivity  are  not  major 
in 
Luxembourg,  concerns  remain  over  water  quality. 
In  2020,  only  2.7%  of  all  surface  water  bodies 
were  in  a  good  ecological  status  and  none 
achieved  a  good  chemical  status (35).  50%  of 
groundwater  bodies  also  failed  to  achieve  a  good 
chemical status. This includes water bodies failing 
due 
to  substances  behaving  as  ubiquitous 
persistent, bio-accumulative, and toxic substances 
(PBTs). 

issues 

There  is  scope  to  improve  nature  protection 
and  conservation  in  Luxembourg.  In  2021, 
land 
Luxembourg  had  the  highest  share  of 
protected  areas  in  the  EU  (55.8).  However,  the 
share 
an 
unfavourable/bad  conservation  status  increased 
between 2012 and 2018 (36). Over 50% of forests 

habitats 

species 

and 

of 

in 

(32)  On the climate protection gap, see the annotations to Table 

A6.1. 

(33)  See 

the 

Commission’s 

and 
recommendation  on  Luxembourg’s  progress  on  climate 
adaptation. 

assessment 

2023 

(34)  Measured as GDP over total fresh surface water abstracted 

in cubic meters. 

(35)  According  to  the  2nd  river  basin  management  plan  (RBMP) 

data. Data from the 3rd RBMP is not available yet. 

(36)  According  to  the  report  on  the  conservation  status  of 
habitats  and  species  covered  by  Article  17  of  the  Habitats 
Directive in 2013-2018. Against the EU average of 15% and 
28%. 

34 

 
 
 
in  a  poor  to  bad  status (37). 

are 
Intensive 
agriculture,  urban  development  and  increasing 
transport  infrastructures  cause  biodiversity  loss. 
The  common  farmland  bird  index  declined  from 
115  in  2011  to  80  in  2020.  Following  several 
complaints, an EU pilot project started in 2021 to 
monitor the loss of fragile grassland habitats that 
bring protected birds close to extinction. 

Intensive  agriculture  has  a  major  impact  on 
ecosystems,  biodiversity,  and  air  quality. 
Between  2015  and  2023,  the  value  of  the 
agricultural  sector’s  annual  output  fluctuated 
between  EUR  400-470  million  and  reached  EUR 
440  million  in  2023.  The  share  of  land  under 
organic  farming  remained  low  at  5.2%  of  total 
utilised agricultural area in 2021 (38). Luxembourg 
is  far  from  the  objective  of  at  least  20%  of 
agricultural  land  under  organic  farming  by  2025. 
Conservation  tillage  practices,  which  increase  soil 
organic  carbon,  covered  31%  of  tillable  area  in 
Luxembourg in 2016. 

Luxembourg's  livestock  density  index  was 
1.24%,  well  above  the  EU  average  of 
0.75% (39). Intensive  poultry  and  pig  farming  was 
the  sector  that  put  the  highest  burden  on  the 
environment  in  terms  of  ammonia  emissions  into 
the  air.  In  2022,  ammonia  releases  into  the  air 
were  862.4%  higher  than  2007  levels (40).  The 
agricultural  sector  was  responsible  for  generating 
86.7 %  of  all  ammonia  emissions  in  2021.  Food 
waste production also remains relatively high and 
there  is  scope  to  improve  the  composting  and 
digestion rate of food waste. 

(37)  European Environment Agency, Forest information system for 

Europe. 

(38)  Against  the  EU  average of  9.1% in 2020.  2021  data  is  not 

available. 

(39)  In 2020. 

Graph A6.2: Changes in livestock density and 
organic farming 

Livestock unit (LSU)/ha of UAA: it measures the stock of 
animals (cattle, sheep, goats, equidae, pigs, poultry and 
rabbits) converted in LSUs per hectare of UAA. 
Source: Eurostat 

Adopting extensive  agriculture practices and 
reducing  the  use  of  pesticides  and  nutrients 
would  help  reduce  pollution.  A  very  high 
number  of  surface  waters  and  groundwaters  are 
found  to  be  eutrophic (41).  Luxembourg  is  one  of 
the  Member  States  that  faces  the  greatest 
challenges  in  tackling  nutrient  pollution  from 
agriculture (42)  –  77%  of  the  nutrient  flux  comes 
from  agriculture.  Based  on  the  best  available 
information on soil health issues at Member State 
level  used  in  the  impact  assessment  for  the  Soil 
Monitoring  Law (43),  41%  of  Luxembourg’s  soil 
could  be  considered  as  unhealthy (44).  Nitrogen 
excess affects 86% of agricultural land, while soil 
erosion  affects  87%  of  cropland.  The  agricultural 
sector contributed 0.2% to GDP (45) but generated 
6.2%  of  all  greenhouse  gas  emissions  in  2021, 
below the EU average of 10.7%. 

(41)  Nitrate  in  groundwater  (europa.eu)  Luxembourg  has  a  high 
share  of  groundwater  monitoring  stations  –  20%  -  that 
record nitrate concentrations above 50 mg/l,  many of which 
show an increasing trend. 

(42)  2022  Environmental  Implementation  Review  -  Luxembourg, 
implementation  report  for  the  Nitrates 

based  on  the 
Directive. 

(43)  SWD  417  final  of  5.7.2023  -  impact  assessment  for  the 
Directive  of  the  European  Parliament  and  of  the  Council  on 
Soil  Monitoring  and  Resilience (Soil  Monitoring  Law),  (see  p. 
10, pp. 189-190, pp. 835-845). 

(44)  However,  not  all  soil  degradation  processes  could  be 
quantified for all land uses. This number simply indicates an 
order of magnitude. 

(40)  Air releases (europa.eu). 

(45)  Agriculture contributed 1.6% of GDP in Europe. 

35 

012024681020162020% LSU per hectare% of total utilised agricultural areaLivestock density index Luxembourg (% LSU per ha)Livestock density index EU-27 (% LSU per ha)Organic farming Luxembourg (% of total utilised agricultural area)Organic farming EU-27 (% of total utilised agricultural area) 
 
           
 
Graph A6.3: Environmental investment gap, annual 
average 

The numbers are computed by the European Commission 
based on the latest internal reports, Eurostat, EIB and national 
data sources. 
Source: European Commission 

Luxembourg  would  benefit  from  investing 
more  in  sustainable  water  management  and 
pollution  prevention  and  control.  Over  the 
2014-2020  period,  the  environmental  investment 
gap  per  year  was  estimated  to  be  at  least 
EUR   269  million,  equivalent  to  0.5%  of  GDP (46). 
The gap is estimated to be slightly increasing over 
the  2021-2027  period  at  EUR  497  million  per 
year.  There  remains  an  opportunity  to  increase 
funding,  in  particular  for  pollution  prevention  and 
control (EUR 202 million per year) and sustainable 
water management (EUR 170 million per year).  

(46)  Below the EU average of 0.8%. 

36 

1142216602021701250050100150200250300Pollution prevention &controlWater managementCircular economy andwasteBiodiversity andecosystemsmillion EUR2014-20202021-2027 
           
 
Table A6.1:  Indicators tracking progress on the European Green Deal from a macroeconomic perspective 

Sources:  (1)  Member  States’  emission  data  for  2019  and  2020  are  in  global  warming  potential  (GWP)  values  from  the  4th 
Assessment Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC). Member States’ 2005 base year emissions 
under  Regulation  (EU)  2018/842,  emissions  data  for  2021  and  2022,  and  2030  projections  are  in  GWP  values  from  the  5th 
Assessment Report (AR5) of the IPCC. 2021 data are based on the final inventory reports, 2022 data are based on approximated 
inventory reports and European Environmental Agency’s calculation of effort sharing emissions. The final data for 2021 and 2022 
will  be  established  after  a  comprehensive  review  in  2027.  The  2030  target  is  in  percentage  change  of  the  2005  base  year 
emissions. Distance to target is the gap between the 2030 target and projected effort sharing emissions with existing measures 
(WEM) and with additional measures (WAM), in percentage change from the 2005 base year emissions. The measures included 
for  the  2030  emission  projections  reflect  the  state  of  play  as  reported  in  Member  States'  draft  updated  national  energy  and 
climate plans or, if unavailable, as reported by 15 March 2023 as per Regulation 2018/1999. (2) Net removals are expressed in 
negative figures, net emissions in positive figures. Reported data are from the 2024 greenhouse gas inventory submission. 2030 
value  of  net  greenhouse  gas  removals  as  in  Regulation  (EU)  2023/839  –  Annex  IIa.  (3)  The  2030  national  objectives  for 
renewable  energy  and  energy  efficiency  are  indicative  national  contributions,  in  line  with  Regulation  (EU)  2018/1999  (the 
Governance  Regulation),  the  EU-level  2030  renewable  energy  target  set  out  in  Directive  EU/2018/2001  amended  by  Directive 
EU/2023/2413 (the revised Renewable Energy Directive) – 42.5% of gross final energy consumption with the aspiration to reach 
45% –, and the formula in Annex I to Directive (EU) 2023/1791 (the Energy Efficiency Directive). (4) Passenger battery electric 
vehicles (BEV) and fuel cell electric vehicles (FCEV). (5) The climate protection gap refers to the share of non-insured economic 
losses caused by climate-related disasters, based on modelling of the risk from floods, wildfires, windstorms, and the insurance 
penetration rate. Scale: 0 (no protection gap) –4 (very high gap) (European Insurance and Occupational Pensions Authority, 2022). 
(6) Total water consumption in renewable freshwater resources available for a territory and period. (7) Material extractions for 
consumption and investment. (8) Years of potential life lost through premature death due to exposure to particulate matter with a 
diameter  of  less  than  2.5  micrometres.  (9)  Share  of  the  number  of  records  under  Art.  17  of  Council  Directive  92/43/EEC  (the 
Habitats  Directive)  for  2013-2018.  (10)  Multi-species  index  measuring  changes  in  population  abundances  of  farmland  bird 
species. (11) Source: annex 12 of the Commission’s proposal for a soil monitoring law, SWD (2023) 417 final. (12) Estimates of 
organic carbon content in arable land. 

37 

Target200520192020202120222030WEMWAMProgress to climate and energy policy targetsGreenhouse gas emission reductions in effort sharing sectors (1)Mt CO2eq, %, pp10 116.2-11%-9%-20%-30%-50%-158Net greenhouse gas removals from LULUCF (2)Kt CO2eq-566.000-364.000-448.000-605.000-648.000-403n/an/aShare of energy from renewable sources (1) (3)%1%7%12%12%14%37%--Energy efficiency: primary energy consumption (3)Mtoe4.84.53.94.23.82.8Energy efficiency: final energy consumption (3)Mtoe4.54.43.84.13.72.8Projected20182019202020212022202120222030Green transition: mobility         Greenhouse gas emissions: road transportMt CO2e---4.94.3769.0786.62.3Share of zero-emission vehicles in new registrations (4)% 0.91.85.610.615.8912.1n/aNumber of publicly accessible AC/DC charging points --107410452365299178446956n/aShare of electrified railways%96.7%96.7%96.7%96.7%-56.1%-n/aGreen transition: buildings         Greenhouse gas emissions: buildingsMt CO2e---1.71.4537.0486.70.9Final energy consumption in buildings2015=100106.1%108.5%109.8%114.3%100.5%104.0%97.2% Climate adaptation         Climate protection gap (5)score 1-4--1.61.00.91.51.5n/a20182019202020212022202020212022State of the environmentWater | Water exploitation index (WEI+) (1) (6)% of renewable freshwater0.50.5---3.6--Circular economy | Material footprint (7)tonnes per person28.127.224.727.323.714.214.814.9Pollution | Years of life lost due to air pollution by PM2.5 (8)per 100.000 inhabitants177290130140-545584-Biodiversity | Habitats in good conservation status (9)%32.114.7                       Common farmland bird index (10)2000=1007780---78--Green transition: agri-food sectorOrganic farming% of total utilised agricultural area4.394.424.635.19-9.1--Nitrates in groundwatermg NO3/litre-----20.42--Food waste per capitaKg per capita147131-130131-Share of soil in poor health (11)%4141Soil organic matter in agricultural land (12)Mt per ha5----7 904--DistanceEU-27 
 
          
 
ANNEX 7: ENERGY TRANSITION AND COMPETITIVENESS 

state  contribution  measure  to  stabilize  energy 
prices  for  residential  customers  at  their  average 
level of 2022. Different subsidy levels apply to the 
various  energy  carriers,  and  are  applicable 
automatically  to  all  residential  customers.  The 
measures  are  expected  to  be  phased  out  at  the 
end of 2024.   

issue 

is  still  an 

Energy  dependency 
in 
Luxembourg.  The  country      is      very  reliant  on 
fossil  fuels,  as  they  accounted  for  77%  of  the 
energy  mix  in  2022.  This,  combined  with  the  fact 
that  it  has  almost  no  national  energy  production, 
translates 
import 
dependency  (91%  in  2022).  In  relative  terms, 
electricity  prices  for  non-household  consumers 
have  increased  significantly  compared  to  the  US, 
Japan,  and  the  UK,  thus  potentially  affecting  the 
international  competitiveness  of  energy-intensive 
industries in Luxembourg. 

into  a  very  high  energy 

Graph A7.1: Luxembourg´s energy retail prices for 
households and industry & service 

(1) For industry, consumption bands are I3 for gas and IC for 
electricity, which refer to medium-sized consumers and 
provide an insight into affordability 
(2) For households, the consumption bands are D2 for gas 
and DC for electricity 
(3) Industry prices are shown without VAT and other 
recoverable taxes/levies/fees as non-household consumers 
are usually able to recover VAT and some other taxes 
Source: Eurostat 

while 

This  Annex (47)  sets  out  Luxembourg’s  progress 
and challenges in accelerating the net-zero energy 
transition 
EU’s 
competitiveness  in  the  clean  energy  sector (48).  It 
considers measures and targets put forward in the 
draft  updated  National  Energy  and  Climate  Plans 
(NECP) for 2030 (49). 

bolstering 

the 

Luxembourg  has  continued  its  significant 
progress  in  renewables  deployment  and  in 
the 
implementation  of  energy  efficiency 
measures. It remains a highly interconnected 
country  for  electricity  and  gas.  However, 
energy  dependency,  in  particular  for  fossil 
fuels, remains an issue.       

Unlike  the  prevailing  trends  across  the  EU, 
energy  retail  prices  remained  stable 
in 
Luxembourg  in  2023,  showing  little  or  no 
difference  with  2022.  In  the  second  half  of 
2023,  average  household gas  prices  reached  EUR 
85/MWh  (a  drop  of  5%  compared  to  2022,  when 
they  were  at  EUR  89/kWh),  while  average 
household electricity prices were at EUR 0.20/kWh 
(1% decrease compared to 2022).  

For  the  industrial  and  services  sector,  both 
gas  and  electricity  average  prices  peaked  in 
the  first  half  (S1)  of  2023  and decreased  in 
the second half of 2023 (S2). According to the 
latest data, the gas/industry service price was EUR 
0.09/kWh  in  S2  2023,  an  increase  of  13%  in 
comparison 
industry 
service/electricity  price  reached  EUR  0.90/kWh  in 
S1 2023, an increase of 90% over S1 2022.           

2022. 

The 

S1 

to 

adopted 

Luxembourg 
support 
measures, mostly untargeted, to cushion the 
inflation  on 
impact  of  energy  price 
households  and  businesses.  It  introduced  a 

several 

(47)  It is complemented by Annex 6 as the European Green Deal 
focuses on the clean energy transition and by Annex 8 on the 
action  taken  to  protect  the  most  vulnerable  groups, 
complementing  ongoing  efforts  under  the  European  Green 
Deal, REPowerEU and European Green Deal Industrial Plan. 

(48)  In line with the Green Deal Industrial Plan and the Net-Zero 

Industry Act 

(49)  Luxembourg submitted its draft updated NECP in July 2023. 
The Commission issued an assessment and country-specific 
recommendations  on  18  December  2023.  Commission 
Recommendation,  Assessment  (SWD)  and  Factsheet  of  the 
draft  updated  National  Energy  and  Climate  Plan  of 
Luxembourg - European Commission (europa.eu) 

38 

0.000.050.100.150.200.250.300.35€/KWhGas (industry & service) - LUGas (industry & service) - EUGas (households) - LUGas (households) - EUElectricity (industry & service) - LUElectricity (industry & service) - EUElectricity (households) - LUElectricity (households) - EU 
 
 
      
 
 
 
Graph A7.2: Trends in electricity prices for non-
household consumers (EU and foreign partners) 

ENTSO-E  analysis (51),  nor  are  there  any  
expected  for  winter  2023/24.  An  expansion  in 
electricity  produced 
renewable  energy 
from 
sources  is  generally  set  to  enable  Luxembourg  to 
reduce  its  dependency  on  electricity  imports,  in 
parallel to an almost full phasing-out of gas-fired 
capacity by 2024.  

period  2021 

As  regards  the  acceleration  of  renewables 
deployment,  the  total  installed  capacity  in 
2023  was  782  MW,  increasing  by  13.5% 
compared  to  2021.  The  production  of  energy 
from  renewable  sources  is  projected  to  increase 
from 314 GWh to 1 034 GWh for wind energy and 
160 GWh to 1 112 GWh for solar photovoltaics in 
the 
Luxembourg 
furthermore  aims  to  acquire  3700  GWh  of 
renewable energy through statistical transfers and 
the  Renewable  Energy  Financing  Mechanism  in 
2030.  These  international  cooperating  measures 
would  lead  to  the  complete  decarbonization  of 
Luxembourg’s 
by  2035. 
Luxembourg has planned to revise legislation that 
the  speeding  up  of  permitting 
will  allow 
procedures for decarbonization projects.  

to  2030. 

electricity 

sector 

Graph A7.3: Luxembourg's installed renewable 
capacity (left) and electricity generation mix 
(right) 

(1) "Other" includes solid biofuels, renewable municipal waste 
and biogas 
Source: IRENA, Ember 

Luxembourg’s share of renewables in heating 
and  cooling  grew  by  2.5%  points  from  2021 
to  2022  (from  12.9%  to  15.4%)  and  is 
projected  to  grow  to  40.3% 
in  2030, 
according  to  their  draft  updated  NECP. 
Approximately 3 000 heat pumps are in operation 

(51)  This  framework  assesses  issues  such  as  the  potential  for 
reducing emissions, stability, flexibility, capital and operating 
costs,  mitigation  of 
loss  of  power  over  long-distance 
transmission  and  integration  of  renewable  energy  into 
existing systems. 

(1) For Eurostat data (EU and LU), the band consumption is ID 
referring to large-sized consumers with an annual 
consumption of between 2 000 MWh and 20 000 MWh, such 
as in electricity intensive manufacturing sectors, and gives an 
insight into international competitiveness  
(2) JP = Japan   
Source: Eurostat, IEA 

The  importance  of  natural  gas  is  relatively 
moderate in Luxembourg’s energy system; in 
2022 
it  accounted  for  15%  of  gross 
available  energy  and  for  4%  of  gross 
electricity  production (50).  Luxembourg  is  fully 
dependent on imports for its gas consumption and 
it  shares  a  common  market  area  with  Belgium. 
Most  of  the  gas  it  consumes  comes  by  pipeline 
from  Norway  and  the  Netherlands  and  transits 
through  Belgium.  It  also  consumes  LNG  delivered 
at  the  Belgian  port  of  Zeebrugge.  Luxembourg 
does  not  have  any  gas  storage  capacity,  nor 
solidarity arrangements with other Member States.  

in 

Overall,  Luxembourg  has  a  high  level  of 
security of gas supply, and it aims to further 
increase it, mainly through energy efficiency 
measures.  These  are  expected  to  result  in  a 
by  2030. 
decrease 
Luxembourg  also  managed  to  reduce  its  gas 
demand  between  August  2022  and  December 
2023  by  27%  in  comparison  with  the  average  of 
the  previous  five  years.  Annual  consumption 
amounted to 0.6 bcm in 2022 (against 0.8 bcm in 
2021). 

consumption 

gas 

As  for  the  security  of  its  electricity  supply, 
there  were  no  adequacy  issues  recorded 
during  the  first  half  of  2023  according  to 

(50)  Eurostat. 

