Recommendation for a COUNCIL RECOMMENDATION endorsing the national medium-term fiscal-structural plan of Luxembourg
Date: 2024-11-26
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Luxembourg, budget deficit, coordination of EMU policies, economic reform, fiscal policy, investment, macroeconomics, national planning, public debt, structural adjustment

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   EUROPEAN COMMISSION  Strasbourg, 26.11.2024  COM(2024) 719 final  Recommendation for a COUNCIL RECOMMENDATION endorsing the national medium-term fiscal-structural plan of Luxembourg   
 
Recommendation for a 

COUNCIL RECOMMENDATION 

endorsing the national medium-term fiscal-structural plan of Luxembourg 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 121 thereof, 

Having regard to Regulation (EU) 2024/1263, and in particular Article 17 thereof, 

Having regard to the recommendation from the Commission, 

Whereas: 

GENERAL CONSIDERATIONS 

(1) 

(2) 

1 

2 

3 

4 

A reformed EU economic governance framework entered into force on 30 April 2024. 
Regulation  (EU)  2024/1263  of  the  European  Parliament  and  of  the  Council  on  the 
effective  coordination  of  economic  policies  and  on  multilateral  budgetary 
surveillance1,  together  with  the  amended  Regulation  (EC)  No  1467/97  on  the 
implementation  of  the  excessive  deficit  procedure,2  and  the  amended  Council 
Directive  2011/85/EU  on  the  budgetary  frameworks  of  Member  States3  are  the  core 
elements of the reformed EU economic governance framework. The framework aims 
at  ensuring  public  debt  sustainability  and  sustainable  and  inclusive  growth  through 
reforms  and  investments.  It  promotes  national  ownership  and  has  a  medium-term 
focus, combined with an effective and coherent enforcement of the rules.  

The  national  medium-term  fiscal-structural  plans  that  Member  States  submit  to  the 
Council  and  to  the  Commission  are  at  the  centre  of  the  new  economic  governance 
framework. The plans are to deliver on two objectives: i) ensuring that, by the end of 
the adjustment period, general government debt is on a plausibly downward trajectory, 
or stays at  prudent  levels,  and that the government  deficit is  brought and maintained 
below the reference value of 3% of GDP over the medium term, and ii) ensuring the 
delivery  of  reforms  and  investments  responding  to  the  main  challenges  identified  in 
the context of the European Semester and addressing the common priorities of the EU. 
To that end, each plan is to present a medium-term commitment to a net expenditure4 

(OJ 

1466/97 

Regulation 

(EC)  No 

Regulation  (EU)  2024/1263  of  the  European  Parliament  and  of  the  Council  of  29  April  2024  on  the 
effective  coordination  of  economic  policies  and  on  multilateral  budgetary  surveillance  and  repealing 
Council 
ELI: 
http://data.europa.eu/eli/reg/2024/1263/ojttp://data.europa.eu/eli/dir/2024/1265/oj). 
Council  Regulation  (EU)  2024/1264  of  29  April  2024  amending  Regulation  (EC)  No  1467/97  on 
speeding  up  and  clarifying  the  implementation  of  the  excessive  deficit  procedure  (OJ  L,  2024/1264, 
30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1264/oj). 
Council Directive (EU) 2024/1265 of 29 April 2024 amending Directive 2011/85/EU on requirements 
for  budgetary 
(OJ  L,  2024/1265,  30.4.2024,  ELI: 
http://data.europa.eu/eli/dir/2024/1265/oj). 
Net expenditure as defined in Article 2 of Regulation (EU) 2024/1263, viz. government expenditure net 
of (i) interest expenditure, (ii) discretionary revenue measures, (iii) expenditure on Union programmes 

the  Member  States 

frameworks  of 

2024/1263, 

30.4.2024, 

L, 

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path,  which  effectively  establishes  a  budgetary  constraint  for  duration  of  the  plan, 
covering four or five years (depending on the regular term of legislature in a Member 
State).  In  addition,  the  plan  is  to  explain  how  the  Member  State  will  ensure  the 
delivery  of  reforms  and  investments  responding  to  the  main  challenges  identified  in 
the  context  of  the  European  Semester,  in  particular  in  the  country-specific 
recommendations  (including  those  pertaining  to  the  macroeconomic  imbalances 
procedure (MIP), if applicable), and how the Member State will address the common 
priorities of the Union. The period for fiscal adjustment covers a period of four years, 
which  may  be  extended  by  up  to  three  years  if  the  Member  State  commits  to 
delivering a set of relevant reforms and investments that satisfies the criteria set out in 
Regulation (EU) 2024/1263.  

