COMMISSION STAFF WORKING DOCUMENT 2025 Country Report - Luxembourg Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Luxembourg
Date: 2025-06-04
Institutions: European Commission, Reform and Investment Task Force
Subjects: Luxembourg, budget policy, economic policy, economic recovery, economic reform, employment policy, investment, social policy, stability pact, transport policy

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 4.6.2025  SWD(2025) 216 final  COMMISSION STAFF WORKING DOCUMENT 2025 Country Report - Luxembourg Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Luxembourg {COM(2025) 216 final}  
 
 
 
 
 
 
 
 
 
 
ECONOMIC DEVELOPMENTS AND KEY POLICY 
CHALLENGES 

Luxembourg’s economy shows 
signs of a mild recovery 

in 

developments 

Positive 
financial 
markets  supported  a  mild  recovery  for 
Luxembourg’s  open  economy.  While  the 
geopolitical  situation  remains  uncertain,  the 
easing of monetary policy and stabilisation of 
financial  markets  supported  the  recovery  in 
2024.  Real  gross  domestic  product  increased 
by 1.0%, following a decline of 0.7% in 2023, 
mainly  driven  by  the  financial  sector.  In 
January 2025, after a gradual recovery, assets 
under  management  by  the  fund  industry  hit 
EUR 5.9 trillion,  a  new  all-time  high  since  the 
previous  peak  in  2021.  However,  this  record 
was  exclusively  due  to  market  valuations,  as 
net  investments  remained  below  the  2021 
records.  Gross 
formation 
continued to fall in 2024 and was 25% lower 
than in 2021. In the same period, real GDP has 
decreased by 0.8%. 

capital 

fixed 

is 

to 

relatively 

low.  However, 

Rising 
the 
tariffs  have  added 
uncertainty  surrounding  the  external 
environment  to  which  the  economy  is 
highly  sensitive.  Luxembourg’s  exposure  in 
terms  of  goods  exported  to  the  United  States 
the 
(US) 
deterioration  in  the  international  economic 
climate  might  affect  exports  via 
indirect 
channels such as a reduction of demand from 
its  European  trade  partners.    Also,  while  a 
financial  services  recovery  started  in  2024 
thanks  to  a  pick-up 
investment  fund 
revenues, uncertainty surrounding global trade 
is  set  to  weaken  the  prospects  of  the  sector 
and  weigh  on  the  contribution  from  net 
exports throughout 2025. 

in 

supported 

consumption 

in  2026  as  the 
demand  and  2.0% 
contribution  from  net  exports  is  due  to 
turn  positive.  The  consumer  confidence 
indicator  points  towards  a  mild  recovery  in 
by  an 
private 
expansionary fiscal stance and falling interest 
rates,  which  underpin  investment.  A  wage 
indexation  that  occurred  in  May  2025  should 
further  support  private  demand,  while  the 
recent  increase in  the  number  of transactions 
in  both  new  and  existing  construction  and  in 
mortgage  demand 
in 
investment in dwellings which is set to further 
accelerate 
in  2026.  That  year,  domestic 
demand is expected to continue to support the 
economy,  while  a  stabilising 
international 
trade situation should support exports. 

indicate  a  recovery 

Policy  measures  kept  inflation  slightly 
below  the  euro  area  average  with  wage 
increases  slowing  down.  The  softening  of 
energy  and  food  prices  has  further  eased 
inflation. 
In  2024,  a  more  pronounced 
slowdown  was  prevented  by  stronger  wage 
growth  in  the  first  half  of  the  year.  Between 
2020  and  2024,  nominal  unit  labour  costs 
increased  by  19.1%,  compared  with  14.7%  in 
the euro area.  Headline inflation forecasts for 
Luxembourg  stand  at  2.1%  for  2025,  further 
declining to 1.8% in 2026. 