39 

050100150200250300350Index ( 2018 S2 = 100)JPUKUSLUEU 
  
 
 
 
in the residential sector. Heating with a heat pump 
is cheaper than heating with a fossil fuel boiler, as 
long  as  electricity  costs  the  end-user  less  than 
three  times  the  price  of  gas.  In  Luxembourg  the 
residential electricity costs the end user 2.3 times 
more  than  the  price  of  gas.  Although  the 
contribution of heat pumps to the total renewables 
share in heating and cooling will increase, biomass 
use will remain the predominant contributor to the 
decarbonization of the heating and cooling sector.  

Luxembourg is highly interconnected in terms 
is  highly 
of  both  power  and  gas  and 
dependent  on  its  neighbours  to  meet  its 
energy  needs. 
In  anticipation  of  growing 
renewable generation and power demand, the grid 
operator  is  planning  to  further  develop  the  high 
voltage  grid  and  improve  interconnections,  with 
Germany  in  particular,  between  now  and  2040.  
According  to  the  national  transmission  systems 
operator (TSO) about 75% of the total import and 
transmission capacity is already used during peak 
import. The TSO sees a need to both increase and 
modernize 
import 
electrical 
transmission  capacities.  Even  if  Luxembourg  is 
involved  in  various  forms  of  regional  energy  co-
operation  in  the  EU,  it  is  not  involved  in  any 
Projects  of  Common  Interest  under  the  TEN-E 
regulation as of today. 

energy 

the 

Consumer  empowerment  in  the  electricity 
and  gas  markets  is  significant,  with  the 
deployment  of  smart  meters  having  reached 
almost  100%  in  2022.  Luxembourg  has  also 
transposed  the  provisions  on  renewable  energy 
communities,  particularly  focusing  on  facilitating 
shared  self-production  and  consumption 
for 
renewable  electricity  production  owned  by  the 
community (52). It increased subsidies and the VAT 
rate  by  3%  in  January  2023  for  all  new  self-
consumption  photovoltaic  installations.  Switching 
rates in electricity were very low, below 1%. 

significant 
demonstrated 
Luxembourg 
progress in reaching the 2030 EU targets for 
energy  efficiency.  In  2022,  it  had  a  primary 
energy consumption of 3.8 Mtoe, a 9.3% decrease 
compared  to  2021,  and  a  14.1%  decrease 
compared 
final  energy 
consumption  of  3.7  Mtoe,  a  9.5%  decrease 
compared  to  2021,  and  a  11.9%  decrease 

to  2012. 

It  had 

(52)  Luxembourg - REScoop 

40 

compared to 2012. In 2023, the best results came 
from the services sector, which decreased its final 
energy consumption by 18.5%, and the least from 
the  residential  sector,  which  decreased  its  final 
energy consumption by 5.0%. 

(RRP) 

resilience  plan 

Luxembourg  has  implemented  a  series  of 
energy efficiency measures with the support 
of  several  EU  funds.  However,  most  of  the 
schemes are addressed at buildings; schemes 
for  businesses  and 
industry  are  rather 
limited.  Luxembourg’s  EUR  88.4  million  recovery 
the 
and 
focuses  on 
transport  sector  by 
decarbonization  of 
promoting 
and 
vehicles 
establishing  alternative  fuel  infrastructure.  Under 
cohesion  policy,  more  than  10%  of  the  overall 
funding  allocated  to  Luxembourg  covers  energy 
efficiency  investment,  targeting  deep  renovations 
in buildings. To fulfil its energy savings obligation, 
the  Energy  Efficiency 
Luxemburg 
Obligation  Scheme,  but  more  efforts  might  be 
required to achieve 2021-2030 target.  

low/zero-emission 

relies  on 

the 

Most of the schemes on energy efficiency are 
still  grant-based  and  the  use  of  financial 
instruments  is  still  very  limited.  One  of  the 
most  important  is  a  grant  scheme  for  efficient 
new  residential  buildings  and  renovation  of 
residential  buildings  (2022-2025)  -  PRIMe  House, 
in 2022 renamed Klimabonus.  

target 

reduction 

Luxembourg’s effort in the residential sector 
to  achieve  a  meaningful  contribution  to  its 
2030 
energy 
consumption by buildings is still insufficient.  
Residential 
consumption  has 
energy 
remained  stable  since  2015,  while  the  national 
Long  Term  Renovation  Strategy  envisages  a 
reduction  in  building  energy  consumption  of  36% 
by 2030.  

final 

for 

residential 

Luxembourg  has  developed  an  energy 
renovation  strategy  which  focusses  on  the 
worst-performing 
buildings, 
accompanied  by  a  comprehensive  set  of 
economic, regulatory, information, fiscal and 
education measures. A national body supporting 
energy 
the 
implementation  of  photovoltaic  installations  for 
residential buildings is planned.  

renovation,  decarbonization  and 

Luxembourg 
its 
households  are  energy  poor.  Without  the 

that  3%  of 

reports 

 
 
(0.06%  as  a  share  of  GDP),  primarily  focused  on 
investment  in  renewables  (68%),  remains  notably 
lower  than  the  EU  average.  Venture  capital 
investment  in  Luxembourg  has  exhibited  positive 
trends,  witnessing  EUR  8.5  million  invested  in 
climate  tech  firms  in  2023,  predominantly  in  the 
energy (generation and grid tech) sector. However, 
this  only  constitutes  5%  of  VC  investment  in 
Luxembourg, falling short of the EU's overall figure 
in  energy  firms. 
investment 
of  24%  of  VC 
Luxembourg's  innovation  landscape  is  evolving, 
but  concerted  efforts  are  required  to  bridge  the 
gap and align with the EU's ambitious goals in the 
research and innovation sector. 

measures put in place in 2022, this figure is 
estimated  to  be  4.1%.  According  to  the  Energy 
Poverty Advisory Hub (EPAH), in 2022 the share of 
households  with  an  inability  to  heat  their  homes 
sufficiently  was  among  the  lowest  in  the  EU, 
amounting  to  2.1%,  and  the  share  of  arrears  on 
utility  bills  in  2022  was  4.4%,  below  the  EU 
average (6.9%). In 2023, the bottom three income 
deciles  of  the  population  spent  an  average  of 
6.4% of their budget on energy, well below the EU 
average  of  10.0% (53).  While  Luxembourg  has  no 
legal  definition  of  energy  poverty,  nor  a  specific 
strategy,  it  has  a  number  of  social  and  energy-
related  measures 
targeting  energy  poverty. 
Households  unable  to  pay  their  energy  bills  can 
apply  for  social  assistance.  In  addition,  targeted 
social 
programmes 
Topup 
Klimabonus) 
incentives  and  provide 
subsidies  to  switch  to  renewables,  and  these 
target low-income households.  

(‘Klimabonus, 

create 

Luxembourg’s  ambitions  for  the  energy 
transition  also  include  decarbonization  by 
means  of  hydrogen.  Renewable  hydrogen  can 
play  a  role  in  the  integration  of  energy  sectors in 
the  long  term.  Initially,  however,  its  use  will  be 
limited to sectors that are difficult to decarbonize 
by direct electrification, such as heavy industry.  

Luxembourg  lacks  manufacturing  capacity 
for  clean  technologies  and  has  historically 
imports  for  renewable  energy 
relied  on 
deployment.  However,  promising  initiatives 
have  recently  emerged,  especially  in  the  PV 
and battery sector. A solar panel manufacturing 
factory came online in late 2023. The facility has a 
maximum rated output of 100 MW a year (nearly 
200 000  panels).  Full  capacity  is  expected  to  be 
achieved by 2026 with production levels projected 
to  remain  below  100 000  panels  per  year  until 
that  time.  Some  lithium-sulphur  batteries  related 
ventures  are  also  implementing  their  activities  in 
to  conduct  R&D  activities  and 
Luxembourg, 
eventually industrial pilots. 

in 

its 

Despite  positive  signs 
innovation 
system,  Luxembourg  still  lags  behind  other 
EU countries. The latest research and innovation 
(R&I)  trends  are  promising,  yet  private  R&D 
spending on Energy Union priorities in Luxembourg 

(53)  Economic  and  distributional  effects  of  higher  energy  prices 
on  households  in  the  EU  :  -  Publications  Office  of  the  EU 
(europa.eu). 

41 

 
 
Table A7.1:  Key Energy Indicators 

(1) The ranking of the main suppliers is based on the latest available figures (for 2022) 
(2) Venture Capital investment includes Venture Capital deals (all stages), Small M&A deals and Private Equity (PE) growth deals 
(for companies that have previously been part of the portfolio of a VC investment firm or have received Angel or Seed funding). 
Source: Eurostat, Gas Infrastructure Europe, JRC elaboration based on PitchBook data (03/2024), JRC SETIS (2024) 

42 

20192020202120222019202020212022Import Dependency [%] 95.0%92.3%92.4%91.3%60.5%57.5%55.5%62.5%of Solid fossil fuels 93.1%112.3%97.4%101.5%43.3%35.8%37.3%45.8%of Oil and petroleum products 100.4%99.9%99.9%99.7%96.7%96.8%91.7%97.7%of Natural Gas 100.0%100.0%100.0%100.0%89.7%83.6%83.6%97.6%Dependency from Russian Fossil Fuels [%]of Natural Gas 11.7%23.3%18.7%0.0%39.7%41.3%41.1%21.0%of Crude Oil0.0%0.0%0.0%0.0%28.8%26.7%26.4%19.5%of Hard Coal7.3%7.1%6.3%4.3%43.5%49.1%47.4%21.5%2016201720182019202020212022Gas Consumption (in bcm)0.8                   0.8                   0.8                   0.8                 0.7                 0.8                 0.6                 Gas Consumption year-on-year change [%]-8.1%-2.3%-0.8%-0.2%-9.4%7.3%-22.2%Gas Imports - by type (in bcm)0.8                   0.8                   0.8                   0.8                 0.7                 0.8                 0.6                 Gas imports - pipeline0.8                   0.8                   0.8                   0.8                 0.7                 0.8                 0.6                 Gas imports - LNG0.00.00.00.00.00.0-                 Gas Imports - by main source supplier (in bcm) (1)Norway0.5                   0.2                   0.1                   0.1                 0.2                 0.3                 0.2                 United Kingdom-                   0.2                   0.1                   0.1                 0.1                 0.0                 0.1                 Belgium-                   0.0                   0.1                   0.3                 0.1                 0.1                 0.1                 Russia0.2                   0.1                   0.2                   0.1                 0.2                 0.1                 0.0                 20192020202120222023LNG Terminals - storage capacity m3 LNGNumber of LNG Terminals00000LNG Storage capacity (m3 LNG)00000Underground StorageNumber of storage facilities00000Technical Capacity (bcm)0.00.00.00.00.020162017201820192020202120222023Gross Electricity Production (GWh)2 198               2 235               2 200               1 908             2 234             2 211             2 238             -              Combustible Fuels468               470               490               547             628             632             526             -              Nuclear0000000-              Hydro1 528           1 422           1 337           949             1 094         1 085         1 124         -              Wind101               235               255               281             351             314             312             -              Solar100               108               119               130             161             180             276             Geothermal0000000-              Other Sources-0 -0 00000-              Gross Electricity Production [%]Combustible Fuels21.3%21.0%22.3%28.7%28.1%28.6%23.5%-              Nuclear0.0%0.0%0.0%0.0%0.0%0.0%0.0%-              Hydro69.5%63.6%60.8%49.7%49.0%49.1%50.2%-              Wind4.6%10.5%11.6%14.7%15.7%14.2%14.0%-              Solar PV4.6%4.9%5.4%6.8%7.2%8.1%12.3%-              Geothermal0.0%0.0%0.0%0.0%0.0%0.0%0.0%-              Other Sources0.0%0.0%0.0%0.0%0.0%0.0%0.0%-              Net Imports of Electricity (GWh)6 299               6 178               6 161               5 879             5 465             5 721             5 507             -              As a % of electricity available for final consumption 98.9%96.6%95.4%91.9%89.3%89.5%89.4%-              Electricity Interconnection [%]-               -               58.4%58.2%55.2%168.4%163.5%166.3%Share of renewable energy consumption - by sector [%]Electricity6.7%8.1%9.1%10.9%13.9%14.2%15.9%-              Heating/cooling7.1%7.5%8.4%8.7%12.6%12.9%15.4%-              Transport6.0%6.5%6.6%7.7%12.6%8.0%8.7%-              Overall5.4%6.2%8.9%7.0%11.7%11.7%14.4%-                 20192020202120222023VC investments in climate tech start-ups and scale-ups (EUR Mln)7.25             12.00           -               18.67             8.50               as a % of total VC investments (2) in Malta4.6%7.1%-               1.6%5.1%Research & Innovation spending in Energy Union R&i prioritesPublic R&I (EUR mln)-               -               -               -              -              Public R&I (% GDP)-               -               -               -              -              Private R&I (EUR mln)61.3             38.3             -               -              -              Private R&I (% GDP)0.10%0.06%-                   -                 -                 ELECTRICITY/ENERGYCLEAN ENERGYLuxembourgEUENERGY DEPENDNCEDIVERSIFICATION OF GAS SUPPLIES 
 
   
 
ANNEX 8: FAIR TRANSITION TO CLIMATE NEUTRALITY 

(EU:  18.2%), 

reaching  8.5%  of 

This  Annex  monitors  Luxembourg’s  progress 
in ensuring a fair transition towards climate 
neutrality  and  environmental  sustainability, 
particularly  for  workers  and  households  in 
vulnerable  situations.  Luxembourg’s  green 
economy  is  expanding.  Between  2015  and  2021, 
total jobs in the environmental goods and services 
increased  significantly,  by  127.8%  (to  around  26 
total 
000) 
employment  (EU:  2.7%).  Also  between  2015  and 
2022,  the  greenhouse  gas  emission  intensity  of 
Luxembourg’s  workforce  (see  Graph  A8.1  and 
Table A8.1) declined from 33.2 to 25.4 tonnes per 
worker,  still  well  above  the  EU  average  (14.3 
tonnes  per  worker  in  2022) (54),  indicating  a 
positive trend in the  green  transition.  To  ensure  a 
fair  green  transition  in  line  with  the  Council 
Recommendation  of  2022  on  ensuring  a  fair 
neutrality (55), 
transition 
Luxembourg  has  increased  its  efforts  to  upskill 
and  reskill  workers  in  declining  and  transforming 
sectors.  However,  labour  shortages  persist,  which 
could potentially result in a bottleneck in the green 
transition. The reforms and investments under the 
recovery  and  resilience  plan  (RRP)  contribute  to  a 
fair green transition, complementing the territorial 
just transition plans and actions supported by the 
European Social Fund Plus (ESF+). 

towards 

climate 

Employment  in  Luxembourg’s  sectors  that 
are  most  affected  by  the  green  transition 
increased. In 2022, employment in Luxembourg’s 
energy-intensive  industries  comprised  0.9%  of 
total employment (EU: 3.5%). The job vacancy rate 
in  construction  (see  Graph  A8.2),  a  key  sector  for 
the green transition, is lower than the EU average 
(1%  vs  3.6%  in  EU  in  2023),  although  this 
contrasts  with  the  perception  of  small  and 
medium-sized enterprises (SMEs) in the sector, as 
that  skills  shortages  are  a 
80%  agreed 
challenge (56).  According  to  the  European  Labour 

(54)  Workforce-related  calculations  are  based  on  the  EU  Labour 
Force  Survey.  Note, 
report  for 
Luxembourg,  such  indicators  were  calculated  based  on 
employment  statistics  in  the  national  accounts.  This  may 
result in limited comparability across the two reports. 

in  the  2023  country 

(55)  Council Recommendation of 16 June 2022 on ensuring a fair 
transition towards climate neutrality (2022/C 243/04) covers 
employment,  skills, 
tax-benefit  and  social  protection 
systems, essential services and housing. 

(56)  Eurobarometer on skills shortages, recruitment, and retention 

Authority (ELA) (57), labour shortages were reported 
in 2023 for a number of occupations that required 
specific  skills  or  knowledge  for 
the  green 
transition (58),  including  insulation  workers,  civil 
engineers and mechanical engineering technicians. 

Graph A8.1: Fair transition challenges in 
Luxembourg 

Source: Eurostat, EU Labour Force Survey, EMPL-JRC GD-
AMEDI/AMEDI+ and DISCO(H) projects (see Table A8.1). 

If  Luxembourg  matches 

Upskilling  and  reskilling  in  declining  and 
transforming  sectors  increased,  but  risks  of 
skills  mismatches  persist,  while 
labour 
shortages are growing. In Luxembourg, 61% of 
the SMEs think that the skills required for greening 
business  activities  are  becoming  more  important 
(EU:  42%) (55). 
its 
projected contribution to the EU’s 2030 renewable 
energy target, between 300 and 1 100  additional 
skilled workers will be needed for the deployment 
of  wind  and  solar  energy,  which  may  require  an 
investment  in  skills  of  EUR  3.6-4.5  million (59). 
Under  the  RRP,  an  action  plan  to  promote 
continuing vocational training aims to help workers 
and 
their  employability. 
Investments  under  the  Just  Transition  Fund 
support training to provide workers with new skills 
for  sectors  instrumental  in  the  green  transition, 
especially  in  the  field  of  electro-mobility  and  in 
in 
construction  and  sustainable 
particular  on  aspects  of  health  and  energy 
efficiency. For example, the ‘operation of strategic 
importance’  (Transition  énergétique  artisanat+) 

renovation, 

jobseekers 

improve 

(57)  Based on the European Labour Authority 2024 EURES Report 
on labour shortages and surpluses 2023, i.e., data submitted 
by the EURES National Coordination Offices. 

(58)  Skills  and  knowledge  requirements  are  based  on  the 
(ESCO) 

European  Skills  Competences  and  Occupations 
taxonomy on skills for the green transition. 

strategies in small and medium-sized enterprises. 

(59)  EMPL-JRC AMEDI+ project. 

43 

0.00.51.01.52.02.5Greenhouse gasemissions per workerEmployment inEnergy-IntensiveIndustriesEnergy povertyTransport poverty(proxy)Carbon inequalityLU Latest vs EU LatestEU LatestLU 2015 vs EU Latest 
 
 
  
 
 
Table A8.1:  Key indicators for a fair transition in Luxembourg 

Source: Eurostat (env_ac_ainah_r2, lfsa_egan2d, ilc_mdes01), EU Labour Force Survey (break in time series in 2021), EMPL-JRC 
GD-AMEDI/AMEDI+ and DISCO(H) projects. 

organises  500  days  of  training  to  develop 
employees’  skills  for  the energy  transition  (2023-
2025).  16.5%  of  ESF+  funding  contributes  to 
increasing  i)  green  skills  and  jobs  with  training 
measures  for 
jobseekers  and  workers,  and 
ii) projects  to  help  pupils  and  students  discover 
green jobs and acquire relevant new skills. 

Graph A8.2: Job vacancy rate in transforming 
sectors and mining and quarrying 

the 

(9.3%) (60).  However, 

Energy  poverty 
indicators  have  slightly 
worsened  in recent  years in  Luxembourg  but 
remain  well  below  the  EU  average. The  share 
of  the  population  unable  to  keep  their  homes 
adequately warm increased from 0.9% in 2015 to 
2.1%  in  2022,  remaining  well  below  the  EU 
indicator 
average 
decreased by 0.4 percentage points between 2021 
and  2022,  despite  energy  price  increases  due  to 
supply  constraints  caused  by  the  COVID-19 
pandemic  and  Russia’s  war  of  aggression  against 
Ukraine.  This  improvement  was  attributed  to 
emergency measures implemented in Luxembourg 
as  well  as  programmes  to  switch  to  renewables 
and  increase  energy  efficiency,  targeting  low-
income  households.  However,  5.4%  of 
the 
population  at  risk  of  poverty  (AROP)  (EU:  20.1%) 
and  2.2%  of  lower  middle-income  households  (in 
deciles  4-5)  (EU:  11.6%)  were  affected  in  2022. 
On the other hand, in January 2023, 29.8% of the 
population at risk of poverty  spent a considerable 
proportion  of  their  budget  (more  than  6%)  on 
private transport fuels (EU: 37.1%) (61). 