Following the submission of the plan, the Commission is to assess whether it complies 
with the requirements of Regulation (EU) 2024/1263. 

Upon  a  recommendation  from  the  Commission,  the  Council  is  to  then  adopt  a 
recommendation to set the net  expenditure path  of the Member State concerned and, 
investment  commitments 
the  set  of  reform  and 
where  applicable,  endorses 
underpinning an extension of the fiscal adjustment period. 

(3) 

(4) 

CONSIDERATIONS  CONCERNING  THE  NATIONAL  MEDIUM-TERM  FISCAL-
STRUCTURAL PLAN OF LUXEMBOURG 

(5) 

On  15  October  2024,  Luxembourg  submitted  its  national  medium-term  fiscal-
structural  plan  to  the  Council  and  to  the  Commission.  The  submission  took  place 
following  an  extension  of  the  deadline  set  out  in  Article  36  of  Regulation  (EU) 
2024/1263,  as  agreed  with  the  Commission  in  view  of  the  reasons  provided  by 
Luxembourg. 

Process prior to the submission of the plan  

(6) 

(7) 

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Luxembourg was eligible for receiving technical information in line with Art. 9(3) of 
Regulation  (EU)  2024/1263  but  did  not  request  it.  The  Commission  provided  to 
Luxembourg on 21 June 2024 the main initial conditions and underlying assumptions 
used  in  the  Commission’s  medium-term  government  debt  projection  framework5,  as 
referred to  in  Recital  (25) of Regulation  (EU) 2024/1263,  and published them on  15 
October 20246. 

In  line  with  Article  12  of  Regulation  (EU)  2024/1263,  Luxembourg  and  the 
Commission engaged in a technical dialogue in September 2024. The dialogue centred 
on  the  underlying  assumptions  (in  particular  potential  growth  and  GDP  deflator),  as 
well as on the envisaged delivery of reforms and investments responding to the main 

Commission’s 

fully matched by revenue from Union funds, (iv) national expenditure on co-financing of programmes 
funded by the Union, (v) cyclical elements of unemployment benefit expenditure and (vi) one-offs and 
other temporary measures.  
The main initial conditions and underlying assumptions are in line with the methodology described in 
(https://economy-
the 
finance.ec.europa.eu/publications/debt-sustainability-monitor-2023_en).  They  are  based  on 
the 
Commission  2024  spring  forecast  and  its  medium-term  extension  up  to  2033,  and  long-term  GDP 
growth  and  ageing  costs  are  in  line  with  the  joint  Commission-Council  2024  Ageing  Report 
(https://economy-finance.ec.europa.eu/publications/2024-ageing-report-economic-and-budgetary-
projections-eu-member-states-2022-2070_en). 
https://economy-finance.ec.europa.eu/economic-and-fiscal-governance/national-medium-term-fiscal-
structural-plans_en#luxembourg 

Sustainability 

Monitor 

2023 

Debt 

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(8) 

challenges  identified  in  the  context  of  the  European  Semester  and  the  common 
priorities  of  the  Union  in  fair  green  and  digital  transition,  social  and  economic 
resilience, energy security and the build-up of defence capabilities.  

In  line  with  Article  11(3)  and  36(1),  point  (c)  of  Regulation  (EU)  2024/1263, 
according  to  the  information  provided  by  Luxembourg  in  its  plan,  Luxembourg  has 
regularly  engaged in  a consultation process with social partners in the context of the 
European  Semester.  According  to  the  information  provided  by  Luxembourg  in  its 
plan,  in  July  2024,  in  the  most  recent  meeting  with  social  partners,  exchanges  were 
about  the  2024  Country  report  for  Luxembourg,  the  2024  country  specific 
recommendations  and  the  modifications  related  to  the  new  economic  governance 
framework.  