The  government  is  phasing  out  its  broad 
energy  price  support  measures  while 
focusing  on  vulnerable  groups.  Broad 
measures to counteract energy prices were not 
fully  phased  out  at end  of  2024.  The  support 
measures  that  remained  in  force  did  not  all 
appear  to  be  fully  targeted  at  protecting 
and 
vulnerable 
preserving  incentives  for  energy  savings  (1). 
But  the  government  has  adopted  a  new 

households 

firms 

and 

Real GDP is expected to grow by 1.7% in 
2025  mainly  supported  by  domestic 

(1)  Commission opinion of 26 November 2024 on the Draft 

Budgetary Plan of Luxembourg. 

2 

 
 
 
package  of  measures  for  2025  aimed  at 
supporting  the  purchasing  power  of  low-
income  households.  Structural  measures  to 
decrease  energy  consumption  and  invest  in 
energy  efficiency  measures  ((EU)  2023/2407) 
would help address the root causes of energy 
poverty. 

Graph 1.1: Government balances and debt 
(2007-2024) percentage of GDP 

public 
low, 

debt 
though 

remains 
Luxembourg’s 
comparatively 
it  has 
increased  substantially  since  the  global 
financial  crisis.  Luxembourg  public  finances 
sound  overall.  The  government 
remain 
registered  a  surplus  of  1.0%  of  GDP in  2024, 
which is mostly explained by windfall revenues 
from  taxes  on  income  and  wealth  revenues 
from  and  a  slow  down  in  expenditure  growth 
on the back of a less inflationary environment 
and  of  the  implementation  of  the  provisional 
so-called  twelfths’  system  in  the  first  part  of 
the  year.  In  2025  and  2026,  the  general 
government  balance  is  expected  to  turn  to  a 
deficit  of  0.4  and  0.5  %  of  GDP,  respectively 
on  the  back  of  an  expansionary  fiscal  stance 
and  of  lower  windfall  revenues.  Despite  the 
recurrent surpluses recorded over most of the 
period  between  2008  and  2024,  general 
government  debt  has  gradually  increased, 
from 14.6% of GDP in 2008 to 26.3% of GDP 
in  2024  (Figure Graph  1.1).  This is due  to  the 
non-appropriation  of  social  security  schemes, 
which  are  booked  as  reserves  in  the  social 
security  agencies,  except  for  the  pension 
scheme,  transferred  into  an  investment  fund 
to  support  the  sustainability  of  the  pension 
system  in  the  long  term  (see  below).  As  a 
result,  central  government  deficits  need  to  be 
financed with debt issuance. 

Source: DG ECFIN, Eurostat 

related 

In  the  short  term,  public  finances  are 
projected  to  remain  sound,  despite  of 
sustained expenditure growth. In 2024, net 
expenditure (2)  in  Luxembourg  grew  by  6.2% 
(see Annex 1). This increase is mainly driven by 
expenditure 
to  compensation  of 
employees and social transfers. Moreover, this 
takes into account the impact of discretionary 
revenue  measures  as  the  indexation  of  tax 
brackets,  which  has  been  estimated  to  shave 
off  revenues.  In  2025,  net  expenditure  is 
forecast by the Commission to grow by 6.8%, 
which  is  above  the  maximum  growth  rate 
recommended  by  the  Council(3).  This  increase 
is  mainly  driven  by  expenditure  related  to 
compensation  of  employees,  social  payments 
and  gross  fixed  capital 
investment.  The 
cumulative  growth  rate  of  net  expenditure  in 
2024 and 2025 taken together is projected at 

(2)  Net expenditure is defined in Article 2(2) of Regulation 
(EU) 2024/1263 as government expenditure net of (i) 
interest expenditure, (ii) discretionary revenue 
measures, (iii) expenditure on programmes of the Union 
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-off 
and other temporary measures. 

(3)  Council Recommendation of 21 January 2025 

endorsing the national medium-term fiscal-structural 
plan of Luxembourg (OJ C, C/2025/650, 10.2.2025, ELI: 
http://data.europa.eu/eli/C/2025/650/oj). 