B - Mining and quarrying 
C - Manufacturing 
D - Electricity, gas, steam and air conditioning supply 
E - Water supply; sewerage, waste management and 
remediation activities 
F - Construction 
H - Transportation and storage 
Source: Eurostat jvs_a_rate_r2. 

inequalities 

leading  to  environmental 

Consumption  footprint  inequality  remains  a  critical 
issue 
in 
Luxembourg.  In  2021,  the  consumption  footprint  for 
20%  of  the  population  with  the  highest  income  was  2.0 
times  higher  than  the  footprint  of  the  poorest  20% (62) 
(EU:  1.8).  For  both  groups,  the  consumption  footprint  is 
highest  for  food  and  housing.  The  average  levels  of  air 
pollution in 2021 stood below the EU average (7.4 vs 11.4 
µg/m3 PM2.5), and all regions were below critical levels of 
air  pollution (63).  However,  there  have  been  an  estimated 
77  premature  deaths  annually  due  to  exposure  to  air 
pollution (64). 

Luxembourg’s  economy  and  labour  market 
appear to be less affected by the challenges 

(60)  Energy poverty is a multi-dimensional concept. The indicator 
used  focuses  on  an  outcome  of  energy  poverty.  Further 
indicators are available at the Energy Poverty Advisory Hub. 

(61)  Affordability of private transport fuels is one key dimension 
of  transport  poverty.    The  indicator  has  been  developed  in 
the  context  of  the  EMPL-JRC  GD-AMEDI/AMEDI+  projects. 
Methodology  explained 
in  Economic  and  distributional 
effects of higher energy prices on households in the EU. 

(62)  Developed in the context of the EMPL-JRC DISCO(H) project. 
Methodology  explained  in  Joint  Research  Centre,  2024. 
Carbon  and  environmental  footprint  inequality  of  household 
consumption  in  the  EU.  JRC137520.  The  EU  average  refers 
to EU27 without Italy (household income data not available 
for IT in the HBS). 

(63)  Two times higher than the recommendations in the WHO Air 

Quality Guidelines (annual exposure of 5µg/m3). 

(64)  EEA - Air Quality Health Risk Assessment 

44 

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%BCDEFHEU 2023LU 2023LU 2015IndicatorDescriptionLU 2015LUEUGHG per workerGreenhouse gas emissions per worker – CO2 equivalent tonnes33.225.4 (2022)14.3 (2022)Employment EIIEmployment share in energy-intensive industries, including mining and quarrying (NACE B), chemicals (C20), minerals (C23), metals (C24) and automotive (C29)1.1%0.9% (2022)3.5% (2022)Energy povertyShare of the total population living in a household unable to keep its home adequately warm0.9%2.1% (2022)9.3% (2022)Transport poverty (proxy)Estimated share of the AROP population that spends over 6% of expenditure on fuels for personal transport18.2%29.8% (2023)37.1% (2023)Carbon inequalityRatio between the consumption footprint of the top 20% vs bottom 20% of the income distribution2.02.0 (2021)2.7 (2021) 
 
      
 
 
  
 
and 

groups 

stemming  from  the  green  transition  due  to 
its economy’s structure. This is reflected in the 
country’s  relatively  low  carbon-intensive  economy 
and currently resilient labour market characterised 
by  the  predominance  of  the  tertiary  sector. 
However,  further  efforts  are  needed  to  target 
sectors, 
appropriate 
employment  measures  to  facilitate  the  retention 
of  workers,  the  return  to  work  and  job-to-job 
transitions.  Luxembourg  plans  to  introduce  a  new 
training  programme  for  workers,  including  for  the 
green  economy,  as  well  as  for  boosting  skills 
needed  for  green  jobs.  Luxembourg  has  in  place 
measures  to  support  access  to  finance  and 
business  creation  by  groups  underrepresented  in 
the labour market (65). 

develop 

(65)  Based  on 

the  monitoring 

the  Council 
Recommendation  on  ensuring  a  fair  transition  towards 
climate neutrality, which took place in October 2023. 

review  of 

45 

 
 
PRODUCTIVITY 
ANNEX 9: RESOURCE PRODUCTIVITY, EFFICIENCY AND CIRCULARITY 

The green transition of industry and the built 
environment,  in  particular  decarbonisation, 
resource  efficiency  and 
is 
Luxembourg’s 
boost 
essential 
competitiveness (66). In this regard, priorities for 
Luxembourg  are  the  use  of  circular  materials  in 
industry and construction. 

circularity, 

to 

Luxembourg’s  circular  economy  transition  is 
insufficient  to  achieve  the  EU  Circular 
In  2022, 
Economy  Action  Plan  goals. 
Luxembourg’s  material  footprint  was  among  the 
EU’s  highest  with  23.67  tonnes  per  capita (67).  In 
2020,  waste  production  per  capita  remained  well 
above  the  EU  average  with  14.6  tonnes  per 
capita (68). Measures targeting the highest levels of 
the  waste  hierarchy  could  significantly  reduce 
environmental 
impacts.  The  key  policies  and 
measures set out in Luxembourg’s national energy 
and climate plan recognise the circular economy’s 
role in decarbonisation, mainly in relation to waste 
and  late  stages  of  the  product  life  cycle.  Design, 
reusability,  skills,  and  training,  however,  are  not 
mentioned.  The  plan  also  addresses 
the 
importance  of  circularity  in  the  2020  building 
in  particular  for  public 
renovation  strategy, 
stakeholders. 

Graph A9.1: ETS emissions by sector since 2013 

the trend of 2013-2019, which saw a reduction of 
almost  21%.  In  2023,  43%  of  the  greenhouse 
gases  emitted  by  Luxembourg’s  ETS  installations 
came  from  cement  and  lime  production,  39% 
came  from  the  metals  industry,  and  12%  from 
other 
industries.  Between  2013  and  2023, 
greenhouse  gas  emissions  from  the  metals 
‘other 
industry  decreased  by  22%,  while 
industries’  (glass  production)  they  declined  by 
62%. With emissions broadly stable between 2013 
and  2022,  cement  and  lime  production  saw  a 
steep  decline  in  2023,  by  36%.  In  2023,  power 
generation  accounted  for  only  6%  of  greenhouse 
gas  emissions  (EU  average:  57%),  following  big 
reductions in 2014-2016. 

in 

its 

resource 

efficiency 

There  is  room  for  Luxembourg’s  industry  to 
improve 
and 
environmental  impact.  Luxembourg’s  industry 
has  a  significant  impact  on  air  quality  and  is  the 
main source of emission for several pollutants (70). 
The  cost  of  air  emission  from  industry  totalled 
almost  EUR  0.5  billion  in  2021.  Luxembourg’s 
circular  material  use  rate  dropped  significantly 
from  10.7%  in  2018  to  5.2%  in  2022,  below  the 
EU average. Luxembourg’s dependence on imports 
is  the  highest  of  all  EU  countries.  In  2022, 
Luxembourg  relied  on  imports  for  89.7%  of 
materials  used (71),  highly  exposing  the  country  to 
market  disruptions.  Moreover,  Luxembourg’s 
consumption  footprint  is  historically  among  the 
highest  of  the  EU (72).  Food  consumption  is  the 
activity  with  the  highest  consumption  impact  on 
the environment, before transport (73). By contrast, 
resource productivity has increased in the last few 

Source: European Commission 

Between  2019  and  2023,  greenhouse  gas 
emissions  from  the  sectors  covered  by  the 
EU  emissions  trading  system 
in 
Luxembourg (69)  declined by  41%,  speeding  up 

(ETS) 

(66)  See also Annexes 6, 7 and 12. 

(67)  Versus an EU average of 14.896 tonnes per capita.  

(68)  Versus  an  EU  average  of  4.8  tonnes  per  capita  (Waste 

statistics - Statistics Explained (europa.eu)). 

(69)  This  analysis  excludes  air  travel.  For  more  details  and  the 
data  sources,  see  Weitzel,  M;  van  der  Vorst,  C.  (2024), 

Uneven  progress  in  reducing  emissions  in  the  EU  ETS,  JRC 
Science for policy brief, JRC138215, Joint Research Centre. 

(70)  Manufacturing and extractive industry contributed in 2021 to 
76.7%  of  SO2,  55.9%  of  NMVOC,  and  33.6%  of  PM2.5 
emissions.  Luxembourg  –  air  pollution  country  fact  sheet  — 
European Environment Agency (europa.eu) 

(71)  Versus  an  EU  average  of  22.4%  (Statistics  |  Eurostat 

(europa.eu)). 

(72)  Totalling 1.7 points of impact per capita in 2021, above the 
EU  average  of  0.95  points  (Consumption  footprints  for  EU 
countries  in  2010  and  2021  —  European  Environment 
Agency (europa.eu)). 

(73)  43% and 23%, respectively (Consumption Footprint Platform 

| EPLCA (europa.eu)). 

46 

00.20.40.60.810.00.20.40.60.81.01.21.41.61.820132014201520162017201820192020202120222023Emissions relative to 2013Mt CO2eCement & LimeChemicalsMetalsRefineriesPower generationOtherLuxembourg (both axes) 
 
 
  
 
 
 
 
Table A9.1:  Circularity indicators 

Source: Eurostat, European Environment Agency 

years  and  Luxembourg  achieved  the  second-
highest score in the EU (74) in 2022. 

Strong  eco-innovation  performance  has 
helped  to  develop  a  highly  competitive 
environmental  goods  industry.  The  2022  Eco-
Innovation  Scoreboard  listed  Luxembourg  among 
the  eco-innovation  leaders,  with  a  score  of  179. 
The country totalled 6 EU Ecolabel licences and 6 
products with the EU Ecolabel in 2023. 

721 kg per person, but the recycling rate stood at 
54.5%  of  municipal  waste.  The  country 
is 
considered  on  track  to  achieve  both  the  2025 
target  for  packaging  waste  and  the  2025  target 
for  municipal  waste.  However,  Luxembourg  is  at 
risk  of  missing  the  plastic  packaging  recycling 
average (76),  with  a  rate  of  39.5%  in  2021. 
Moreover,  the  share  of  incinerated  municipal 
waste  is significantly high, with more than 41.7% 
in 2021. 

Graph A9.2: Treatment of municipal waste 

Source: Eurostat 

Luxembourg’s  significant  progress  in  waste 
management  is  dampened  by  a  high  waste 
generation. In 2022, the country generated more 
municipal  waste  than  the  EU  average (75),  with 

floor  areas 

Despite  some  positive  trends,  there  is  still 
room  to  improve  resource  efficiency  in  the 
residential  and  non-
building  sector.  The 
residential 
slightly  decreased, 
respectively,  to  54 m2  and  17.6  m2  per  capita  in 
2020,  just  below  the  EU.  However,  Luxembourg’s 
soil  sealing  index  remains  above  the  EU  average. 
In  2020,  Luxembourg  published  a 
long-term 
renovation plan  to  decarbonise  the  building stock, 
including 
for 
sustainable construction. 

economy 

concepts 

circular 

and 

improved 

demolition 

waste 
Construction 
in 
management  can  also  be 
Luxembourg.  Since  2010,  waste  generated  from 
construction  and  demolition  activities  per  capita 
increased  significantly (74).  The 
rate 
decreased  in  2021,  below  the  EU  average.  Some 
major  companies  in  the  construction  sector  are 
reporting  on  circular  economy  activities.  However, 
a  more  comprehensive  approach  beyond  the 
decarbonisation dimension is lacking. 

recovery 

(74)  E.g. almost 4 purchasing power standards per kilogram. 

(76)  Of 54.4 m2 per capita (EU Building Stock Observatory - 

(75)  Of 513 kg per person (Statistics | Eurostat (europa.eu)). 

Factsheets (europa.eu)). 

47 

803791790793721010020030040050060070080020182019202020212022Kg per capita Waste treatment to be determinedLandfill/disposalTotal incineration (including energy recovery)Composting and digestionMaterial recyclingEU-27201820192020202120222023EU-27Latest yearIndustryResource productivity (purchasing power standard (PPS) per kilogram)3.43.43.53.54.0-2.52022Circular material use rate (%)10.79.09.64.15.2-11.52022Eco-innovation index (2013=100)172.0175.5174.7173.1179.0-121.52022Recycling of plastic packaging (%)32.333.434.739.5--40.72021Cost of air emissions from industry (EUR bn)0.50.50.50.5--352.72021Built environmentRecovery rate from construction and demolition waste (%)98.0-99.088.1--89.02020Soil sealing index (base year = 2006)104.4-----103.42018Non-residential floor area (m2 per capita)17.817.717.6---18.02020Waste backfilled (%)0.5-9.6-4.6-9.92020 
            
 
 
 
       
 
ANNEX 10: DIGITAL TRANSFORMATION 

transformation  by  2030, 

Digital  transformation  is  key  to  ensuring  a 
resilient and competitive economy. In line with 
the  Digital  Decade  Policy  Programme,  and  in 
particular  with  the  targets  in  that  Programme  for 
digital 
this  Annex 
describes  Luxembourg’s  performance  on  digital 
skills,  digital  infrastructure/connectivity  and  the 
digitalisation  of  businesses  and  public  services. 
Where relevant, it makes reference to progress on 
implementing  the  Recovery  and  Resilience  Plan 
(RRP). Luxembourg allocates 29.6% of its total RRP 
budget  to  digital  (EUR 24.47  million) (77).  Under 
Cohesion  Policy,  an  additional  EUR 6.8 million 
(18%  of  the  country’s  total  Cohesion  Policy 
funding)  is  allocated  to  the  country’s  digital 
transformation (78). 

The  Digital  Decade  Policy  Programme  sets 
out  a  pathway  for  EU’s  successful  digital 
transformation by 2030. Luxembourg’s national 
roadmap outlines the actions it intends to take to 
reach the objectives and targets at national  level. 
The first Report on the State of the Digital Decade 
highlighted the need to accelerate and deepen the 
collective efforts to reach the EU-wide targets and 
objectives (79).  Among  others,  a  digitally  skilled 
population 
the  development  and 
adoption  of  digital  technologies  and  leads  to 
productivity  gains  and  new  business  models.  It 
also  leads  to  higher  inclusion  and  participation  in 
an environment increasingly shaped by the digital 
transformation (80). 
technologies, 
infrastructure  and  tools  all  play  a  role 
in 
addressing 
the  current  structural  challenges, 
including  strategic  dependencies,  cybersecurity 
and climate change. 

increases 

Digital 

(77)  The  share  of  financial  allocations  that  contribute  to  digital 
objectives  has  been  calculated  using  Annex  VII  to  the 
Recovery and Resilience Facility Regulation. 

(78)  This amount includes all investment specifically aimed at or 
substantially  contributing  to  digital  transformation  in  the 
2021-2027 Cohesion Policy programming period. The source 
funds  are  the  European  Regional  Development  Fund,  the 
Cohesion Fund, the European Social Fund Plus, and the Just 
Transition Fund. 

(79)  European  Commission  (2023):  Report  on  the  state  of  the 
Digital Decade 2023, 2023 Report on the state of the Digital 
Decade | Shaping Europe’s digital future (europa.eu). 

(80)  See  for  example  OECD  (2019):  OECD  Economic  Outlook, 
Digitalisation and productivity: A story of complementarities, 
OECD  Economic  Outlook,  Volume  2019  Issue  1  |  OECD 
iLibrary  (oecd-ilibrary.org)  and  OECD  (2019):  Going  Digital: 
Shaping 
– 
Lives 
Summary, https://www.oecd.org/digital/going-digital-
synthesis-summary.pdf. 

Improving 

Policies, 

individuals  employed  as 

Luxembourg  performs  very  well  in  terms  of 
advanced  digital  skills,  having  a  large  share 
of  ICT  specialists  in  the  workforce.  While  the 
percentage  of 
ICT 
specialists is very high (8.0%) compared to the EU 
average (4.8%), the share of businesses reporting 
hard-to-fill  vacancies  for 
ICT 
specialist skills is well above the EU average (71% 
compared  to  63%),  showing  the  labour  market’s 
increasing  need  for  ICT  specialists.  In  terms  of 
population  (aged  between  16  and  74)  having  at 
least  basic  digital  skills, the  country  scores  above 
the EU average (60% compared with 56%), but a 
slight decrease has been observed since 2021. 

requiring 

jobs 

Luxembourg  is  among  the  EU  leaders  in 
digital  infrastructure/connectivity.  It  scores 
considerably  above  the  EU  average  for  very  high 
capacity  network 
In  2023, 
overall  5G  coverage  stood  at  100%,  also  well 
above the EU average.  

(VHCN)  coverage. 

Digital  technologies  are  well  integrated  into 
business activities. Luxembourg performs at the 
EU  average  (58%)  in  terms  of  basic  digital 
intensity  of  small  and  medium-sized  enterprises 
(SMEs). For adoption of the three advanced digital 
technologies  monitored  in  the  Digital  Decade, 
enterprises  score  slightly  below  the  EU  average, 
with  52%  of  enterprises  using  either  cloud 
computing 
services,  big  data  or  artificial 
intelligence  (EU  average:  55%).  In  2022,  4.3%  of 
enterprises  in  Luxembourg  reported  ICT  service 
outage  due  to  cyberattacks  (e.g.  ransomware 
attacks,  denial  of  service attacks).  Over  the  same 
year, 19.4% of enterprises developed or reviewed 
their 
ICT  security  policy  within  the  previous 
12 months. 

Luxembourg  scores  well  on  digital  public 
services.  The  country  performs  considerably 
above  the  EU  average  in  digital  public  services  –
for  both  citizens  and  businesses.  The  country 
implements  multiple  initiatives  and  programmes 
to  further  digitalise  the  public  sector.  A  national 
electronic  identification  (eID)  scheme  is  in  place, 
which  has  been  notified  under 
the  eIDAS 
Regulation.  A  national  electronic  wallet  is  under 
development  enabling  users  to  manage  and 
present  digital  versions  of  official  documents  on 
their smartphones. The country has also started to 
implement some RRP measures to modernise and 
digitalise  public  services  and  to  provide  e-health 
services.  

48 

 
 
 
 
Table A10.1:Key Digital Decade targets monitored by the Digital Economy and Society Index indicators 

(1) The 20 million target represents about 10% of total employment. 
(2) The fibre to the premises coverage indicator is included separately as its evolution will also be monitored separately and taken 
into consideration when interpreting VHCN coverage data in the Digital Decade. 
(3) At least 75% of EU enterprises have taken up one or more of the following, in line with their business operations: (i) cloud 
computing services; (ii) big data; (iii) artificial intelligence.   
Source: Digital Economy and Society Index 

49 

EUDigital Decade target by 2030 2022202320242024(EU)Digital skillsAt least basic digital skills64%64%60%56%80%% individuals20212021202320232030ICT specialists (1)6.7%7.7%8.0%4.8%20 million% individuals in employment aged 15-7420212022202320232030Digital infrastructure/connectivityFixed very high capacity network (VHCN) coverage93%93%95%79%100%% households20212022202320232030Fibre to the premises (FTTP) coverage (2)75%76%79%64%-% households2021202220232023Overall 5G coverage13%93%100%89%100%% populated areas20212022202320232030Digitalisation of businessesSMEs with at least a basic level of digital intensity54%NA58%58%90%% SMEs2021202320232030Data analyticsNANA32%33%-% enterprises20232023Cloud29%29%33%39%-% enterprises2021202120232023Artificial intelligence13%13%14%8%-% enterprises2021202120232023AI or cloud or data analytics (3)NANA52%55%75%% enterprises202320232030Digitalisation of public servicesDigital public services for citizens93959579100Score (0 to 100)20212022202320232030Digital public services for businesses97979785100Score (0 to 100)20212022202320232030Access to e-health recordsNA677679100Score (0 to 100)2022202320232030Luxembourg 
 
      
 
 
 
 
 
 
 
ANNEX 11: INNOVATION 

This  Annex  provides  a  general  overview  of  the 
research  and 
performance  of  Luxembourg’s 
innovation system, which is essential for delivering 
the 
long-term 
transition  and  ensuring 
twin 
competitiveness. 