(9) 

The plan was presented to the national parliament on 15 October. 

Other related processes 

(10)  On  15  October,  Luxembourg  submitted  its  Draft  Budgetary  Plan  for  the  year  2025. 
The Commission adopted an opinion on this Draft Budgetary Plan on [26 November 
2024]7.  

(11)  On  21  October  2024,  the  Council  addressed  to  Luxembourg  a  series  of  country-

specific recommendations (CSRs) in the context of the European Semester8. 

SUMMARY OF THE PLAN AND THE COMMISSION’S ASSESSMENT THEREOF 

(12) 

In  line  with  Article  16  of  Regulation  (EU)  2024/1263,  the  Commission  assessed  the 
plan as follows: 

Context: macroeconomic and fiscal situation and outlook  

(13)  Economic  activity  in  Luxembourg  declined  by  1.1%  in  2023,  driven  by  a  negative 
contribution to growth of net exports and a contraction in investment. According to the 
European  Commission  Autumn  2024  Forecast,  the  economy  is  expected  to  grow  by 
1.2%  in  2024,  on  the  back  of  an  increase  in  domestic  demand  and  a  positive 
contribution from net exports. In 2025, real GDP is set to increase by 2.3%, supported 
by  an  expansionary  fiscal  stance,  falling  interest  rates  -which  underpin  investment-, 
and  the  improvement  of  the  external  environment.  In  2026,  real  GDP  is  expected  to 
increase by 2.2%, as momentum is expected to weaken on the back of lower domestic 
demand.  Over  the  forecast  horizon  (i.e.,  2024-2026),  potential  GDP  growth  in 
Luxembourg is  expected to  peak at  2.0% yearly growth,  due to  a deceleration in  the 
population  of  working  age  and  in  average  working  hours.  The  unemployment  rate 
stood at 5.2% in 2023, and is projected by the Commission to amount to 6.0% in 2024, 
6.0% in 2025 and 5.8% in 2026. Inflation (GDP deflator) is projected to increase from 
3.4% in 2023 to 3.9% in 2024, and to reach 3.0% in 2025 and 2.9% in 2026.  

(14)  Regarding  fiscal  developments,  in  2023  Luxembourg’s  general  government  deficit 
amounted  to  0.7%  of  GDP.  According  to  the  European  Commission  Autumn  2024 
Forecast, it is set to decrease to a deficit of  0.6% of GDP in 2024 and to increase to 
0.8%  of  GDP  in  2025  and,  on  a  no-policy  change  basis,  to  reduce  to  0.6%  in  2026. 
The  European  Commission  Autumn  2024  Forecast  includes  Luxembourg’s  draft 
budget for 2025 that the government proposed to the national parliament in October. 

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8 

Commission Opinion on the Draft Budgetary Plan of Luxembourg, 26.11.2024, C(2024)9059 final. 
Council Recommendation on economic, budgetary, employment and structural policies of Luxembourg, 
not yet published. 

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General government debt was 25.5% of GDP at end-2023. According to the European 
Commission Autumn 2024 Forecast, the debt ratio is expected to increase to 27.5% of 
GDP at end-2024. It is projected to broadly stabilise 27.6% of GDP at end-2025 and at 
27.5  %  of  GDP  until  end-2026.  The  fiscal  forecast  by  the  Commission  does  not 
consider  the  policy  commitments  in  the  medium-term  plans  as  such  until  they  are 
underpinned credibly announced and sufficiently specified concrete policy measures. 

Net expenditure path and main macroeconomic assumptions in the plan 

(15)  Luxembourg’s  national  medium-term  fiscal-structural  plan  covers  the  period  2025-

2029 and presents a fiscal adjustment over four years.  

(16)  The  plan  contains  the  information  required  by  Article  13  of  Regulation  (EU) 
2024/1263,  except  Table  7c  and  7d,  which  however  are  not  strictly  essential  for  the 
assessment of the plan of Luxembourg.  