3 

-20-1001020-5-3035070809101112131415161718192021222324Public debt (rhs)Social Sec. bal.Central gov. bal.Local gov. bal.Gen. gov. bal. excl. SS 
  
 
13.5%,  which  is  below  the  maximum  rate 
recommended by the Council.  

an 

The  main  challenge  for  Luxembourg’s 
public  finances  is  to  ensure  long-term 
sustainability 
ageing 
despite 
population.  This  is  due  to  escalating  pension 
costs  (projected  to  increase  by  8.1 pps  from 
9.4% of GDP in 2024, to reach 17.5% of GDP 
by  2070  (4))  which  are  expected  to  exert 
substantial  upward  pressure  on  government 
spending in the decades to come (5). 

Continuing diversification of the 
financial sector   

international 

Luxembourg’s 
financial 
sector  remains  a  key  pillar  of  the 
national  economy,  but  its  competitive 
edge  is  being  tested  by  evolving  market 
dynamics,  technological  advancements 
and  global  regulatory  changes.  The  sector 
real  gross  value  added  (GVA),  which  had 
dropped by 5.0% in 2022 (after an exceptional 
performance  in  the  previous  year:  +14.3%), 
decreased  further  in  2023  (-6.9%)  and  in 
2024  (-0.7%).  From  the  peak  reached  in  Q4-
2021  to  the  upturn  in  Q4-2023,  the  shift  in 
real GVA was -18.6%. The sector's productivity 
declined  by  17.4%  in  2021-2024.  Meanwhile, 
banking  profits  almost  doubled  (to  reach 
11.5%  of  GDP), 
revealing  a  disconnect 
between profitability and economic growth (6), 
amid growing volatility, and a 30% increase in 
output  prices  over  that period.    The  continued 
decline  in  the  financial  sector’s  productivity 
its  eroding  competitiveness,  suggest 
and 
structural  weaknesses,  calling  for  further 
diversification strategies. 

(4)  European Commission, 2024, 2024 Ageing Report. 
Economic and Budgetary Projections for the EU 
Member States (2022-2070) 

(5)  European Commission, 2024, 2024 Country Report - 

Luxembourg  

(6)  The financial sector gross value added is compiled in 
accordance with ESA 2010. Output excludes interest 
margins on inter-bank and central-bank positions, which 
are treated as property income rather than production. 

limited 

regulations. 

Luxembourg  has  struggled  to  keep  pace 
with leading financial hubs in integrating 
leveraging 
emerging  technologies  and 
international 
Luxembourg 
the  most  competitive 
features  one  of 
environments  for  FinTech  providers  in  the  EU 
(7).  However, 
the  adoption  of  advanced 
technologies  such  as  cloud  services  (32.6%) 
and big data analytics (32.4%) remains below 
EU  averages  and  drags  the  financial  centre 
ratings  in  the  main  aggregate  indexes  (8). 
Luxembourg  ranks  27th  in  the  Smart  Centres 
Index  2024  (9).  The  Deloitte  Digital  Banking 
Maturity (DBM) (10) indicates that Luxembourg 
has  been  downgraded  to  the  lowest  group, 
“Digital  latecomers”,  and  ranks  30th  out  of  44 
Index  of  34%  - 
countries,  with  a  DBM 
significantly  below  the  worldwide  average 
(41%).  Regulatory  caution,  a  fragmented 
digital finance strategy and the transition from 
legacy  systems  have 
large-scale 
technology-driven  adoption,  such  as  artificial 
intelligence, in the low-R&D-intensity activities 
(11). 
of  banking  and  asset  management 
Furthermore,  developments,  including  the  US 
Tax Cuts and Jobs Act of 2017 and the OECD’s 
Base Erosion and Profit Shifting initiative have 
tightened regulations, potentially reducing part 
of 
competitive 
advantage  in  corporate  taxation.  In  2024, 
financial  assets  stocked  in  the  country  (total 
international  investment  position)  remained 
high,  amounting  to  EUR 12.8 trillion.  However, 
these stocks have been declining in GDP terms 
over the period 2016-2024 (-24.4% in 2016-
2024)  and  in  two  out  of  three  instances  real 
GDP showed the same pattern (see Graph 1.2). 
The  strong  relationship  between  real  GDP 
growth  and  the  growth  of  Luxembourg’s 
international  investment  position  to  its  GDP 
(IIP/GDP) suggests that the country's economic 
performance  is  closely  tied  to  its  ability  to 
attract  and  retain  foreign  investment.  This 
investment  has  been  shrinking  in  terms  of 
stable 
GDP, 