Luxembourg  is  a  ‘strong  innovator’,  but  its 
performance  decreased  relative  to  the  EU 
average.  According  to  the  2023  edition  of  the 
European Innovation Scoreboard (81), its innovation 
performance  has  decreased  by  1.5  percentage 
points  since  2016,  at  a  lower  rate  than  the  EU’s 
(8.5pp).  However,  its  overall  performance  remains 
above  the  EU  average  (117.2%).  Luxembourg’s 
relative  strengths  notably  include  the  share  of 
international  scientific  co-publications  or  foreign 
doctorate  students,  reflecting  the  quality  and 
attractiveness  of  Luxembourg’s  public  research 
system which has become a pole of attraction for 
excellent researchers. 

Luxembourg has been unable to raise its R&D 
intensity, which has been on a declining trend 
over  the  past  two  decades.  Low  and  declining 
R&D intensity, in 2022 representing 77% from the 
2016 value (0.98% in 2022 compared to 1.27% in 
2016),  remains  a  challenge,  holding  back  the 
much-needed  diversification  of  the  economy. 
While public expenditure on R&D (relative to GDP) 
has  remained  stagnant  (at  0.48%  in  2022)  in 
recent years, business R&D intensity has continued 
to  decline,  falling  to  0.50%  in  2022  (graph  A 
1.1.1).  This 
is  weighing  on  Luxembourg’s 
competitiveness,  as  reflected  for  example  in  the 
fact that Luxembourg lost seven places compared 
with  last  year  and  is  now  ranked  the  20th  most 
competitive  country  in  the  world  according  to  the 
IMD World Competitiveness Ranking 2023 (82). 

Graph A11.1: Business expenditure on R&D as % of 
GDP, 2011-2022 

Source: Eurostat 

has 

continued 

Public  support  for  business 
innovation 
remains  very  low.  Over  the  last  few  years 
implementing 
Luxembourg 
measures  aimed  at  fostering  business innovation, 
for  example  through  the  ‘Fit  4’  performance 
programmes  targeting  210  start-ups  and  small 
and medium-sized enterprises in 2022, where new 
components such as Sustainability and Innovation 
HealthTech Market have been added (83). However, 
public  support  for  business  innovation  is  still 
marginal (0.037% of GDP in 2019, compared to an 
EU  average  of  0.204%).  Luxembourg  does  not 
provide indirect support to R&D in the form of tax 
credits,  unlike  most  OECD  and  EU  countries.  The 
government allocates only 25% of its R&D budget 
to  specific  projects,  including  those  with  private 
partners, the remaining 75% being for institutions. 
Only  6%  of  business  R&D 
funded  by 
government (84). 
recently 
announced  an  increase  in  research  funding  of 
nearly EUR 300 million, reaching a total of EUR 1.7 
billion  for  2022-2025 (85),  but  that  amount  is  for 
public  institutions  only.  Luxembourg  could  fund 
more 
in  partnership  with 
businesses to generate more private research and 
innovation.  This  is  key  to  increasing  productivity 
(see Annex 12). 

innovation  projects 

government 

The 

is 

Despite  the  high  quality  of  Luxembourg’s 
public  research  system,  linkages  with  the 

(81)  European 

Innovation 

Scoreboard 

(EIS) 

2023: 

https://ec.europa.eu/assets/rtd/eis/2023/ec_rtd_eis-country-
profile-lu.pdf.  The  EIS  provides  a  comparative  analysis  of 
innovation performance in EU countries, including the relative 
strengths  and  weaknesses  of  their  national  innovation 
systems (also compared to the EU average). 

(83)  Luxinnovation, 

annual 

report, 

2022. 

https://www.luxinnovation.lu/wp-
content/uploads/sites/3/2023/04/luxinnovation-rapport-
annuel-2022-web.pdf. 

(84)  OECD  Economic  Surveys:  Luxembourg  2022  |  READ  online 

(oecd-ilibrary.org). 

(82)  World  Competitiveness  Index  2023  https://imd.cld.bz/IMD-

(85)  Luxembourg  to  invest  EUR 1.7 billion  in  research  and  higher 

World-Competitiveness-Booklet-2023/37/. 

education – researchluxembourg. 

50 

00.20.40.60.811.21.41.6201120122013201420152016201720182019202020212022EULU 
 
 
   
 
 
Table A11.1:Key innovation indicators 

(1) EU average for the latest available year or the year with the largest number of country data. 
Source: Eurostat, OECD, DG JRC, Science-Metrix (Scopus database and EPO’s Patent Statistical Database), Invest EU 

linkages 

business  sector  remain  underexploited (86). 
remain  weak,  as 
Science-business 
evidenced  by  the  low  share  of  public  expenditure 
on  R&D  financed  by  businesses  (0.01%  in  2021, 
compared  to  an  EU  average  of  0.054%).  The 
Luxembourg  recovery  and  resilience  plan  (RRP) 
does not contain specific measures to address this 
challenge.  However, 
feature 
substantial  support  for 
the  development  of 
quantum  communication  infrastructure,  which  is 
expected  to  help  Luxembourg  accumulate  key 
research  and  innovation  (R&I)  capabilities  in  this 
field  while  providing  possible  opportunities  for 
and 
cooperation 
businesses. 

the  plan  does 

research 

between 

labs 

The  shortage  of  skilled  workers  has  worsened, 
accentuating  the  mismatch  between  available 
skills and the profiles required on the market. The 
gap  between  the  profiles  available  and  the  skills 
that  the  economy  needs  persists,  due  to  the 
difficulties  which  the  national  education  system 
has  in  training  the  talents  that  companies  need 
and  due  to  companies’  strong  dependence  on 
highly qualified people from abroad (87).  

(86)  Through the national PEARL programme,  EUR 4 million were 
allocated  in  2023  to  develop  quantum  computing,  while 
through  the  national  programme  BRIDGE,  Luxembourg 
launched  specific  calls  for  industry  partnerships  between 
public  research  institutions  and  national  or  international 
companies as well as thematic calls. 

(87) 

https://www.cc.lu/fileadmin/user_upload/tx_ccnews/Publicatio
ns_2021_Eco_News_Flash_N__6__Ecosysteme_d_innovati
on.pdf. 

51 

EU2022average (1)R&D intensity (GERD as % of GDP)1.421.251.061.040.982.24Public expenditure on R&D as % of GDP0.480.590.520.510.480.73Business enterprise expenditure on R&D (BERD) as % of GDP0.940.660.540.530.51.48Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 13.712.613.58::9.6PCT patent applications per billion GDP (in PPS)1.61.72.19: :3.4Public-private scientific co-publications as % of total publications9.48.910.613.413.47.6Public expenditure on R&D financed by business enterprise (national) as % of GDP0.0080.0070.0120.013:0.054New graduates in science & engineering per thousand pop. aged 25-34:1.92.52.7:16.9Total public sector support for BERD as % of GDP:0.052:::0.204Business enterprise expenditure on R&D (BERD) financed by the public sector (national and abroad) as % of GDP :0.052:::0.1R&D tax incentives: foregone revenues as % of GDP::::::Share of environment-related patents in total patent applications filed under PCT (%)1711.915.9::14.7Venture capital (market statistics) as % of GDP0.0350.0110.0360.0420.1230.085Employment share of high growth enterprises measured in employment (%):10.311.9::12.512021Luxembourg201020152020Finance for innovation and economic renewalKey indicators Quality of the R&I systemAcademia-business cooperationHuman capital and skills availabilityPublic support for business enterprise expenditure on R&D (BERD)Green innovation  
 
 
 
 
  
 
ANNEX 12: INDUSTRY AND SINGLE MARKET 

to 

the 

Institute 

Luxembourg  has  a  competitive  economy  and 
is  well  integrated  into the  single  market  for 
services.  According 
for 
to 
Management Development (88), Luxembourg is the 
20th  most  competitive  economy  in  the  world,  a 
good  position  despite  dropping  seven  places 
compared  to  the  year  before.  This  drop  is  mainly 
due 
the  deterioration  of  Luxembourg’s 
performance  in  international  investment  and  its 
domestic  economy,  with  a  fall 
in  GDP  and 
investments. However, it  remains  a top  performer 
in attracting talent and maintains a strong position 
in  international  investment  and  trade.  Its  single 
market  integration  is  the  highest  in  the  EU,  with 
exports  and 
imports  of  goods  and  services 
representing  113%  of  its  GDP  (EU  average  43%) 
(see  Table  A12.1).  This  is  mainly  explained  by 
Luxembourg’s 
in 
particular  financial  services:  in  2022,  exports  and 
imports  of  services  represented  87%  of  GDP,  far 
ahead of the EU average (12%), while exports and 
imports  of  goods  only  represented  26%  of  GDP, 
which  was  slightly  below 
the  EU  average 
(29%) (89).  

specialisation 

services, 

in 

have 

firms 

faced 

2022, 

Since 
an 
unfavourable  economic  climate  and  a  sharp 
increase  in  labour  costs,  which  weigh  on 
investment  and  competitiveness.  Geopolitical 
tensions,  rising  interest  rates,  high  prices  and 
inflation,  high  labour  costs  and  labour  shortages 
have harmed firms’ trust in the economic outlook. 
In  particular, 
labour  costs 
increase 
constitutes  a  major  challenge  for  64%  of 
Luxembourgish  firms (90).  All  these  factors  weigh 
on  investment:  21%  of  firms  plan  to  reduce  their 
investments  in  the  coming  months,  in  particular 
those  active  in  the  construction,  hospitality  and 
manufacturing sectors (91). 

the 

in 

Although  still  one  of  the  highest  in  the  EU, 
Luxembourg’s  labour  productivity  has  been 
stagnating  over  the  last  two  decades.  When 
looking  at  labour  productivity  levels  measured  as 
GDP per hour worked, Luxembourg has one of the 
highest  levels  in  the  EU.  When  analysing  labour 

(88)  Institute 

Management 
Competitiveness Ranking 2023 – Luxembourg, 6/2023. 

Development,  World 

for 

productivity in terms of growth rates, the situation 
looks  less  positive.  Graph  A12.1  shows  that  since 
2010,  Luxembourg’s 
labour  productivity  has 
evolved less favourably than that of the euro area 
and  its  neighbouring  countries (92).  In  2023,  it  is 
forecast to decrease by 3.3%, against a decrease 
of  0.7%  in  the  EU (93).  Differences  across  sectors 
are significant, both in terms of levels and growth. 
information  and 
in 
Labour  productivity 
communication  sector  has  declined  sharply  since 
2017 (94).  Since  2018,  labour  productivity  per 
person  in  industry  has  decreased  on  average  by 
nearly  0.5%  per  year,  while  it  has  increased  by 
1.6% on average in the EU (95). 

the 

Graph A12.1: Labour productivity (GDP per person 
employed, index 2010=100) 

Source: Eurostat 

represented  8.2%  of  GDP 

Low  productivity  gains  are  partly  explained 
by  low  business  investment,  including  in 
research  and  innovation.  In  2022,  business 
investment 
in 
Luxembourg  against  13.7%  in  the  EU.  This  is 
among  the  lowest  in  the  EU (96)  and  in  the 
OECD (97).  In 2023, investment in equipment grew 
less  in  Luxembourg  than  in  the  rest  of  the  EU 
(3.4%  against  4.2%) (98).  Business  expenditure  on 
R&D has continued to decline and fell to 0.50% in 
2022 against 1.48% in the EU (99), while non-R&D 

(92)  Eurostat, NAMA_10_LP_A21. 

(93)  European  Commission,  Spring  2024  forecasts-  statistical 

annex, 15/5/2024. 

(94)  Conseil  national  de  la  productivité,  rapport  annuel  2021-

2022, 12/2022, p.18. 

(95)  Eurostat, NAMA_10_LP_A21. 

(96)  Eurostat, SDG_08_11 

(89)  Eurostat, bop_c6_a 

(90)  Luxembourgish  Chamber  of  Commerce,  baromètre  de 

l’économie 2nd semester 2023. 

(91)  Ibid. 

(97)  OECD, Economic Surveys: Luxembourg 2022, 17/11/2022. 

(98)  European  Commission,Spring  2024  forecasts-  statistical 

annex, 15/5/2024. 

(99)  European Commission, Eurostat, RD_E_BERDPFR2  

52 

8590951001051102010Q22011Q22012Q22013Q22014Q22015Q22016Q22017Q22018Q22019Q22020Q22021Q22022Q22023Q2LuxembourgEuro area - 19 countriesBelgiumGermanyFrance 
 
 
          
 
 
innovation  expenditure  is  still  far  below  the  EU 
average despite some improvement. Investment in 
intangible  assets  is  significantly  below  the  EU 
aggregate, driven by weak investment in both R&D 
Innovation  Scoreboard (100) 
and  software.  The 
highlights  government  support  for  business  R&D 
as a relative weakness. Public support for business 
innovation  is  in  fact  still  low  (0.037%  of  GDP  in 
2019,  compared  to  an  EU  average  of  0.197%). 
Luxembourg  has  implemented  measures  to  boost 
business 
‘Fit  4’ 
performance  programmes.  However,  it  could  fund 
more  innovation  projects  in  partnerships  between 
the  public  research  system  and  businesses  (see 
Annex 11). 

innovation,  such  as 

the 

Labour 

shortages 

The lack of skilled staff is seen as the main 
long-term barrier to business investment. The 
availability of skilled staff is the most  cited long-
term  barrier  to  investment  by  Luxembourgish 
firms  (91%  vs  81%  in  the  EU) (101).  Despite  the 
high number of cross-border workers (47% of the 
workforce),  firms,  especially  small  and  medium-
sized  enterprises  (SMEs),  face  skills  shortages, 
particularly  machine  operators,  craft  and  skilled 
trade  workers (102). 
are 
particularly  high  in  the  construction  sector  (see 
Annex  14).  The  other  most  cited  barriers  to 
investment  are  energy  costs  (84%  vs  83%)  and 
uncertainty  about  the  future  (82%  vs  78%). 
Labour regulations are referred to more frequently 
by  Luxembourgish  firms  than  by  other  EU  firms 
(67%  vs  60%),  while  business  regulations  are 
mentioned less than in the rest of the EU (57% vs 
61%).  Despite  the  rise in  interest  rates,  access  to 
loans  and 
finance 
equity (103)  and  does  not  constitute  a  barrier  to 
investment for most  firms. On late payments, the 
situation is less favourable: the share of SMEs that 
experienced late payments reached nearly 70% in 
2023, significantly above the EU average (49%).  

remains  good  for  both 

Entrepreneurship  is  insufficiently  developed. 
Luxembourg  only  ranks  39th  out  of  47  countries 
for  total  early-stage  entrepreneurial  activity (104). 

(100) European  Commission, 
Luxembourg, 6/2023. 

Innovation  Scoreboard  2023, 

(101) European  Investment  Bank,  EIB  Investment  Survey  2023, 

10/2023. 

(102) European Commission, Flash Eurobarometer 529, 9/2023. 

(103) EIF SME Access to Finance Index. 

(104) Global Entrepreneurship Monitor 2023, 2/2023, pp. 142-143.  

53 

of 

and 

establishment 

industry  and  to  certain 

The  business  birth  rate  is  rather  low  (8.6%  vs 
10.7% in the EU in 2021) (105). Starting a business, 
while possible to do online, remains a cumbersome 
procedure (106).  Entrepreneurs’  fear  of  failure  is 
among  the  highest  in  the  EU.  To  modernise  the 
stimulate 
right 
entrepreneurship,  Luxembourg  amended  the  law 
governing  access  to  occupations  in  craft  trades, 
business  and 
liberal 
professions in 2023 (107). The law provides among 
other  things  for  the  digitalisation  of  some 
procedures  to  start  a  business,  the  promotion  of 
the  right  to  start  a  second  business  after 
bankruptcy, the simplification of the requirements 
relating  to  the  holder  of  the  business  licence  and 
business transfers, and the facilitation of access to 
certain craft professions (see below). However, this 
law  contains  restrictions,  as  pointed  out  by  the 
Luxembourgish Chamber of Commerce (108).     

the 

board (109), 

investments 

regulatory  framework 

including 
Tackling  structural  weaknesses, 
restrictive  regulations  in  services,  would 
improve  productivity.  According  to  the  national 
productivity 
in 
digitalisation,  research  and  innovation,  reskilling 
and  improvement  of  managerial  skills,  as  well  as 
adaptation  of 
to 
strengthen  competition,  are  key  to  improving 
productivity (see also the analyses in Annexes 10, 
11,  14  and  below).  Professional  licensing  rules  in 
Luxembourg are in fact among the most restrictive 
in  the  OECD.  Making  professional  regulations  less 
restrictive  could  increase  GDP  per  capita  by  0.6% 
over  5  years (110).  Compared  to  other  EU  Member 
States,  regulatory  restrictions  remain  particularly 
high  for  architects,  civil  engineers,  accountants 
and  tax  advisers,  lawyers  and  estate  agents (111). 
that  regulates  civil 
The  fragmented  system 
free  movement  of 
engineers  hinders 

the 

(105) Eurostat, birthrate, 2021. 

(106) OECD Economic Surveys: Luxembourg 2022, 17/11/2022. 

(107) Loi du 26 juillet 2023 portant modification de la loi modifiée 
du 2 septembre 2011 réglementant l’accès aux professions 
d’artisan,  de  commerçant,  d’industriel  ainsi  qu’à  certaines 
professions libérales.. 

(108) Réforme du droit d’établissement : la Chambre de Commerce 
juge les efforts de modernisation insuffisants, 13/7/2023.  

(109) Conseil  national  de  la  productivité,  Rapport  annuel  2022-

2023, 12/2023 

(110) OECD, Economic surveys: Luxembourg 2022, 17/11/2022.  

(111) European  Commission, Communication  on  updating  the 
in  professional 

reform  recommendations  for  regulation 
services, COM (2021)385, 9/7/2021. 

 
 
 
the  system  to  function  smoothly  and  to  reduce 
administrative burden. 

that 

rules 

categories 

professionals,  and 
the 
spread 
of 
over  different 
responsibility 
professionals  in  the  same  area  of  activity  affect 
the  proportionality  and  efficiency  of  service 
provision. The law governing access to occupations 
in  craft  trades,  business  and  industry  and  to 
certain  liberal  professions  deregulated  several 
craft  professions  such  as  photographer  or  knitter, 
for  which  a  professional  qualification  is  therefore 
no  longer  necessary.  In  the  retail  sector,  the 
regulatory  environment  for  both  establishing  and 
operating  shops  has  significantly  improved  since 
2018 (112).  However,  territorial  supply  constraints 
still  affect  consumer  choice  and  prices.  In  2022, 
food  prices  in  Luxembourg  were  among  the 
highest in the EU (113). 

Luxembourg’s  administration  performs  well 
on  single  market  indicators.  The  country  has 
shortened  the  time  taken  to  transpose  single 
market  directives  into  national  law.  It  needs  10.1 
months  to  transpose  directives  (EU  average  18.3 
months) (114).  Its  transposition  deficit  was  1%  (EU 
average  0.7%).  On  single  market  infringements, 
Luxembourg performs well: it has been among the 
Member States with the fewest cases since 2010. 
However, the duration of infringement proceedings 
is  increasing  and  now  exceeds  the  EU  average. 
Luxembourg  solved  83.0%  of  the  24  cases  it 
handled  as  lead  centre,  below  the  EU  average  of 
88.3%.    Businesses’  access  to  public  procurement 
remains satisfactory, and the share of single bids 
is slightly below the EU average.  

Luxembourg  is  in  the  intermediate  stage  of 
implementing  the  components  needed  to  connect 
to  the  ‘Once-Only’  Technical  System  (OOTS) (115). 
the  Single  Digital  Gateway 
As  part  of 
Regulation (116), 
the 
the  system  will  enable 
automated  cross-border  exchange  of  evidence 
between  competent  authorities,  improving  online 
access  to  information,  administrative  procedures 
and  assistance  within  the  EU.  The  onboarding  of 
Luxembourg’s  competent  authorities  is  crucial  for 

(112) European  Commission,  2022  update  of 

the  Retail 

Restrictiveness Indicator 

(113) Eurostat,  Comparative  price  levels  of  consumer  goods  and 

services for 2022 

(114) European  Commission,  Single  Market  Scoreboard  .  See  also 

Table A12.1.  