(17)  The  plan commits  to the net  expenditure path  indicated in  Table 1, corresponding to 
average  net  expenditure  growth  of  4.9%  over  the  years  2025-2029.  The  net 
expenditure  path  committed  to  in  the  plan  is  reported  to  lead  to  a  structural  primary 
balance of 0.4% of GDP at the end of the adjustment period (2028). The plan assumes 
potential  GDP  growth  to  steadily  increase  from  1.5%  in  2024  to  2.1%  in  2029.  In 
addition, the plan expects the growth rate of the GDP deflator to increase from 1.7% in 
2024 to 3.1% in 2025 and 2026, to then bottom out at 1.9% in 2027 before returning to 
around 2.5% in 2028 and 2029. 

Table 1: Net expenditure path and main assumptions in Luxembourg’s plan 

2024 

2025 

2026 

2027 

2028 

2029 

8.0 

5.8 

4.7 

3.8 

5.4 

4.7 

Average 
over the 
period of 
validity of 
the plan 
2025-2029 
4.9 

Average over 
the 
adjustment 
period 
2025-2028 

4.9 

8.0 

14.2 

19.6 

24.1 

30.8 

36.9 

n.a. 

n.a. 

1.5 

1.7 

1.7 

3.1 

1.8 

3.1 

1.9 

1.9 

2.0 

2.6 

2.1. 

2.5 

1.9 

2.6 

1.9 

2.7 

Net 
expenditure 
growth 
(annual, %) 
Net 
expenditure 
growth 
(cumulative, 
from base 
year 2023, %) 
Potential GDP 
growth (%) 
Inflation 
(GDP deflator 
growth) (%) 

Source: Medium-term fiscal-structural plan of Luxembourg and Commission calculations. 

Implications of the plan’s net expenditure commitments for general government debt 

(18) 

If the net  expenditure path  committed to  in  the plan and the underlying assumptions 
materialise, general government debt would, according to the plan, gradually decrease 
from 27.5% in 2024 to 26.0% of GDP at the end of the adjustment period (2028), as 
per the following table. After the adjustment, over the medium term (i.e. until 2038), 
the debt ratio is projected to gradually decline according to the plan and to bottom out 

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in 2032, at 25.4% of GDP, before starting to gradually increase and peaking at 26% of 
GDP by 2038. 

Table 2: General government debt and balance developments in Luxembourg’s plan 

2023 

2024 

2025 

2026 

2027 

2028 

2029 

2038 

Government debt 
(% of GDP) 

Government 
balance 
(% of GDP) 

25.5 

27.5 

27.5 

27.2 

26.7 

26.0 

25.6 

26.0 

-0.7 

-0.6 

-0.6 

-0.5 

-0.3 

-0.4 

-0.2 

-2.1 

Source: Medium-term fiscal-structural plan of Luxembourg 

Thus, according to the plan, general government debt would stay below the Treaty reference 
value  of  60%  of  GDP  over  the  medium  term.  Therefore,  based  on  the  plan’s  policy 
commitments  and  macroeconomic  assumptions,  the  net  expenditure  path  put  forward  in  the 
plan is consistent with the requirement for debt as set out in Article 16(2) of Regulation (EU) 
2024/1263. 

Implications  of  the  plan’s  net  expenditure  commitments  for  the  general  government 
balance 

(19)  Based  on  the  plan’s  net  expenditure  path  and  assumptions,  the  general  government 
deficit would decrease from 0.6% in 2025 to 0.4% of GDP in 2028. Thus,  according  to 
the plan, the general government balance would not exceed the 3% of GDP reference 
value at the end of the adjustment period (2028). In addition, in the ten years following 
the adjustment period (i.e. until 2038), the government deficit would not exceed 3% of 
GDP.  Therefore,  based  on  the  plan’s  policy  commitments  and  macroeconomic 
assumptions,  the  net  expenditure  path  put  forward  in  the  plan  is  consistent  with  the 
requirement for the deficit as set out in Article 16(2). 