(115) Implementing Regulation (EU) 2022/1463 

(116) Regulation (EU) 2018/1724  

54 

 
 
Table A12.1:Single Market and Industry 

Source:  (1)  AMECO,  (2)  Eurostat,  (3)  Single  Market  Scoreboard,  (4)  OECD,  (5)  ECFIN  BCS,  (6)  COMEXT  and  Commission 
calculations,  (7)  EIB  Investment  Survey,  (8)  Intrum  Payment  Report,  (9)  SAFE  survey,  (10)  EIF  SME  Access  to  Finance  Index. 
* Own Commission calculations for the EU27 average 

55 

POLICY AREAINDICATOR NAME20192020202120222023EU27 average*Net Private investment, level of private capital stock, net of depreciation, % GDP14.22.24.63.22.83.8Net Public investment, level of public capital stock, net of depreciation, % GDP11.82.21.71.51.91.2Real labour productivity per person in industry (% yoy)210.4-22.8-11.76.3-1.24Cost competitivenessNominal unit labour cost in industry (% yoy)2-8.10.92.717.80.99.83Single Market integrationEU Trade integration, % (Average intra-EU imports + average intra EU exports)/GDP2112.5109.6117.3116.8112.842.9Transposition deficit, % of all directives not transposed30.61.91.81.510.7Conformity deficit, % of all directives transposed incorrectly30.70.90.80.80.51.1SOLVIT, % resolution rate per country350.093.876.980.083.088.3Number of pending infringement proceedings3111118131025.9RestrictionsEEA Services Trade Restrictiveness Index40.070.070.070.070.070.05Single bids, % of total contractors3172018232728.6Direct Awards, %3386648.1Material Shortage (industry), firms facing constraints, %55.34.618.314.210.717.2Labour Shortage using survey data (industry), firms facing constraints, %56.512.016.427.019.623.3Vacancy rate, % of vacant posts to all available ones (vacant + occupied)21.91.82.33.12.32.5Concentration in selected raw materials, Import concentration index based on a basket of critical raw materials60.170.150.160.180.190.22Installed renewables electricity capacity, % of total electricity produced20.90.90.90.950Investment obstaclesImpact of regulation on long-term investment, % of firms reporting business regulation as major obstacle711.010.412.310.015.022.2Bankruptcies, Index (2015=100)2125.7104.4117.0104.7105.1105.6Business registrations, Index (2015=100)2113.1104.0112.596.7107.9120.2Payment gap - corporates B2B, difference in days between offered and actual payment8-----15Payment gap - public sector, difference in days between offered and actual payment8-----16Share of SMEs experiencing late payments in past 6 months, %949.339.168.753.269.648.7EIF Access to finance index - Loan, Composite: SME external financing over last 6 months, index values between 0 and 1100.720.490.890.70-0.49EIF Access to finance index - Equity, Composite: VC/GDP, IPO/GDP, SMEs using equity, index values between 0 and 110 0.190.110.410.37-0.17LuxembourgHEADLINE INDICATORSEconomic StructureSINGLE MARKETComplianceLate paymentsAccess to financePublic procurement ECONOMIC STRUCTUREShortagesStrategic dependenciesBUSINESS ENVIRONMENT - SMEsBusiness demography 
 
  
 
ANNEX 13: PUBLIC ADMINISTRATION 

public 

administration 

Luxembourg’s 
is 
essential for providing services and carrying 
out reforms. Perceived government effectiveness 
in  Luxembourg  remains  one  of  the  highest  in  the 
improved  compared  to 
EU  and  has  slightly 
previous  years  (Graph  A13.1).  The  new  coalition 
government  formed  in  2023  announced  public 
administration 
service 
provision.  These  will  be  carried  out  through 
initiatives  on  modernisation  and  attractiveness  of 
the  civil  service,  digitalisation  and  process 
simplification,  and 
legal 
framework for local authorities (117). 

improvement  of  the 

focused  on 

reforms 

Graph A13.1: Government effectiveness 

Average value over 2018-2022 and change over 2018-2022. 
The  GDP  per  head  bar  shows  the  mean  value  of  the 
government  effectiveness  indicator  for  the  group  of  EU 
countries  belonging  to  the  same  GDP  per  head  cluster  as 
Luxembourg  (EU  countries  are  ranked  in  terms  of  their  GDP 
per head and grouped into three equally sized clusters). 
Source: Worldwide Governance Indicators 

the 

Overall,  Luxembourg 
is  one  of  the  top 
performers  in  e-government  (Table  A13.1). 
Planned  measures  under 
recovery  and 
resilience  plan  include  the  digitalisation  of  public 
services so that more people and businesses have 
access.  The  new  government  has  also  announced 
other initiatives to develop a digital wallet for safe 
online  identification,  access  to  official  documents 
and secure storage. 

governance 

Regulatory 
several 
challenges.  Ex  ante  impact  assessments  are 
carried out for all new laws, but only included as a 
short annex to draft bills. Ex post assessments are 

faces 

(117) Accord de coalition 2023-2028, gouvernement.lu. 

56 

neither  done  systematically  nor  publicly  available. 
There are no new initiatives to evaluate the quality 
of laws and regulations. The government is taking 
steps  to  make  future  legislation  digital-ready, 
proactively  examining  the  compatibility  of  new 
laws  with  digital  requirements  and  avoiding 
additional costs and administrative burden (118). 

Civil  servants  in  Luxembourg  are  young 
compared to the EU average.  However, gender 
parity in senior civil service positions is still one of 
the lowest in the EU although it recovered from its 
lowest point in 2022 (Graph A13.2c). The share of 
civil  servants  with  higher  education  is  also  below 
the EU average (Table A13.1). One of the country's 
strategic objectives is to be an attractive employer 
as set  out  in the 2022-2024 work programme of 
the  Centre  for  Personnel  Management  and 
Organisation  of  the  State (119).  In  that  respect,  an 
employer brand content strategy was created and 
to  promote 
was 
government  jobs  in  2023.  According  to  the  latest 
Adult  Education  Survey,  participation  in  lifelong 
learning  in  the  public  administration  and  average 
instruction  hours  by  participants  are  also  below 
the  EU  average  (Graph  A13.2a-b).  To  promote 
learning, 
for  Public 
Administration  is  working  on  the  GovCampus 
introduce  new  digital 
programme,  which  will 
solutions  for  managing  training  and  promoting 
skills development in the public sector (120). 

followed  by  a  campaign 

the  National 

Institute 

To address fiscal challenges, the independent 
fiscal  institution  could  be  strengthened.  The 
National  Council  of  Public  Finances 
(CNFP)’s 
monitoring  could  be  reinforced,  in  particular  by 
improving its access to more detailed information 
beyond  the  aggregates  published  by  STATEC  and 
the budgetary legislative texts.  

justice  system  performs  efficiently, 
The 
although  the  digitalisation  of 
is 
lagging  behind  other  EU  countries (121).  The 
efficiency  of  civil  justice  continues  to  be  high 

justice 

(118) European  Commission,  DG  REFORM,  Public  administration 
and governance: Luxembourg, Publications Office of the EU, 
2024 (forthcoming). 

(119) Ministry of Civil Service, Luxembourg, gouvernement.lu. 

(120) European  Commission,  DG  REFORM,  Public  administration 
and governance: Luxembourg,  Publications Office of the EU, 
2024 (forthcoming). 

(121) For  a  more  detailed  analysis,  see  the  2024  EU  Justice 
Scoreboard and the 2024 Rule of Law Report (forthcoming). 

-0.20.00.20.40.60.81.01.21.41.61.82.0LUEU-27GDP perhead clusterChange 2018-2022Average 2018-2022 
 
      
 
 
 
Table A13.1:Public administration indicators 

(1) High values denote a good performance, except for indicator # 6. (2) 2023 value. If unavailable, the latest value available is 
shown. (3) Measures the user centricity (including for cross-border services) and transparency of digital public services as well as 
the existence of key enablers for the provision of those services. (4) Defined as the absolute value of the difference between the 
percentage of men and women in senior civil service positions. 
Flags: (b) break in time series; (d) definition differs; (u) low reliability. 
Source: E-government activities of individuals via websites, Eurostat (# 1); E-government benchmark report (# 2); Open data 
maturity report (# 3); Labour Force Survey, Eurostat (# 4, 5, 7); European Institute for Gender Equality (# 6); Fiscal Governance 
Database (# 8, 9); OECD Indicators of Regulatory Policy and Governance (# 10). 

Graph A13.2: Adult education: a) participation rate in job-related employer-sponsored education and 
training (left side); b) average instruction hours spent by participants in education and training by 
sector (centre); c) share of women and men in management positions in the public administration 

Source: Eurostat, Adult Education Survey (charts a and b); European Institute for Gender Equality (chart c) 

follow  proceedings 
in  civil,  commercial  and 
administrative cases. On judicial independence, no 
systemic deficiencies have been reported. 

although the length of proceedings is significantly 
longer  at  second  and  third  instances  despite 
improvements (in 2022, 182 days at first instance, 
464  days  at  second  instance  and  216  days  at 
third  instance).  However,  digitalisation  of  the 
system  needs  improvement.  There  are  still  very 
few  digital  solutions  available  to  initiate  and 

57 

LU20192020202120222023EU-27(2)1n/an/an/a90.989.475.02n/a84.387.188.889.675.830.60.60.70.70.80.8435.438.542.9 (b)41.842.752.9520.814.917.7 (b)18.8 (u)14.217.9642.848.443.853.442.69.272.52.72.8 (b)3.33.51.580.70.80.80.8n/a0.790.70.80.80.8n/a1.410n/an/a1.43n/an/a1.7Medium-term budgetary framework indexIndicator (1)E-government and open government dataShare of internet users within the last year that used a public authority website or appE-government benchmark overall score (3) Open data and portal maturity indexEducational attainment level, adult learning, gender parity and ageingShare of public administration employees with higher education (levels 5-8, %)Participation rate of public administration employees in adult learning (%)Gender parity in senior civil service positions (4)Ratio of 25-49 to 50-64 year olds in NACE sector OPublic financial management Strength of fiscal rules indexEvidence-based policy makingRegulatory governance020406080100120140160Publicadministration(O)Education (P)Health andsocial work(Q)Totaleconomyb)Average instruction hoursLUEU-270102030405060708090100LUEU-27LUEU-27LUEU-27Level 1administratorsLevel 2administratorsSenioradministratorsc) Gender parityMenWomen0%10%20%30%40%50%60%70%Publicadministration(O)Education (P)Health andsocial work(Q)Totaleconomya) Adult learningLUEU-27 
 
 
       
 
  
FAIRNESS 
ANNEX 14: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
THE EUROPEAN PILLAR OF SOCIAL RIGHTS 

qualified 

jobseekers 

increases in unemployment were recorded among 
the  most 
(university 
graduates)  and young people under 30. The long-
term  unemployment  rate  has  also  started  to  rise 
slowly. Moreover, there are challenges for specific 
groups. Despite an increase of 7 percentage points 
(pps)  since  2016,  the  employment  rate  of  older 
workers  (aged  55-64)  remains  the  lowest  in  the 
EU  (46.3%  in  2023  against  an  EU  average  of 
63.9%). At the same time, the employment rate of 
low-skilled  people  continued  to  improve  (reaching 
62%  in  2023).  The  employment  gap  between 
people born in or outside the EU reached   7.8 pps 
in  2023  and  the  unemployment  rate  differential 
between  those  two  categories  is  still  significant 
(8.9  pps  in  2023).    The  overall  employment  rate 
remained  stable  in  2023  (74.8%,  as  in  2022), 
slightly  below  the  EU  average.  Addressing  these 
challenges  will  help  Luxembourg 
its 
employment  rate  target  of  77.6%  by  2030  and 
improve  the  sustainability  of  public  finances.  The 
(ESF+)  supports 
European  Social  Fund  Plus 
measures  to  strengthen  active  labour  market 
policies,  with  a  focus  on  digital  skills  and  jobs, 
targeting  young  people,  low-skilled  people,  the 
long-term  unemployed,  women  and  people  aged 
over 45.  

reach 

in  construction) 

Luxembourg faces labour shortages. Although 
the job vacancy rate was 1.9% in Q2-2023, which 
is below the EU average (2.7%), in October 2023 a 
high proportion of employers (16% in industry and 
labour 
49% 
shortages  were  a  factor  limiting  their  production. 
The  rate  is  especially  high  in  construction,  almost 
double  the  EU  average  (27%),  but  it  is  below  the 
EU  average  for  industry  (22%).  Compared  to  pre-
pandemic  levels,  labour  shortages  more  than 
tripled  in  industry  and  more  than  doubled  in 
construction. 

reported 

that 

overall 

Luxembourg’s 

Despite 
strong 
performance on skills, mismatches are higher 
than the EU average and might contribute to 
low 
labour  shortages 
unemployment. In 2022, the mismatch across all 
skills  levels  amounted  to  23.8%  (EU:  20.2%). 
Among  small  and medium-sized  enterprises,  80% 
find it difficult to find workers with the right skills 

in  a  context  of 

The  European  Pillar  of  Social  Rights  is  the 
compass  for  upward  convergence  towards 
better  working  and  living  conditions  in  the 
EU.  This  Annex  provides  an  overview  of 
Luxembourg’s progress in implementing the Pillar’s 
20  principles  and  the  EU  headline  and  national 
targets  for  2030  on  employment,  skills  and 
poverty reduction. 

Table A14.1:Social Scoreboard for Luxembourg 

Update of 25 April2023. Members States are categorised 
based on the Social Scoreboard according to a methodology 
agreed with the EMCO and SPC Committees. Please consult 
the Annex of the Joint Employment Report 2024 for details on 
the methodology. 
Source: Eurostat 

Luxembourg’s labour market proved resilient 
in  2022  but  weakened  in  2023  due  to  a 
slowdown in economic activity, notably in the 
financial, trade and construction sectors. As a 
result,  the  total  number  of  job  vacancies  fell  by 
40% in 2023 according to the public employment 
service (122). This was mirrored by a slight increase 
in  the  unemployment  rate  from  4.6%  (Q4-2022) 
to 5.4% (Q4-2023), the highest level for over two 
years.  According  to  national  data,  the  biggest 

(122) https://adem.public.lu/en/actualites/adem/2023/12/cc-2023-

11.html 

58 

45.26.860.18.56.84.574.85.21.7111.219.42433.728.515.254.70.5Critical situationTo watchWeak but improvingGood but to monitorOn averagePolicy areaHeadline indicatorEqual opportunities and access to the labour marketAdult participation in learning (during the last 12 months, excl. guided on the job training, % of the population aged 25-64, 2022)Early leavers from education and training(% of  the population aged 18-24, 2023)Share of individuals who have basic or above basic overall digital skills(% of the population aged 16-74, 2023)Young people not in employment, education or training(% of the population aged 15-29, 2023)Gender employment gap(percentage points, population aged 20-64, 2023)Income quintile ratio (S80/S20, 2022)Dynamic labour markets and fair working conditionsEmployment rate(% of the population aged 20-64, 2023)Unemployment rate(% of the active population aged 15-74, 2023)Long term unemployment(% of the active population aged 15-74, 2023)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2022)Social protection and inclusionAt risk of poverty or social exclusion (AROPE) rate (% of the total population, 2022)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2022)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2022)Disability employment gap (percentage points, population aged 20-64, 2022)Housing cost overburden (% of the total population, 2022)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2022)Self-reported unmet need for medical care (% of the population aged 16+, 2022)Better than averageBest performers 
 
 
 
   
 
 
 
also 

(39.5%). 

undermine 

the  EU  average 

and  58%  to  keep  skilled  workers (123).  Labour 
shortages and skills mismatches, along with other 
challenges, 
Luxembourg’s 
potential  to  invest  and  improve  its  economic 
competitiveness  (see  Annex  12).  Participation  in 
adult learning over the previous 12 months rose to 
45.2%  in  2022,  2.6  pps  up  from  2016  and  well 
above 
In  2023, 
Luxembourg  surpassed  the  EU  average  of  55.5% 
of  individuals  aged  16-74  with  at  least  basic 
digital  skills  (60.1%).  Participation  of  adults  in 
learning is still remarkable for unemployed people 
at  42.3%  in  2022  (vs.  EU:  29.2%)  but  lags  for 
older workers (27.4% vs. EU: 29.4) and people with 
a  low  level  of  qualifications  (24.2  vs.  25.1%). 
Although, according to Eurostat, exposure to work-
based learning of recent vocational education and 
training  (VET)  graduates  was  lower  than  the  EU 
average  in  2022  (33.7%  vs.  EU:  60.1%),  the 
employment  rate  of  VET  graduates  (ISCED  3-4) 
was  well  above  the  EU  average  (92.1%  vs.  EU: 
77.4%).  To  address 
the 
government, 
social  partners, 
conducted  sectoral  studies  on  trends  in  future 
professions  and  skill  requirements,  and  on  the 
creation of a national skills strategy (included as a 
reform  in  the  recovery  and  resilience  plan).  This 
was followed by the Skills Plang bill introduced in 
June  2023.  As  of  September  2023,  Luxembourg 
simplified  access  to  skilled  jobs  (IT,  healthcare, 
engineering,  finance  and  business  support  and 
certain  building  trades)  for  non-EU  nationals.  The 
lifelong 
ESF+  supports  measures  promoting 
learning  in  connection  with  skills  needs.  Those 
measures are expected to help Luxembourg reach 
the national target of at least 62.5% of all adults 
participating  in  education  and  training  every  year 
by 2030. 

these  challenges, 

together  with 

The  educational  performance  of  pupils  is 
closely  linked  to their  socio-economic  status 
and  linguistic  background.  Based  on  the  latest 
available  data (124),  the  average  levels  of  pupils’ 
performance  were  significantly  lower than  the  EU 
average  in  reading,  mathematics,  and  science. 
Moreover,  the  gap  between  advantaged  and 
disadvantaged students remains the largest in the 
EU.  The  rate  of  early  leavers  from  education  and 

(123) https://europa.eu/eurobarometer/surveys/detail/2994 

(September 2023). 

(124) As  measured  by  the  OECD  Programme  for  International 
Student  Assessment  (PISA);  reference  data  from  2018  as 
Luxembourg did not participate in the latest 2022 study. 

training  (6.8%)  is  below  the  EU-level  target, 
showing  a  strong  correlation  with  generally 
excellent  repetition  (see  Annex  15).  The  ESF+ 
supports  measures  to  improve  education  and 
training  and  career  guidance,  fight  early  school 
integration  of  young 
leaving,  and  boost  the 
refugees and migrants into the school system.  

Some  groups  remain  more  exposed  to 
poverty and social exclusion than the rest of 
the population. While the share of people at risk 
of poverty or social exclusion (AROPE) is below the 
EU  average  and  falling  (from  21.1%  in  2021  to 
19.4%  in  2022),  38.3%  of  people  not  born  in the 
EU  were  AROPE,  26  pps  higher  than  the  share  of 
people born in Luxembourg. The risk of poverty or 
social  exclusion  among  children  was  at  24%  in 
2022, close to the EU average. 54.7% of children 
under  3  years  of  age  benefited  from  childcare  in 
2022,  well  above  the  EU  average 
(35.7%). 
the  most 
However, 
vulnerable  groups,  mirroring  those  in  the  labour 
market.  Regarding  childhood  education  and  care, 
the  enrolment  gap  between  children  AROPE  and 
those not at a risk was 24.9 pps in 2022 (21.6 pps 
in 2021). 

inequalities  persist 

for 

Table A14.2:Situation of Luxembourg on 2030 
employment, skills and poverty reduction targets 

(1) Adult Education Survey, adults in learning in the past 12 
months, special extraction excl. guided on-the-job training. 
(2) Change in the number of persons at risk of poverty or 
social exclusion (AROPE), reference year 2019. 
Source: Eurostat, DG EMPL. 

In-work poverty remains high in Luxembourg. 
There is a positive correlation between the in-work 
poverty rate in Luxembourg (12.9% vs. EU: 8.5% in 
2022)  and  a  low  level  of  educational  attainment, 
having  dependent  children,  living  in  a  household 
with low work intensity or being a foreigner a rate 
of  33.4%  for  non-EU  born  vs.  EU:  19.9%).  Single 
parent  families  are  the  type  of  household  most 
exposed to economic precariousness (125). In 2022, 
the  housing  cost  overburden  rose  to  15.2% (126) 

(125) STATEC Rapport Travail et Cohésion Sociale 2023 p. 96. 

(126) Break in time series from 2020 to 2022. 

59 

IndicatorsLatest dataTrend            (2016-2022)2030 targetEU target 74.8(2023)45.2(2022)2(2022)Poverty reduction2 (thousands)-4-15,000Employment (%)77.678Adult learning1 (%)62.560 
 
 
  
 
 
increasing 

(EU:  8.7%).  This  phenomenon  is  mainly  driven  by 
population growth, a limited housing supply and a 
high level of  income disparity in Luxembourg city. 
Although almost all household types are affected, 
the 
lack  of  affordable  housing 
aggravates  the  risk  of  poverty  in  lower  income 
groups.  The  government  proposed 
several 
measures  in  2024  to  increase  the  supply  of 
affordable  housing.  The 
these 
measures  on  the  most  vulnerable  will  need  to  be 
assessed.  Measures  under  the  ESF+  will  help 
further  reduce  poverty  by  assisting  people  from 
vulnerable  groups  to  find  jobs  or  training,  and  by 
dedicating  6%  of  the  resources  of  the  ESF+  to 
tackling child poverty. This will help Luxembourg to 
achieve its national target of lifting at least 4 000 
people, including 1 300 children, out of poverty by 
2030. 

impacts  of 

60 

 
ANNEX 15: EDUCATION AND TRAINING 

This  Annex  outlines  the  main  challenges  of 
training  system 
Luxembourg’s  education  and 
based on the 2023 Education and Training Monitor 
and  the  2022  OECD  Programme  for  International 
Student Assessment (PISA) results. 

Teachers’ working conditions are favourable, 
yet  teaching  positions  are  difficult  to  fill. 
High salaries, good job security, small classes and 
few  teaching  hours  make  teaching  interesting  for 
young people. Entering the profession, however, is 
difficult:  applicants  for  tenure  are  selected  from 
studies  via  open 
graduates 
competition where subject knowledge is tested. In 
addition,  teachers  must  be  proficient  in  the  three 
national 
teacher 
In 
shortages,  the  University  of  Luxembourg  has 
extended its offer of education programmes. 

in  education 

languages. 

response 

to 

From  the  age  of  3,  participation  in  early 
childhood education and care (ECEC) is below 
the EU average. 88.9% of children from the age 
of  3  participate  in  ECEC,  below  the  EU  average 
(92.5%)  and  the  EU-level  target  (96%)  for  2030. 
Despite activities to familiarise children aged 1 to 
4  with  Luxembourgish  and  French,  a  recent 
study (127)  shows  that  the  impact  of  participation 
in ECEC on early literacy is small, and insignificant 
on mathematics. The study calls for the promotion 
of  German  in  ECEC  to  prepare  children  better  for 
primary education and to align language policies in 
ECEC and later schooling. 

Pupils’  performance  is  strongly  linked  to 
their  socio-economic  status  and  linguistic 
background. In 2018 (128), Luxembourg’s average 
competence  levels,  as  measured  by  the  OECD 
Programme  for  International  Student  Assessment 
(PISA),  were  significantly 
lower  than  the  EU 
average  in  all  three  areas  tested.  The  score  gap 
between  advantaged  and  disadvantaged  students 
was  the  largest  one  observed  across  all  EU 
countries.  The  national  competence  tests  show 
that, at the time of starting school, pupils have the 
essential  basic  skills  to  begin  acquiring  literacy, 
even though significant differences in these initial 
skills could be identified (129). However, by the time 
pupils  start  year  3  in  primary  school,  aged  8,  the 

(127) Luxembourg Centre for Educational Testing: Early Childhood 

Education and Care in Luxembourg 

(128) Luxembourg did not participate in the 2022 PISA survey. 

(129) Hornung et al. (2021) In: University of Luxembourg, 

Luxembourg Centre for Educational Testing: Bildungsbericht 

skills  gap  widens.  Pupils’  performance  in  German 
reading comprehension and maths falls noticeably, 
particularly  the  performance  of  pupils  from  a 
disadvantaged background or of those whose first 
language is neither German nor Luxembourgish. In 
September  2022,  Luxembourg  launched  a  pilot 
project in four primary school classes, where pupils 
start  learning  first  in  French,  then  continue  in 
German. 
If  extended  to  more  schools,  this 
approach  could  help  improve  the  performance  of 
pupils whose first language is French. Furthermore, 
the  number  of  European  public  schools  has 
increased to six. Pupils in these schools can choose 
between English, French or German as main tuition 
language.  The  option  of  teaching  through  one 
main  language  may  substantially  improve  pupils’ 
learning outcomes, who struggle with the trilingual 
system.  As  of  2022-2023,  Luxembourg  offers 
pupils free school meals and after-school facilities. 

Graph A15.1: Changes in writing comprehension in 
German in year 3 of primary school, depending on 
socio-economic status between 2018 and 2020 

Source: LUCET 2021. Note: Pupils’ achievements are 
standardised so that the mean value of the respective 
reference cohort is always 500 and the standard deviation 
100 (Fischbach et al., 2014) 

The rate of early leavers from education and 
training  (ELET)  (6.8%)  is  already  below  the 
EU-level  target  (below  9%).  In  2020-2021, 
80%  of  pupils  who  dropped  out  had  repeated  a 
year at least once (130). The repetition rate remains 
high:  by  the  end  of  primary  education  (age  12), 
21%  of  pupils  will  have  repeated  at  least  one 

(130) Ministère de l’Éducation nationale, de l’Enfance et de la 
Jeunesse: jeunes décrocheurs et jeunes inactifs au 
Luxembourg 2021/2022 

61 

5665675754614494340100200300400500600201820192020PointsAdvantaged studentsDisadvantaged students 
 
 
  
 
 
 
Table A15.1:EU-level targets and other contextual indicators under the European Education Area 
strategic framework 

Notes: b = break in time series; d = definition differs; e = estimated; p = provisional; u = low reliability; : = data not available.  
Source: 1,3,4,5,7,8,9,10,12=Eurostat; 11= Eurostat, Adult Education Survey; 2,6=OECD, PISA. 

Overall participation in VET and in lifelong learning 
activities is high (see Annex 14). 

school  year (131).  Across  the  different  secondary 
education sectors, most young people dropped out 
of  vocational  education  and  training  (VET)  (38%) 
the  second  cycle  of  general  secondary 
or 
education 
(enseignement  secondaire  général) 
(23%). In 2019-2020, 55% of early school leavers 
were  of  foreign  nationality  while  they  only  made 
up  33%  of  the  school  population (132).  To  reduce 
early school leaving and youth unemployment, the 
compulsory school  age was raised from 16 to 18 
in 2023, to be in force as of 2026-2027. 

The  tertiary  educational  attainment  rate  is 
among the highest in the EU, with 60.2% of the 
population  aged  25-34  holding  a  tertiary  degree 
(EU 43.1%). The rate is significantly higher among 
the  migrant  population  (67.2%,  compared  with 
52.7% of people born in Luxembourg). This is close 
to  the  level  before  the  COVID-19  pandemic. 

(131) Ministère de l’Éducation nationale, de l’Enfance et de la 

Jeunesse: Enseignement fondamental - Statistiques globales 
et analyse des résultats scolaires 2020-2021 

(132) Le fonctionnement du système d’intégration et ses acteurs 

au Grand-Duché de Luxembourg 

62 

96%89.9%201391.8%201387.2%92.2%88.9%202192.5%2021,dReading< 15%22.2% 18.0%29.3% 22.5%:026.2%2022Mathematics< 15%24.3% 22.1%27.2%22.9%:029.5%2022Science< 15%22.2% 16.8%26.8%22.3%:024.2%2022< 9 %8.1%12.6%6.3%10.5%6.8%u9.5%Men10.7%14.5%6.8%12.1%8.5%u11.3%Women5.5%10.6%5.9%8.7%:u7.7%Cities9.8%b11.2%:u9.4%:u8.6%Rural areas6.9%bu14.0%4.9%u11.0%:u9.9%5By country of birthNative7.1%11.3%6.5%9.2%7.2%u8.2%EU-born11.5%u26.2%5.0%u22.4%:u21.0%Non EU-born:u30.1%:u23.0%:u21.6%6Socio-economic gap (percentage points)36.3:37.529.5:202237.220227Exposure of VET graduates to work-based learning≥ 60% (2025) ::: :34.5% 64.5%45%49.9%34.1%53.7%38.7%60.2%43.1%Men47.8%29.1%49.5%33.3%55.7%37.6%Women52.0%39.2%57.9%44.2%65.0%48.8%Cities64.7%b43.5%79.0%49.0%89.2%53.3%Rural areas41.8%b24.8%45.8%27.7%53.2%31.7%Native43.2%35.4%47.6%39.7%54.3%44.2%EU-born56.9%29.3%58.8%36.7%67.0%40.2%Non EU-born51.0%24.2%55.1%31.0%60.3%37.1%11Participation in adult learning (age 25-64)≥ 47% (2025) ::42.6%201637.4%201645.2%202239.5%202211.8%201322.7%201311.6%23.8%9.9%202124.5%2021Tertiary educational attainment (age 25-34)8Total8By gender9By degree of urbanisation10By country of birth12Share of school teachers (ISCED 1-3) who are 55 years or over1Participation in early childhood education (age 3+)2Low-achieving 15-year-olds in:Early leavers from education and training(age 18-24)3Total3By gender4By degree of urbanisation201220182023IndicatorTargetLuxembourgEU-27LuxembourgEU-27LuxembourgEU-27 
 
 
  
 
profile  of  the  Luxembourgish  population,  public 
expenditure  on  health  is  projected  to  increase  by 
1.0 percentage  points  (pps)  of  GDP  by  2070, 
compared  to  0.6 pps  for  the  EU  overall  (see 
Graph 16.2 and Annex 21). 

Graph A16.2: Projected increase in public 
expenditure on healthcare over 2024-2070 

ANNEX 16: HEALTH AND HEALTH SYSTEMS 

A  healthy  population  and  an  effective, 
accessible  and  resilient  health  system  are 
prerequisites  for  a sustainable  economy and 
society.  This  Annex  provides  a  snapshot  of 
in 
population  health  and  the  health  system 
Luxembourg. 

Life  expectancy  in  Luxembourg  is  above  the 
EU  average  and  has  rebounded  after  falling 
slightly in 2020 at the onset of the COVID-19 
pandemic.  Luxembourg  fares  comparatively  well 
in avoiding deaths from treatable causes. In 2021, 
cancers  and  diseases  of  the  circulatory  system 
(‘cardiovascular diseases’) were the leading causes 
of death, followed by COVID-19. 

Graph A16.1: Life expectancy at birth, years 

Baseline scenario 
Source: European Commission / EPC (2024) 

Source: Eurostat 

relative 

spending 

to  GDP 

in 
Health 
Luxembourg  was  below  the  EU  average  in 
is  partly  due  to  data 
2021.  However,  this 
regarding  Luxembourg’s 
issues 
comparability 
GDP (133).  In  2021,  total  health  spending  as  a 
proportion  of  GDP  decreased  slightly  to  5.7% 
(from 5.8% in 2020), but in real terms total health 
spending  increased  by  around  10%  compared  to 
2020. Provisional data suggest that in 2022 total 
health  spending  fell  back  to  5.5%  of  GDP.  Health 
spending  per  capita  in  Luxembourg  is  among  the 
highest in the EU. Public expenditure on health as 
a  proportion  of  total  health  spending  is  also 
among the highest in the EU at 86%, above the EU 
average of 81.1%. Consequently, the share of out-
of-pocket  spending  for  health  in  Luxembourg  is 
among  the  lowest  in  the  EU.  Based  on  the  age 

(133) A  significant  proportion  of  GDP  in  Luxembourg  consists  of 
profits from foreign-owned companies which are repatriated. 
Gross  national  income  can  be  used  as  an  alternative 
measure of the domestic economy in Luxembourg.  

spending  on  prevention 

In  2021, 
in 
Luxembourg  amounted  to  6.6%  of  total 
spending  on  healthcare,  compared  to  6.0% 
for  the  EU  overall.  Between  2019  and  2021, 
spending  on  prevention  in  Luxembourg  increased 
by  around  168%,  compared  to  a  106%  increase 
for  the  EU  overall.  Proportionally,  budget  shares 
for  prevention  across  the  EU  increased  most  for 
emergency 
response,  disease  detection  and 
immunisation  programmes.  In  Luxembourg,  the 
in  the 
main  factors  explaining  the 
spending  on  preventive  care  in  2021  are  early 
disease 
immunisation  measures, 
epidemiological  surveillance  and  risk  and  disease 
control  programmes.  Provisional  data  for  2022 
indicate  a  stark  drop  to  4.7%  of  total  health 
spending going to  preventive  care. Heavy  drinking 
continues  to  be  a  major  public  health  issue  in 
Luxembourg  and  will  require  more  attention  in 
prevention and health promotion measures. 

detection, 

increase 

Luxembourg  faces  a  shortage  of  doctors. 
There  were  3 practising  doctors  per  1 000 
population in Luxembourg in 2021 (against an EU 
average  of  4.1)  and  the  increase  since  2010  is 
small.  Luxembourg’s  health  system  strongly 
depends on staff who are resident in neighbouring 
countries,  making  it  particularly  vulnerable  in 
crises  that  necessitate  border  closures.  This 
concerns two thirds of nurses and half of doctors 
practising  in  Luxembourg.  The  age  structure  adds 
to  the  challenge:  in  2017,  43.4%  of  doctors  were 
aged 55 or over, with 54.4% of practising general 
practitioners  and  60%  of  specialists  over  the  age 

63 

82.182.382.782.282.783.080.981.081.380.480.180.6201720182019202020212022LuxembourgEU6.64.10.61.002468EULuxembourg% of GDP20242070increase 
 
 
   
 
   
 
Table A16.1:Key health indicators 

Note: The EU average is weighted for all indicators except for doctors and nurses per 1 000 population, for which the EU simple 
average is used. Doctors’ density data refer to practising doctors in all countries except Greece, Portugal (licensed to practise) and 
Slovakia  (professionally  active). Nurses’  density  data  refer  to  practising nurses  in  all  countries except  Ireland,  France,  Portugal, 
Slovakia (professionally active) and Greece (hospital only). 
Source: Eurostat Database; except: * OECD, ** Joint Questionnaire on non-monetary healthcare statistics, *** ECDC, **** Council 
Recommendation on stepping up EU actions to combat antimicrobial resistance in a One Health approach. 

a 

and 

implementing 

developing 
national 
digitalisation  strategy,  including  electronic  health 
records.  Together,  these  measures  may  help 
Luxembourg  overcome  a  slow  uptake  of  digital 
health  solutions.  For  example,  the  number  of 
individuals  accessing  personal  health  records 
online  in  Luxembourg  is  below  the  EU  average, 
indicating a lagging uptake of e-health and overall 
health systems digitalisation. 

launched. 

in  medical  science  was 

of 50. The low density of doctors is mostly due to 
the  absence  of  medical  training  in  the  country 
before  2021,  when  the  first  national  bachelor’s 
In 
degree 
contrast,  the  density  of  nurses  in  Luxembourg  is 
one  of  the  highest  in  the  EU  (at  approximately 
11.7 nurses per 1 000 population, compared to an 
EU average of 7.9). To increase the attractiveness 
and  domestic  supply  of  nurses,  the  government 
introduced  four  bachelor’s  degrees  in  nursing, 
starting in September 2023. These degrees are an 
alternative  to  the  existing  vocational  nursing 
diploma,  which  requires  2 years  of  training,  and 
open up possibilities for further training and career 
in  nursing.  Additionally,  new 
opportunities 
bachelor’s  degrees  will  be 
for 
professionals  who  have  already  graduated  in 
general  nursing.  Finally,  the  government  set  up 
public  campaigns  in  December  2022  to  increase 
the attractiveness of health professions. 

launched 

launched 

in  February  2020 

The  health  strategy  included in  the  recovery 
and resilience plan (RRP) aims to address staff 
shortages by decreasing reliance on foreign health 
professionals. Furthermore, the Gesondheetsdësch 
reform 
laid  the 
foundations  for  the  new  national  health  plan. 
Another reform by 2025 will trigger policy changes 
to  make  health  professions  more  attractive  to 
residents, implement skill-mix approaches, expand 
in  place  new 
training  opportunities,  and  put 
academic  programmes  for  nurses,  in  addition  to 
the general medicine faculty, which was opened in 
2021.  Under  the  RRP,  investments  worth  EUR 1.2 
million  (1.4%  of  the  RRP’s  total  value)  will  help 
improve telemedicine and will set up an electronic 
register  of  health  professionals.  In  May  2023, 
additional  national  funding  was  granted  for 

64 

20182019202020212022EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)68.563.660.354.7NA93.3 (2021)Cancer mortality per 100 000 population225.8219.3203.1203.4NA235.4 (2021)Current expenditure on health, % GDP 5.35.55.85.75.510.9 (2021)Public share of health expenditure, % of current health expenditure84.185.086.586.0NA81.1 (2021)Spending on prevention, % of current health expenditure 2.22.55.36.64.76.0 (2021)Available hospital beds per 100 000 population451426419414NA525 (2021)Doctors per 1 000 population3.0*3.0*3.0*3.0*NA4.1 (2021)*Nurses per 1 000 population11.7**11.7**11.7**11.7**NA7.9 (2021)Total consumption of antibacterials for systemic use, daily defined dose per       1 000 inhabitants per day ***22.122.116.115.919.119.4 (2022) 
 
 
     
 
ANNEX 17: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

1
2

Annex 17 showcases the economic and social 
regional  dynamics  in  Luxembourg.  It  provides 
an  analysis  of  economic,  social  and  territorial 
cohesion  in  Luxembourg  and  assesses  emerging 
investment  and  subnational  reform  needs  to 
stimulate  economic  growth,  social  development 
and competitiveness in the country. 

Luxembourg  has  been  the  EU  Member  State 
with  the  highest  GDP  per  capita for  the  last 
decades. In 2022, the level amounted to 257% of 
the  EU  average,  but  9  percentage  points  (pp.) 
below the level of 2021. Real GDP increased by an 
average  yearly  rate  of  2.6%  between  2013  and 
2022,  faster  than  the  EU  average  of  1.6%. 
However, real GDP per capita only grew by 0.5% in 
the  same  period,  compared  to  an  increase  in  the 
EU of 1.4% per year. This is partly due to a higher-
than-average  population  growth  (2%  per  year 
compared  to  0.2%  in  the  EU)  between  2013  and 
2021  because  of  both  positive  natural  change 
(+0.35%)  and  positive  net  migration  (causing  a 
yearly increase of 1.6%).  

Labour  productivity  remains  much  higher 
than in the rest of the EU, standing at 161% 
of the EU average in 2022. Between 2013 and 
2022,  however,  it  dropped  by  0.3%  per  year  on 
average, against a growth rate of 0.7% in the EU. 
Compared  to  the  EU  average,  productivity  is 
highest  in  the  financial  sector  with  47.7%  of  the 
total labour productivity. Luxembourg also had one 
of 
the  EU  Regional 
Competitiveness Index 2.0 (125.1). 

the  highest  values 

in 

in  Luxembourg.  The  share  of 

recent years higher in towns and suburbs than on 
the 
average 
population at-risk-of-poverty or social exclusion in 
2022 was also highest in towns and suburbs, but 
it declined compared to the previous year. It stood 
at 21.7% (-3pp from 2021) while it fell sharply in 
cities  (15.4%,  -5.2pp)  and  instead  rose  in  rural 
areas (18.6%, +2.3pp). 