Macroeconomic assumptions of the plan 

(20)  The  plan  is  based  on  a  set  of  assumptions  which  differs  from  the  Commission’s 
assumptions transmitted to Luxembourg on 21 June 2024. In particular, the plan uses 
different assumptions for seven variables, namely the starting point (structural primary 
balance in 2024), potential GDP growth, GDP deflator growth, stock-flow adjustment, 
real GDP, nominal implicit interest rate, and output gap closure. A careful assessment 
of  these  differences  in  assumptions  is  necessary  especially  as  the  average  net 
expenditure  growth  in  the  plan  is  less  demanding  than  what  would  be  necessary  to 
comply with the applicable fiscal rules based on the Commission’s assumptions. The 
differences  in  assumptions  with  the  most  significant  impact  on  average  net 
expenditure  growth  are  listed  below,  together  with  an  assessment  of  each  difference 
considered in isolation.  

• 

The  plan  assumes  that  the  structural  primary  balance  would  stand  at  a  surplus  of 
+1.1% of GDP in 2024 compared to surplus of +0.1% of GDP in 2024 based on the 
Commission’s assumptions transmitted to Luxembourg on 21 June 2024. The better-
than-assumed  initial  position  in  2024  is  underpinned  by  more  recent  fiscal  data, 
whereby  the  plan  assumes  that  the  general  government  balance  would  stand  at  a 
deficit of -0.6% of GDP in 2024 compared to the assumption of a deficit of -1.7% of 

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GDP  in  2024  transmitted  to  Luxembourg  on  21  June.  This  is  in  line  with  the 
European  Commission  2024  Autumn  forecast.  Consequently,  this  assumption  is 
deemed to be duly justified. 

• 

The plan assumes growth in the GDP deflator to average 2.7% over the adjustment 
period  compared  to  the  assumption  of  an  average  growth  of  2.5%  transmitted  to 
Luxembourg on 21 June. The projections for GDP deflator growth used in the plan 
have been produced by the Luxembourg national statistical office (STATEC) and are 
based on more recent macroeconomic data. The projections for both 2025 and 2026 
appear to be plausible. Consequently, this assumption is deemed to be duly justified.  

The remaining differences do not have a significant impact on average net expenditure growth 
compared to the Commission’s assumptions. Overall, all the differences taken together lead to 
an average net expenditure growth in the plan that is lower than the average net expenditure 
growth ceiling that would be necessary to comply with the applicable fiscal rules based on the 
Commission’s assumptions. The Commission will take into account the above assessment of 
the plan’s assumptions in future assessments of compliance with the net expenditure path. 

Fiscal strategy of the plan  

(21)  According  to  the  indicative  fiscal  strategy  in  the  plan,  the  commitments  on  net 
expenditure  will  be  delivered  mainly  through  containing  expenditure  growth  and 
ensuring  that  revenue  growth  will  remain  above  growth  of  expenditure.  The  precise 
specification  of  the  relevant  policy  measures  is  to  be  confirmed  or  adjusted  and 
quantified  in  the  annual  budgets.  At  the  same  time,  there  are  risks  to  the 
implementation  of  the  indicative  fiscal  strategy  in  the  plan,  which  stem  from  the 
information  on the specific measures underpinning the fiscal  strategy  not being  fully 
detailed in the plan. In addition, the Draft Budgetary Plan for 2025 specifies that net 
expenditure  growth  is  expected  to  decelerate  in  relation  to  the  decrease  in  price 
pressure,  which  is  an  important  factor  in  determining  expenditure  growth  in 
Luxembourg, given the mechanism of automatic indexation to inflation which applies 
to a large share of public expenditure9. 

Reform  and  investment  intentions  in  the  plan  responding  to  the  main  challenges 
identified in the context of the European Semester and addressing the common priorities 
of the Union  

(22)  The plan describes policy intentions concerning reforms and investments to respond to 
the main challenges identified in the context of the European Semester, especially the 
CSRs, and to address the common priorities of the EU. The plan includes close to 90 
reforms and investments, of which over 10 are financially supported by the Recovery 
and Resilience Facility and some are complemented by cohesion policy funds.  

(23)  Concerning  the  common  priority  of  a  fair  green  and  digital  transition,  including  the 
climate  objectives  set  out  in  Regulation  (EU)  2021/1119,  the  plan  includes  various 
measures  such  as  investing  in  renewable  energy  (recommended  in  2022,  2023  and 
2024), promoting the deployment of photovoltaic panels, and the government's support 
for  circular  economy  principles.  The  plan  confirms  the  authorities’  support  for  the 
updated National Energy and Climate Plan. Additionally, recognising that transport is 
Luxembourg’s  largest  contributor  to  greenhouse  gas  emissions,  the  plan  emphasises 
decarbonising transport (recommended in 2019, 2020, 2022, 2023 and 2024), through 
electrification,  renewable  energy  use,  and  enhanced  public  transport  infrastructure, 

9 

See Commission Opinion on the Draft Budgetary Plan of Luxembourg, 26.11.2024, C(2024)9059 final. 

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including  investments  in  the  railway,  tramway,  and  bus  networks.  These  initiatives 
directly  address  the  climate  transition  and  energy  security  objectives.  The  measures 
aim 
technologies  and  sustainable  energy 
infrastructure crucial for Luxembourg to meet its national and EU-defined targets. 

investments 

in  green 

increase 

to 

(24)  Concerning  the  common  priority  of  social  and  economic  resilience,  including  the 
European  Pillar  of  Social  Rights,  the  plan  includes  measures  to  address  housing 
affordability and availability issues exacerbated by rapid population growth driven by 
strong  labour  market  dynamics.  Specific  actions  include  increasing  housing  supply 
(recommended in 2019, 2020, 2023 and 2024) through simplified planning procedures 
and  ongoing  work  on  the  reform  of  property  taxes,  moving  away  from  transactions-
based  toward  recurrent  property  taxation  and  introducing  a  new  tax  on  unused 
constructible  land.  Additionally,  the  measures  promote  equality  in  the  education 
system  with  an  emphasis  on  multilingual  and  inclusive  education  that  ensures  equal 
opportunities for all students, addressing recommendations in 2022, 2023 and 2024 to 
reduce the impact of inequalities on pupils’ performance. Measures include continuous 
investments  in  educational  research,  innovative  learning  environments,  and  a 
reinforced support system for inclusive education. For example, through the new Law 
for  newly  arrived  students,  which  aims  to  provide  new  pupils  and  their  families  a 
smooth transition, and by introducing a new approach to mathematics education in  a 
multilingual  context.  However,  the  plan  does  not  address  remaining  barriers  to 
competition  in  regulated  professional  business  services  (recommended  in  2019).  It 
neither  adequately  addresses  features  of  the  tax  system  that  facilitate  aggressive  tax 
planning,  beyond  the  consensus  on  minima  thresholds  internationally  agreed,  as 
recommended  in  2019,  2020,  2022,  2023  and  2024.  It  includes  one  measure  to 
increase  the  employment  rate  of  older  workers  through  enhanced  employment 
opportunities  (recommended  in  2019).  Initiatives  such  as  the  continuous  upskilling 
and  reskilling  of  the  workforce,  and  extending  the  vocational  training  offer 
(recommended  in  2019,  2023  and  2024),  have  the  potential  to  contribute  positively. 
However, the plan does not adequately address the negative effects of early retirement 
schemes and the financial incentives to leave the labour market early (recommended in 
2019, 2022, 2023 and 2024), which remain a challenge to the long-term sustainability 
of the pension system.  