Luxembourg is one of the EU Member States 
that reduced the most of its greenhouse gas 
(GHG)  emissions,  with  a  drop  in  their  per 
capita  level  of  60.9%  between  1990  and 
2022. However, the country’s GHG emissions (13 t 
CO2  equivalent  per  capita in  2022)  are  still much 
higher than the GHG emissions in the EU in 2022 
(8 t  CO2  equivalent  per  capita).  According  to  the 
Luxembourg authorities, the GHG emission quotas 
have  been  exceeded  in  2021  in  three  sectors:  (i) 
energy 
industries, 
construction,  (ii)  residential  and  tertiary  buildings 
and  (iii)  waste  and  wastewater  treatment.  The 
targets  for  2030  are  to  reduce  greenhouse  gas 
emissions by 57.8% compared to 2005 (as set out 
in  the  Climate  Act  and  the  revised  draft  national 
energy and climate plan). 

manufacturing, 

and 

In  2022  the  share  of  renewable  energy  in 
gross  final  energy  consumption  was  14.4% 
(EU  average:  23%).  The  revised  draft  national 
energy and climate plan for Luxembourg from July 
2023 forecasts a share of 37% in 2030.  

in  2022, 

Luxembourg, 

rate  stood  at  5.2% 

socio-economic 
Within 
disparities  between  types  of  territories 
remain  significant.  They  tend  to  be  worse  in 
towns  and  suburbs  where 
the 
(-1pp. 
unemployment 
compared to 2021), against a percentage of 4.8% 
in cities (4.8%, -0.3pp. from 2021) and rural areas 
(3.9%,  -0.4pp.  from  2021).  In  2022,  the  share  of 
people aged 25-64 with a tertiary degree was also 
lower  in  towns  and  suburbs  (45.0%)  and  rural 
areas  (46.5%)  than  in  cities  (77.2%)  and  the 
national  average  (52.3%).  The  percentage  of 
NEETs (134)  was  also  higher  in  towns  and  suburbs 
and  rural  areas  (Table  1),  and  the  share  of  early 
leavers  from  education  and  training  has  been  in 

(134) NEETs are defined as young people (aged 15–34) neither in 
employment nor in education and training. It is measured as 
% of total population aged 15-34. 

65 

 
 
 
 
 
 
 
Table A17.1:Main socio-economic indicators by 
degree of urbanisation, Luxembourg, 2022 

Source: Eurostat, EDGAR database 

investment  priorities 

Cohesion  policy 
in 
Luxembourg  focus  mainly  on  supporting  the 
country’s  green  and  digital  transition.  The 
priorities  set  out  in  the  2021-2027  programming 
period, which were adopted in 2022, remain valid.  

Investments  in  R&I  for  low  carbon  and  the 
circular  economy,  in  research  centres  and  in 
the  digitalisation  for  people,  companies, 
research organisations and public authorities 
continue to be necessary and investments to 
support the  green transition  are particularly 
relevant.  The  promotion  of  energy  efficiency  in 
public infrastructure as well as the development of 
renewable energy and the reduction of greenhouse 
gas  emissions, 
including  the  development  of 
enabling  and  emerging  green  technologies  and 
sustainable transport remains important. The Just 
Transition  Fund  should  be  used  effectively  in 
particular  in  the  south  of  the  country  where 
greenhouse gas emissions are the highest. 

Luxembourg  could  also  benefit  from  the 
opportunities  of  the  Strategic  Technologies 
for Europe Platform (STEP) to support industry 
transformation,  notably  by  investing  in  strategic 
value 
industry, 
decarbonization of energy-intensive industries and 
digital innovation.  

net-zero 

chains 

like 

66 

Luxembourg (2022)CitiesTowns and suburbsRural areasUnemplyment rate (%)4.85.23.9Population (aged 25-64) with tertiary education (%)77.245.046.5NEET (%)6.18.86.0AROPE (%)15.421.718.6 
 
  
 
MACROECONOMIC STABILITY 
ANNEX 18: KEY FINANCIAL SECTOR DEVELOPMENTS 

Luxembourg  has  maintained  its  position  as 
the leading investment-fund hub in the EU. As 
a  key  international  financial  centre, Luxembourg’s 
financial  sector  accounted  for  approximately 
22.4%  of  the  country’s  GDP  and  11.3%  of  total 
employment  in  2023.  In  particular,  Luxembourg 
stands out as the primary European – and one of 
the  world’s  largest  –  fund  domiciles,  with  its 
investment 
funds  overseeing  assets  worth 
EUR 6.2 trillion. 

Activity  in  the  key  financial-services  sector 
contracted  significantly  in  2023.  Gross  value 
added in the sector dropped by 8.8% year-on-year 
in  Q3-2023.  Despite  this,  exports  of  financial 
services  remained  robust  throughout  2023.  Even 
though these exports have not yet fully recovered 
from their previous peak (reaching EUR 18.8 billion 
in  Q3-2023  compared  to  EUR 18.9 billion  in  Q4-
2021) they continue to be a crucial contributor to 
account.  Moreover, 
current 
Luxembourg’s 
employment 
financial  services  and 
the 
rapidly, 
insurance  sector  has  been  growing 
registering a 3.8% increase between Q2-2022 and 
Q3-2023. 

in 

Luxembourg’s banks are well capitalised with 
good  asset  quality,  reflected  in  the  lowest 
non-performing  loans  (NPL)  ratio  in  the  EU 
(0.7%  in  2023).  There  has  been  a  significant 
erosion  in  their  deposit  base  over  the  past  year, 
with  deposits  declining  by  9.9%  since  its  peak  in 
April  2022  to  EUR 773 billion  in  December  2023. 
Deposits  declined  for  most  sectors,  but  especially 
so for the non-bank financial  sector, which saw a 
decline  of  EUR 29  billion 
(9.5%)  between 
December  2022  and  December  2023.  This  dip  in 
deposits is primarily attributable to the withdrawal 
of  funds  by  investment  entities,  as  alternative 
monetary  vehicles  such  as  money  market  funds 
became more attractive amidst the general rise in 
interest rates. On the assets side, and in line with 
the decrease in Luxembourg’s GDP in 2023, loans 
to  non-financial  corporations  declined  by  4.3%  in 
2023,  while  loans  for  house  purchases  decreased 
financial 
to  other 
by  1.1%,  and 
intermediaries saw a reduction of 5.9%. 

loans 

The  profitability  of  the  banking  sector 
in  2023.  Activity 
improved  considerably 
declined and balance sheets shrank further during 
the  year.  However,  lending  rates  rose,  helping  to 
bolster  net income.  Coupled  with  both  substantial 

capital  buffers  (reflected  in  a  capital  adequacy 
ratio  of  18.8%)  and  a  high  liquidity  ratio,  the 
sector  is  well-positioned  to  absorb  any  potential 
losses. 

Graph A18.1: Evolution of credit activity 

Source: ECB 

As  monetary  policy  tightened  throughout 
2023, 
increased  financial  risks  emerged 
within  Luxembourg’s  real  estate  market  and  
for  more  heavily  indebted  households,.  with 
lower  incomes  and  variable-rate  mortgages,  who 
continue  to  face  financial  stress  in  meeting 
mortgage  obligations  in  a  higher-interest-rate 
environment. A study using 2021 data found that 
around  30%  of  Luxembourg  households  could  be 
considered 
vulnerable.  However, 
indebted households in this group only account for 
11% of the number of mortgage contracts and 9% 
of  aggregate  household  sector  debt (135).  So  far, 
there  has  only  been  a  slight  increase  in  the  NPL 
ratio  of  households,  rising  to  1.9%  in  June  2023 
from  1.7%  a  year  earlier.  As  credit  risk  is 
concentrated  among  low-income  households,  the 
probability of default in this sector could increase 
the 
if 
unemployment rate increases further.  

remain  high  and 

financially 

interest 

rates 

The  investment-fund  sector  in  Luxembourg 
has  shown  resilience  amidst  the  financial 
market disruptions caused by Russia’s war of 
aggression  in  Ukraine  and  rising  interest 

(135) Giordana  and  Ziegelmeyer, 

June  2023,  Household 
indebtedness  and  their  vulnerability  to  rising  interest  rates, 
BCL Working Papers, BCL.lu. 

67 

-20-10010203040200920102011201220132014201520162017201820192020202120222023Total privateNFCHH% 
 
 
  
 
 
Table A18.1:Financial Soundness Indicators 

1Last data: Q3 2023. 
2Data are annualised. 
3Data available for EA countries only, EU average refers to EA area. 
Source: ECB, Eurostat. 

Luxembourg  is  an  important  base  for  the 
European  life-insurance  industry,  although 
the  amount  of  gross  premiums  written  by 
this  industry  has  decreased  in  the  past  2 
years.  Luxembourg  is  the  eighth  largest  domicile 
for life-insurance businesses in the EU, with gross 
premiums  written  of  EUR 15.6 billion  by  Q3 2023. 
It also continues to play a crucial role in the cross-
border  distribution  of 
life-insurance  products. 
Despite insurers bolstering their financial solvency 
from  190%  in  2022  to  a  comfortable  201%  in 
Q3 2023,  this  level  of  financial  solvency  remains 
below the EU average (262%). 

the 

climate 

context 

In 
change, 
of 
Luxembourg  demonstrates  a  relatively  high 
level  of  insurance  coverage  against  natural 
hazards.  As  evidenced  by  the  EIOPA’s  2023 
Dashboard  on  the  insurance  protection  gap  for 
natural  catastrophes,  approximately  58%  of  the 
total  losses  caused  by  extreme  weather  and 
climate-related events in Luxembourg are covered, 
surpassing the EU average of 22%. However, it will 
remain an ongoing challenge to increase resilience 
and  insurance  coverage  against  extreme  events, 
particularly floods.  

rates.  Both  the  decline  in  market  valuations  of 
financial  assets  and 
the  general  economic 
slowdown  have  led  to  a  decrease  in  the  value  of 
investment  funds’  assets.  Throughout  2023, 
market  valuations  have  rebounded,  although  net 
asset  emissions  for  Luxembourg  undertakings  for 
collective investment (UCITs) continued falling, and 
remained  below  their  peak  volume  at  the  end  of 
2021 (a peak volume of EUR 5.9 trillion at the end 
of 2021 versus EUR 5.3 trillion in December 2023).  

In parallel to the growth in UCITS, alternative 
investment  funds  have  continued  to  expand. 
The segment expanded nearly seven-fold in the 5 
years to November 2023, accounting for assets of 
EUR 594 billion.  Luxembourg  has  also  experienced 
a surge in the growth of private-debt funds’ assets 
in  recent  years.  Luxembourg’s  private-debt  funds 
act  as  non-bank  lenders  across  the  EU.  Their 
current  attractiveness  may  be  attributable  to  the 
recent  rise  in  bank  lending  rates  which  prompted 
more  borrowers  to  explore  alternative  –  and 
potentially cheaper – funding sources. As a result, 
private  lending  has  become  one  of  the  primary 
strategies 
funds, 
enabling  companies  to  bypass  traditional  banks 
when  seeking  loan  facilities.  The  recently  agreed-
upon  review  of  the  Alternative  Investment  Fund 
Managers  Directive  by  the  EU  introduces  a  pan-
European  loan-origination  regime  for  alternative 
investment  funds.  This  reform  provides  greater 
legal  certainty,  enabling  the  private-debt-funds 
sector  in  Luxembourg  to  continue  growing  in  the 
coming years. 

for  alternative 

investment 

68 

2017201820192020202120222023EUMedianTotal assets of the banking sector (% of GDP)1784.71787.81861.81935.61913.71772.21808.7257.0184.6Share (total assets) of the five largest banks (%)26.226.327.731.329.631.2--69.6Share (total assets) of domestic credit institutions (%)113.213.012.814.113.514.713.7-62.9NFC credit growth (year-on-year % change)3.24.54.9-1.6-4.73.1-12.4-2.4HH credit growth (year-on-year % change)7.87.32.67.710.07.9-4.3-1.4Financial soundness indicators:1        - non-performing loans (% of total loans)0.70.80.60.70.61.20.71.81.8- capital adequacy ratio (%)22.521.419.721.720.518.818.719.620.1- return on equity (%)25.75.55.24.45.55.29.39.913.2Cost-to-income ratio (%)156.059.362.261.661.256.448.252.844.9Loan-to-deposit ratio (%)176.675.676.562.455.656.359.293.380.2Central bank liquidity as % of liabilities0.90.80.61.11.71.00.7-0.7Private sector debt (% of GDP)289.4289.2298.4327.8343.9325.5-133.0118.4Long-term interest rate spread versus Bund (basis points)22.716.813.29.71.758.553.2107.7104.2Market funding ratio (%)65.865.763.064.766.865.7-50.839.8Green bonds outstanding to all bonds (%)3---0.81.82.62.84.02.71-34-1011-1718-2424-27Colours indicate performance ranking among 27 EU Member States. 
 
 
  
 
existing mortgage interest deductibility from 2.4% 
to 3.5% and of the income limit (136).  

Luxembourg’s income tax burden is relatively 
low  across  the  income  distribution.  Graph 
A19.1  shows  that  Luxembourg’s  tax  wedge  in 
2023  was  lower  than  the  EU  average  at  lower 
income  levels  (i.e.  for  single  earners  at  50%  and 
67%  of  the  average  wage),  while  being  higher 
than  the  EU  average  at  100%  and  167%  of  the 
average  wage.  Furthermore,  the  tax  wedge  for 
second  earners  at  67%  of  the  average  wage was 
clearly higher than the EU average. In addition, the 
difference  between  the  tax  wedge  for  second 
earners  and  the  tax  wedge  for  single  persons  at 
67% of the average wage was the highest among 
all  EU  Member  States.  While  the  difference 
between  the  tax  wedge  at  50%  and  at  167%  of 
the  average  wage  was  higher  than  for  the  EU 
average, the tax-benefit system as a whole has a 
income 
relatively  small 
inequality  as  measured  by  the  difference  in  the 
Gini  coefficient  before  and  after  taxes  and  social 
transfers. 

reducing 

impact 

in 

Graph A19.1: Tax wedge for single and second 
earners as a % of total labour costs, 2023 

ANNEX 19: TAXATION 

This  annex  provides  an 
indicator-based 
overview  of  Luxembourg’s  tax  system.  It 
includes  information  on  the  tax  structure  (the 
types  of tax  that Luxembourg  derives most  of its 
revenue from), the tax burden on workers, and the 
progressivity  and  the  redistributive  effect  of  the 
tax  system.  It  also  provides  information  on  tax 
collection  and  compliance,  and  on  the  risks  of 
aggressive tax planning. 

is 

scope 

Luxembourg’s  tax  revenues  in relation  to its 
GDP are slightly below the EU average. Table 
A19.1 shows that Luxembourg’s tax revenues as a 
percentage  of  GDP  (38.4%)  were  slightly  below 
the  EU  aggregate  in  2022  (40.2%)  but  increased 
to  41.1%  in  2023.  Luxembourg’s  revenues  from 
labour  taxation  as  a  share  of  GDP  are  below  the 
EU  average,  Revenues  from  consumption  and 
environmental taxes as a share of GDP are among 
the  lowest  in  the  EU.  The  temporary  decrease  of 
VAT  rates  by  1%  in  2023,  no  longer  applies  in 
2024.  Environmental  taxation 
limited  and 
mostly  consists  of  transport  fuel  taxes.  This 
suggests 
incentivise 
to 
environmentally  friendly  behaviour,  including  by 
developing  pollution  and  resources  taxes  which 
only  represent  0.8%  of  the  environmental  tax 
revenues  and  do  not  cover  NOx  emissions,  waste 
landfilling  and  incineration,  fertilisers,  pesticides, 
and  plastic products.  Revenues  from  capital  taxes 
as  a  share  of GDP  are  the  highest in  the  EU,  and 
revenues  from  property  taxes  in  general  are 
relatively  high,  but  revenues  from  recurrent 
property  taxes  are  among  the  lowest  in  the  EU. 
Following  the  government’s  announcement  of  tax 
inflation 
cuts,  since  1  January  2024  an 
adjustment  of  personal  income  brackets  and  an 
adjustment of the income tax scale to include four 
index-linked brackets is in force. 

better 

The second earner tax wedge assumes a first earner at 100% 
of the average wage and no children. For the methodology of 
the tax wedge for second earners, see OECD, 2016, Taxing 
Wages 2014-2015. 
Source: European Commission 

In December 2023, the Parliament adopted a 
law  on  tax  credits  of  up  to  18  percent 
favouring  double  transition  by  enterprises,  that  is 
in  force  since  1  January  2024.  The  measure  is 
intended  to  benefit  companies  investing  in  the 
digital  transformation  and  ecological  and  energy 
transition.  On  31st  January  2024,  the  government 
announced  a  package  of  measures  intended  to 
revive the construction sector and facilitate access 
to  housing  which  include  an  increase  of  the 

(136) Mesures adoptées - logement et fiscalité (gouvernement.lu) 

69 

26.433.541.347.446.22025303540455050100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - LUSingle earner - EU averageSecond earner -  LUSecond earner -  EU average 
 
 
 
      
 
 
 
Table A19.1:Taxation indicators 

(1) Forward-looking effective tax rate (OECD). 
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average. 
(**) forecast value for 2022, if available. For more details on the VAT gap, see European Commission, Directorate-General for 
Taxation and Customs Union, 2023, VAT gap in the EU, https://data.europa.eu/doi/10.2778/911698. 
For more data on tax revenues as well as the methodology applied, see the Data on Taxation webpage, 
https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en 
Source: European Commission and OECD 

Luxembourg scores well  on indicators of the 
effectiveness  of 
its  tax  administration. 
Outstanding  tax  arrears  decreased  by  2 pps 
between  2020  and  2021  to  9.9%  of  total  net 
revenue,  which  is  significantly  below  the  EU-27 
average of 35.5%. The VAT gap further decreased 
to  1.6%  in  2021,  which  indicates  a  high  level  of 
VAT compliance (compared with the EU aggregate 
of  5.4%).  The  ICT  costs  are  only  2.3%  of  total 
operating expenditure, which suggests some scope 
for increasing efficiency. 