(25)  Concerning  the  common  priority  of  energy  security,  the  plan  includes  significant 
investments in energy infrastructure, including the development of new electricity grid 
capabilities  such  as  a  new  380  kV  interconnection  line  between  Germany  and 
Luxembourg and the promotion of hydrogen infrastructure.  For instance, through the 
European  economic  interest  group  "Grande  Région  Hydrogen",  with  a  project 
involving the construction of a 100 km hydrogen pipeline network based on a 70 km 
natural  gas  transport  infrastructure.  This  distribution  network  is  expected  to  be 
operational by 2027. These measures are aligned with the recommendations in 2022, 
2023  and  2024  on  ensuring  energy  supply  resilience,  while  also  contributing  to 
reducing  reliance  on  fossil  fuels.  The 
to  support 
Luxembourg's  economic  and  demographic  changes  and  the  broad  electrification  of 
various sectors. 

investments  are  essential 

(26)  Concerning  the  common  priority  of  defence  capabilities,  the  plan  emphasizes  the 
transformation  of  the  Luxembourg  Army  to  better  respond  to  current  geopolitical 
challenges,  including  developing  military  capabilities  in  aviation,  cyber,  and  space 
domains.  Moreover,  the  formation  of  a  Belgo-Luxembourg  binational  battalion  for 
combat recognition and projects focused on societal resilience are prioritised.  

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(27) 

In  addition,  the  plan  includes  other  policy  measures  going  beyond  the  common 
priorities  of  the  EU,  including  measures  to  support  advanced  research,  development, 
and  innovation  policies  (recommended  in  2019,  2020  and  2024)  through  the 
establishment of a science and technology park, renewing aid schemes for R&D and 
innovation,  and  fostering  public-private  collaborations.  These  initiatives  aim  to 
enhance  Luxembourg’s  competitiveness  and  productivity  by  focusing  on  emerging 
technologies and digitalization initiatives for SMEs, contributing to both fair green and 
digital  transitions.  Nonetheless,  the  plan  does  not  include  measures  to  address  CSRs 
on enforcing the anti-money laundering framework (recommended in 2020). 

(28)  The  plan  provides 

information  on 

the  consistency  and,  where  appropriate, 
complementarity  with  the  Cohesion  policy  funds  and  Luxembourg’s  recovery  and 
resilience plan (RRP). The government  has  ensured that the initiatives listed support 
ongoing efforts under the RRP, especially in the areas of green and digital transitions, 
as well as social cohesion.  

(29)  The  plan  aims  to  contribute  to  meet  the  public  investment  needs  of  Luxembourg 
related  to  the  common  priorities  of  the  EU.  For  the  green  transition,  it  identifies 
investments  in  renewable  energy  infrastructure  and  energy  efficiency  measures. 
Regarding  social  and  economic  resilience,  it  highlights  the  need  for  continuous 
investment  in  education,  social  cohesion  measures,  and  increased  housing  supply. 
Energy security needs focus on upgrading the energy grid and hydrogen infrastructure. 
In defence capabilities, it underscores the necessity of enhanced military spending and 
foresees an increase of defence budget towards achieving a 2% of GNI defence effort 
by 2030, in alignment with NATO commitments. 

Conclusion of the Commission’s assessment 

(30)  Overall,  the  Commission  is  of  the  view  that  Luxembourg’s  plan  fulfils  the 

requirements of Regulation (EU) 2024/1263. 

OVERALL CONCLUSION 

(31) 

In accordance with Article 17 of Regulation (EU) 2024/1263, the net expenditure path 
as set in the plan should be recommended by the Council to Luxembourg. 

HEREBY RECOMMENDS that Luxembourg 

(1) 

Ensure  that  net  expenditure  growth  does  not  exceed  the  maxima  established  in 
Annex I to this Recommendation. 

In  addition,  the  Council  invites  Luxembourg  to  ensure  the  delivery  of  reforms  and 
investments  responding  to  the  main  challenges  identified  in  the  context  of  the  European 
Semester, in particular in the country-specific recommendations, and addressing the common 
priorities of the Union. 

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ANNEX I 

Maximum growth rates of net expenditure 
(annual and cumulative growth rates, in nominal terms) 

LUXEMBOURG 

Years 

2025 

2026 

2027 

2028 

2029 

Growth rates 

Yearly 

5.8 

4.7 

3.8 

5.4 

4.7 

(%) 

Cumulative 

14.2 

19.6 

24.1 

30.8 

36.9 

(*) The cumulative growth rates are calculated by reference to the base year of 2023. 

Done at Strasbourg, 

For the Council 
The President 

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