There  continues  to  be  a  high  risk  of 
aggressive  tax  planning 
in  Luxembourg. 
Luxembourg’s  level  of  inward  FDI  stock  of  EUR2 
825 bn and outward FDI stock of EUR 3 746 bn in 
2022  was  only  surpassed by  the  Netherlands  and 
was the highest in the EU in terms of percentage 
of  GDP  (see  Graph  A19.2 (137)).  Around  60%  of 
Luxembourg’s  inward  and  outward  stock  is  held 
through 
(SPEs). 
purpose 
Luxembourg  is  also  a  major  conduit  for  dividend 
and  interest  flows  (see  Graph  A19.2).  It  receives 
21%  of  all  dividends  and  around  34%  of  all 
interest  received  by  the  EU  and  is  the  source  of 
21%  of  all  the  dividends  and  27%  of  all  interest 
paid  by  the  EU.  Luxembourg  is  a  major  financial 
hub in the EU and globally, but the scale of these 

entities 

special 

to 

figures  suggests  that  there  is  a  high  risk  of 
aggressive tax planning in Luxembourg, especially 
when compared with other Member States. As part 
of  its  RRP,  Luxembourg  introduced  a  conditional 
interest  and 
measure  of  non-deductibility  of 
royalty  payments  in  2021.  However,  the  scope  is 
limited 
the  EU-list  of  non-cooperative 
jurisdictions  which  are  not  Luxembourg’s  main 
economic partners and does not specifically target 
low  or  zero  tax  jurisdictions,  so  the  expected 
economic  impact  of  the  measure  is  small.  Based 
on  data  provided  by  Luxembourg,  this  measure 
has  resulted  in  the  refusal  of  EUR 2 338  million 
worth  of  deductions  in  2021  (this  data  is  still 
provisional).  The  impact  of  this  measure  has  not 
been quantified yet, so it is not possible to assess 
its  effectiveness.  Luxembourg's  other  measures 
have  been  limited  to  implementing  EU  legislation 
and Council Conclusions. The Pillar 2 Directive has 
been in force in the EU since 1 January 2024, and 
Luxembourg  has  notified  the  Commission  of  its 
transposition  into  national  law.  However,  it  is 
expected to have a limited impact on the outbound 
payment issue in Luxembourg because its scope is 
limited  to  the  largest  multinationals  (revenue 
threshold  of  EUR 750 million)  and  there  are  some 
sectoral  exemptions (138).  Finally,  as  the  2023 

(137) See Eurostat:  

(138) Excluded  entities  are  governmental  entities,  international 
organisations,  non-profit  organisations,  pension  funds,  and 

70 

LU2010202020212022202320102020202120222023Total taxes (including compulsory actual social contributions) (% of GDP)35.738.338.338.441.137.940.040.440.2Labour taxes (as % of GDP)15.818.918.118.620.021.320.720.3Consumption taxes (as % of GDP)9.98.48.68.810.810.711.211.0Capital taxes (as % of GDP)10.011.111.611.17.18.08.68.9Of which, on income of corporations (as % of GDP)5.44.84.54.42.42.53.03.4Total property taxes (as % of GDP)1.02.52.62.61.92.32.22.1Recurrent taxes on immovable property (as % of GDP)0.10.10.10.11.11.21.11.0Environmental taxes as % of GDP2.31.41.51.22.42.22.32.0Tax wedge at 50% of average wage (Single person) (*)25.325.826.126.026.433.931.732.131.831.7Tax wedge at 100% of average wage (Single person) (*)35.339.539.839.941.341.040.139.940.040.2Corporate income tax - effective average tax rates (1) (*)23.523.523.219.519.019.0Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)9.76.95.34.98.68.18.27.9Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)12.99.940.935.5VAT Gap (% of VAT total tax liability, VTTL)(**)10.05.11.69.75.4LuxembourgEU-27Tax structureProgressivity & fairnessTax administration & compliance 
 
 
 
 
       
 
Graph A19.2: Financial activity risk in Luxembourg: dividend and interest flows, and the use of special 
purpose entities (SPEs) for foreign direct investment (FDI) 

Source: European Commission 

Country Report already pointed out, Luxembourg’s 
tax system allows transfer pricing mismatches (for 
example by deducting deemed interest payments) 
which can facilitate aggressive tax planning.  

any investment fund or real estate investment vehicle that is 
the ultimate parent entity (UPE) of an MNE group. 

71 

0%20%40%60%80%100%120%140%0.100.200.300.400.500.600.ReceivedPaidReceivedPaidDividends                                           Interest*% of GDP€ billionTotal dividends and interest flows in LU and in the rest of the EUIn EUR billion (LHS) and in % of respective GDP (RHS), 2022EU26 - LHSLuxembourg - LHSEU26 - RHSLuxembourg - RHS2,7623,2972,2293,0272,09914,5011,71113,15502000400060008000100001200014000160001800020000LUEU-26LUEU-26AssetsLiabilities€ billionsUse of SPEs for FDI in Luxembourg and in the rest of the EUIn assets (left) and liabilities (right) stocks in EUR billion, 2022SPENon-SPE 
 
        
ANNEX 20: TABLE WITH ECONOMIC AND FINANCIAL INDICATORS 

Table A20.1:Key economic and financial indicators 

(1) domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches. 
(2) NIIP excluding direct investment and portfolio equity shares. 
Source: Eurostat and ECB as of 2024-5-17, where available; European Commission for forecast figures (Spring forecast 2024). 

72 

2004-072008-122013-2020212022202320242025Real GDP (y-o-y)5.20.62.07.21.4-1.11.42.3Potential growth (y-o-y).2.22.42.32.01.81.91.8Private consumption (y-o-y)1.82.41.211.42.34.02.92.4Public consumption (y-o-y)1.73.63.45.12.62.53.02.1Gross fixed capital formation (y-o-y)4.42.80.816.9-7.7-1.00.13.3Exports of goods and services (y-o-y)8.31.63.810.3-0.6-1.42.73.3Imports of goods and services (y-o-y) 7.32.94.112.4-1.9-0.13.23.6Contribution to GDP growth:Domestic demand (y-o-y)1.81.91.17.2-0.31.51.51.8Inventories (y-o-y)0.1-0.10.10.0-0.40.00.00.0Net exports (y-o-y)3.3-1.30.8-0.12.1-2.6-0.10.5Contribution to potential GDP growth:Total Labour (hours) (y-o-y).1.31.61.21.41.51.51.4Capital accumulation (y-o-y).1.30.91.00.70.70.60.7Total factor productivity (y-o-y).-0.3-0.20.0-0.2-0.3-0.3-0.2Output gap1.5-1.4-1.10.80.2-2.7-3.1-2.6Unemployment rate4.64.96.15.34.65.25.85.7GDP deflator (y-o-y)4.13.81.94.65.73.44.02.5Harmonised index of consumer prices (HICP, y-o-y)3.22.70.93.58.22.92.32.0HICP excluding energy and unprocessed food (y-o-y)2.52.41.51.54.44.72.72.1Nominal compensation per employee (y-o-y)4.02.21.95.15.87.33.62.9Labour productivity (real, hours worked, y-o-y)1.9-1.10.10.0-1.4-3.50.10.3Unit labour costs (ULC, whole economy, y-o-y)2.24.32.80.97.911.03.52.5Real unit labour costs (y-o-y)-1.80.50.9-3.62.17.3-0.40.0Real effective exchange rate (ULC, y-o-y)1.02.11.20.83.93.9-0.90.2Real effective exchange rate (HICP, y-o-y)1.20.40.10.9-1.1-1.8..Net savings rate of households (net saving as percentage of net disposable income)5.26.19.212.4....Private credit flow, consolidated (% of GDP)40.45.114.164.1-19.5...Private sector debt, consolidated (% of GDP)218.0287.4306.3343.9325.5...of which household debt, consolidated (% of GDP)46.255.163.166.666.8...of which non-financial corporate debt, consolidated (% of GDP)171.8232.3243.2277.3258.7...Gross non-performing debt (% of total debt instruments and total loans and advances) (1)..0.70.50.9...Corporations, net lending (+) or net borrowing (-) (% of GDP)7.20.5-1.5-2.7-2.2-7.6-7.6-7.9Corporations, gross operating surplus (% of GDP)28.630.930.630.629.926.827.126.9Households, net lending (+) or net borrowing (-) (% of GDP)-0.20.21.22.82.74.74.44.7Deflated house price index (y-o-y)8.11.26.112.54.0-12.2..Residential investment (% of GDP)3.23.23.84.03.73.5..Current account balance (% of GDP), balance of payments6.85.76.17.97.76.86.36.3Trade balance (% of GDP), balance of payments29.636.539.738.537.434.2..Terms of trade of goods and services (y-o-y)0.01.10.00.6-0.7-0.70.3-0.1Capital account balance (% of GDP)0.4-0.40.11.00.2-0.3..Net international investment position (% of GDP)10.112.168.342.647.033.8..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (2)..-3672.8-4598.7-3753.7-3854.6..IIP liabilities excluding non-defaultable instruments (% of GDP) (2)..10289.511414.69618.09883.5..Export performance vs. advanced countries (% change over 5 years)..17.021.52.64.7..Export market share, goods and services (y-o-y)4.5-1.34.7-1.6-16.6-2.4-0.8-0.3Net FDI flows (% of GDP)..43.8191.0104.055.1..General government balance (% of GDP)1.20.81.10.5-0.3-1.3-1.7-1.9Structural budget balance (% of GDP)..1.60.2-0.40.0-0.3-0.7General government gross debt (% of GDP)8.017.721.724.524.725.727.128.5forecast 
 
 
 
  
 
 
 
ANNEX 21: DEBT SUSTAINABILITY ANALYSIS 

This  annex  assesses  fiscal  sustainability 
risks for Luxembourg over the short, medium 
and  long  term.  It  follows  the  multi-dimensional 
approach  of  the  European  Commission’s  2023 
Debt Sustainability Monitor, updated based on the 
Commission 2024 spring forecast. 

Government 

(Table A21.2) (139). 

1  –  Short-term  risks  to  fiscal  sustainability 
low.  The  Commission’s  early-detection 
are 
indicator  (S0)  does  not  point  to  short-term  fiscal 
risks 
gross 
financing  needs  are  expected  to  decrease  around 
3%  of  GDP  on  average  over  2024-2025 
(Table A21.1, Table 1). 
markets’ 
perceptions  of  sovereign  risk  remain  positive,  as 
confirmed  by  the  government  bond  spreads 
(versus  Germany)  and  the  ‘AAA’  rating  that  the 
three  major 
to 
Luxembourgish government debt. 

Financial 

agencies 

assign 

rating 

2  –  Medium-term  fiscal  sustainability  risks 
appear  low.    The  DSA  baseline  shows  that  the 
government  debt  ratio  is  expected  to  remain 
broadly  stable  below  60%  of  GDP  in  the medium 
term  (at  around  30%  of  GDP  in  2034)  (Graph 1, 
Table  1) (140).  The  assumed  structural  primary 
surplus  (excluding  changes  in  cost  of  ageing)  of 
0.1%  of  GDP  as  of  2024.    appears  plausible 
compared  to  past  fiscal  performance 
(Table 
A21.2) (141).The  debt  decline  also  benefits  from  a 

(139) The  S0  is  a  composite  indicator  of  short-term  risk  of  fiscal 
stress.  It  is  based  on  a  wide  range  of  fiscal  and  financial-
competitiveness  indicators  that  have  proven  to  be  a  good 
predictor of emerging fiscal stress in the past.  

to 

refers 

(which 

the  10-year 

(140) The  assumptions  underlying  the  Commission’s  ‘no-fiscal 
policy  change’  baseline  include  in  particular:  (i)  a  structural 
primary surplus, before  changes in  ageing costs, of  0.1% of 
GDP  from  2024  onwards;  (ii)  inflation  converging  linearly 
towards  the  10-year  forward  inflation-linked  swap  rate  10 
years  ahead 
inflation 
expectations  10  years  ahead);  (iii)  the  nominal  short-  and 
long-term  interest  rates  on  new  and  rolled  over  debt 
converging  linearly  from  current  values  to  market-based 
forward  nominal  rates  by  T+10;  (iv)  real  GDP  growth  rates 
from the Commission 2024 spring forecast, followed by the 
EPC/OGWG ‘T+10 methodology projections between T+3 and 
T+10  (average  of  2.1%);  (v)  ageing  costs  in  line  with  the 
2024  Ageing  Report  (European  Commission,  Institutional 
Paper 279, April 2024). For information on the methodology, 
see  the  2023  Debt  Sustainability  Monitor 
(European 
Commission, Institutional Paper 271, March 2024). 

(141) This  assessment  is  based  on  the  fiscal  consolidation  space 
indicator, which measures the frequency with which a tighter 
fiscal  position  than  assumed  in  a  given  scenario  has  been 
observed  in  the  past.  Technically,  this  consists  in  looking  at 
the  percentile  rank  of  the  projected  SPB  within  the 

73 

still  favourable  but  declining  snowball  effect, 
Finally,  government  gross  financing  needs  are 
expected  to  slightly  increase  by  the  end  of  the 
projection  period  in  2034  around  4%  of  GDP, 
above the average over 2024-2025.  

four 

The  baseline  projections  are  stress-tested 
against 
deterministic 
alternative 
scenarios to assess the impact of changes in 
key  assumptions  relative  to  the  baseline 
(Graph 1).  For  Luxembourg,  the  debt  ratio  would 
be  lower  than  under  the  baseline  only  under  the 
historical structural primary balance (SPB) scenario 
(i.e.  the  SPB  returns  to  its  historical  15-year 
average of 1.7% of GDP). Under this scenario, the 
debt  is  about  11  pps.  of  GDP  lower  than  the 
baseline  in  2034.  Otherwise,  all  the  other  stress 
tests  scenarios  would  lead  to  worse  results  as 
compared 
the  baseline,  with  particularly 
adverse developments under the adverse interest-
growth  rate  differential  scenario  (i.e.  the  interest-
growth  rate  deteriorates  by  1  pp.  compared  with 
the  baseline),  with  the  debt  ratio  that  would  be 
higher than under the baseline by around 2 pps. of 
GDP  in  2034.  Similar  results  are  obtained  under 
the  lower  structural  primary  balance  scenario  (i.e. 
the  projected  cumulative improvement  in the  SPB 
over 2023-2024 is halved) and under the financial 
stress  scenario  (i.e.  interest  rates  temporarily 
increase  by  1  pp.  compared  with  the  baseline), 
with debt ratio that would higher by only around 1 
pp. and 0.3 pp. respectively.  

to 

to 

plausible 

The  stochastic  projections  indicate  low  risk, 
pointing  to  the  low  sensitivity  of  these 
unforeseen 
projections 
events  (142). These stochastic simulations indicate 
about  64%  probability  that  the  debt  ratio  will  be 
higher  in  2028  than  in  2023,  implying  low  risks 
the 
In  addition, 
the 
given 
uncertainty 
the  baseline  debt 
projections  is  low,  as  measured  by  the  difference 
between  the  10th  and  90th  debt  distribution 
percentiles in five years’ time (Graph 2).  

low  debt 
surrounding 

level. 

distribution  of  SPBs  observed  in  the  past  in  the  country, 
taking into account all available data from 1980 to 2022. 

(142) The stochastic projections show the joint impact on debt of 
the  government’s 
10,000  different  shocks  affecting 
budgetary  position,  economic  growth,  interest  rates  and 
exchange  rates.  This  covers  80%  of  all  the  simulated  debt 
paths and therefore excludes tail events. 

 
 
 
 
 
 
 
3  –  Long-term  fiscal  sustainability  risks 
appear  overall  high.  This  assessment  is  based 
on  the  combination  of  two  fiscal  gap  indicators, 
capturing  the  required  fiscal  effort  to  stabilise 
debt  (S2  indicator)  and  bring  to  60%  of  GDP  (S1 
indicator) over the long term (143). This assessment 
is  mostly  driven  by  the  projected  increase  in 
ageing costs.  

very  small  share  of  short-term  debt,  relatively 
stable  financing  sources  (with  a  diversified  and 
large  investor  base),  the  government  debt  fully 
denomination 
low 
borrowing  costs  supported  by  the  AAA-ratings.  In 
addition,  Luxembourg’s  positive  net  international 
investment  position  (stronger  compared  to  2020) 
helps mitigating vulnerabilities. 

in  euro,  and  historically 

The  S2 
indicator  points  to  high  fiscal 
sustainability  risks.  The  indicator  shows  that, 
relative  to  the  baseline,  the  SPB  would  need  to 
improve by 7.8 pps. of GDP in 2025 to ensure debt 
stabilisation over the long term. This result mostly 
driven by the projected increase in ageing-related 
costs (contribution of 7.7 pps. of GDP). Ageing cost 
developments are primarily driven by the projected 
increase  in  pensions  (5.7  pps.  of  GDP)  as  well  as 
long-term care and health-care spending (2.2 pps.) 
(Table 2).  

The  S1  indicator  points  to  medium  fiscal 
sustainability risks. The indicator shows that the 
country  would  need  to  improve  its  fiscal  position 
by 2.7 pps. of GDP in 2025 to ensure that its debt 
does not exceed 60% of GDP by 2070. This result 
is  mainly  driven  by  the  increase  of  the  ageing-
related public expenditure (contribution of 3.9 pps. 
of  GDP),  which  is  partly  offset  by  the  debt 
requirement  (-0.7  pp.)  and  the  favourable  initial 
budgetary position (-0.4 pp.) (Table 2).  

4  –  Finally,  several  additional  risk  factors 
need to be considered in the assessment.  On 
the one hand, risk-increasing factors are related to 
contingent 
from 
guarantees  granted  to  the  private  sector  and 
changes in international corporate tax regulations. 
On  the  other  hand,  risk-mitigating  factors  include 
the  lengthening  of  debt  maturity  in  recent  years, 

stemming 

liability 

risks 

(143)The  S2 

indicator  measures 

fiscal  sustainability 

the 
permanent  SPB  adjustment  in  2025  that  would  be  required 
to stabilise public debt in the long term. It is complemented 
by  the  S1  indicator,  which  measures  the  permanent  SPB 
adjustment in 2025 to bring the debt ratio to 60% by 2070. 
For  both  the  S1  and  S2  indicators,  the  risk  assessment 
depends on the amount of fiscal consolidation needed: ‘high 
risk’ if the required effort exceeds 6 % of GDP, ‘medium risk’ 
if it is between 2% and 6% of GDP, and ‘low risk’ if the effort 
is  negative  or  below  2%  of  GDP.  The  overall  long-term  risk 
classification  combines  the  risk  categories  derived  from  S1 
and S2. S1 may notch up the risk category derived from S2 if 
it  signals  a  higher  risk  than  S2.  See  the  2023  Debt 
Sustainability Monitor for further details. 

74 

 
 
 
 
 
Table A21.1:Debt sustainability analysis - Luxembourg 

Source: Commission services. 

Table A21.2:Heat map of fiscal sustainability risks - Luxembourg  

Source: Commission services. 

75 

Table 1. Baseline debt projections20212022202320242025202620272028202920302031203220332034Gross debt ratio (% of GDP)24.524.725.727.128.529.229.128.828.828.929.029.229.429.7Changes in the ratio-0.10.20.91.41.50.7-0.1-0.20.00.10.10.20.20.3of whichPrimary deficit-0.70.20.91.31.20.70.1-0.10.00.20.40.60.81.0Snowball effect-2.5-1.5-0.3-1.0-0.7-1.0-1.1-0.9-0.7-0.6-0.6-0.5-0.5-0.5Stock-flow adjustments3.11.50.21.01.11.00.90.80.70.50.30.20.0-0.2Gross financing needs (% of GDP)2.73.54.62.93.02.72.32.22.42.73.03.23.53.6S1S2Overall index  (pps. of GDP)2.77.8of which Initial budgetary position-0.40.2Debt requirement-0.7Ageing costs3.97.7of which    Pensions2.95.7     Health care0.50.9     Long-term care0.71.3Education-0.2-0.2Table 2. Breakdown of the S1 and S2 sustainability gap indicators0510152025303520212022202320242025202620272028202920302031203220332034Graph 1. Deterministic debt projections Historical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioBaseline% of GDPp10p20p40p60p80p900102030405020212022202320242025202620272028% of GDPGraph 2. Stochastic debt projections 2024-2028MedianBaselineBaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallLOWLOWLOWLOWLOWLOWDebt level (2034), % GDP29.718.830.831.830.0Debt peak year20342026203420342034Fiscal consolidation space97%78%100%97%97%Probability of debt ratio exceeding in 2028 its 2023 level64%Difference between 90th and 10th percentiles (pps. GDP)22.1(1) Debt level in 2034. Green: below 60% of GDP. Yellow: between 60% and 90%. Red: above 90%. (2) The debt peak year indicates whether debt is projected to increase overall over the nextdecade.Green:debtpeaksearly.Yellow:peaktowardsthemiddleoftheprojectionperiod.Red:latepeak.(3)Fiscalconsolidationspacemeasurestheshareofpastfiscalpositionsinthecountrythatweremorestringentthantheoneassumedinthebaseline.Green:highvalue,i.e.theassumedfiscalpositionisplausiblebyhistoricalstandardsandleavesroomforcorrectivemeasuresifneeded.Yellow:intermediate.Red:low.(4)Probabilityofdebtratioexceedingin2028its2023level.Green:lowprobability.Yellow:intermediate.Red:high(alsoreflectingtheinitialdebtlevel).(5)thedifferencebetweenthe90thand10thpercentilesmeasuresuncertainty,basedonthedebtdistributionunder10000 different shocks. Green, yellow and red cells indicate increasing uncertainty. (For further details on the Commission's multidimensional approach, see the 2023 Debt LOWLOWHIGHMEDIUMHIGHShort termMedium term - Debt sustainability analysis (DSA)Long termOverall                               (S0)Overall Deterministic scenariosStochastic projectionsS2S1Overall(S1 + S2)