Luxembourg’s 

compared 

historical 

rather 

the 

to 

(7)  GFCI 37 – FinTech Ratings 

(8)  DESI, 2024 

(9)  The Smart Centres Index 10, 2024 

(10)  DBM, 2024 

(11)  Conseil national de la productivité, 2023, 

4 

 
 
 
contribution  of  the  sector  to  GDP  (Annex  2). 
Furthermore,  most  investment  is  in  financial 
entities  within  the  same  group  and  in  real 
estate,  with  small  or  negative  consequences 
for the real economy. 

Graph 1.2: International Investment position 
(assets to current GDP) and real GDP (2017-
Q1, 2024-Q4). Year-on-year percentage 
changes 

Source: DG ECFIN, Eurostat 

stable 

increased 

supervision  of 

Luxembourg  has  developed  a  resilient 
and 
environment 
regulatory 
allowing  the  impressive  expansion  of  its 
global  financial  hub.  The  reduction  in  the 
corporate  tax  rate  in  2025,  the  creation  of  a 
secondary  market  for  non-performing  loans, 
and 
financial 
institutions reflect a cautious, stability-focused 
approach. The government has also introduced 
targeted policy measures, including regulatory 
sandboxes  for  fintech.  While  these  measures 
preserve  Luxembourg’s  AAA  credit  rating  and 
maintain 
investor  confidence,  which  are 
among  the  country’s  main  strategic  priorities, 
they  do  not  necessarily  address  the  need  for 
broader financial sector transformation. 

Diversification within the financial sector 
could  reduce  overreliance  on  the  funds 
industry.  Sustainable  finance  and  innovation 
are  among  the  areas  where  Luxembourg  has 
strong  potential  for  financial  diversification 

social 

products 

compliant 
and 

(12).  The  country  has  already  positioned  itself 
as  a  leader  in  green  investment  funds  and 
financial 
with 
environmental, 
governance 
standards  ('ESG-compliant').  These  are  areas 
that  are  expected  to  grow  significantly  in  the 
coming  years.  Further  supporting  innovative 
structuring  of  blended  climate-finance  and 
cooperative ventures, and enforceable ways to 
achieve  transparency  and  accountability,  will 
Luxembourg’s 
be 
key 
competitiveness 
financial 
landscape  and  ensuring  sustainable  economic 
growth. 

to  maintaining 

the  global 

in 

Prioritising housing affordability 
essential 

with 

Luxembourg  is  facing  a  severe  housing 
challenge, 
affordability 
deteriorating  significantly  over  the  past 
decade  due  to  soaring  property  prices. 
Between  2018  and  2022,  housing  prices  rose 
by nearly 60%, making Luxembourg one of the 
most  expensive  housing  markets  in  Europe. 
However, the market has recently undergone a 
correction, with prices falling by 9.1% in 2023 
– –one of the sharpest contractions in the EU 
(-1.2%  in  the  euro  area)  –  and  by  5.4%  in 
2024.  In  real  terms  (13),  house  prices  have 
decreased  to  their  2020  levels.  However, 
housing  affordability  remains  an  issue  for  a 
growing  proportion  of  the  population  and 
prompts  newly  arrived  workers  to  commute 
and  seek  accommodation 
in  neighbouring 
France,  Belgium  and  Germany,  where  housing 
prices  are  lower.  This  has  created  regional 
housing inflation pressures in border towns (14) 
and  exacerbated  cross-border  commuting 
challenges (15). 

(12)  OPC LUX: Climate Policy Observatory, Luxembourg, 

Annual Report 2023. 

(13)  As calculated by the Luxembourg Observatoire de 

l’Habitat based on the national CPI. 

(14)  Coût du logement: Une comparaison du Luxembourg 
avec la France, la Belgique et l’Allemagne, Note 40, 
Observatoire de l’habitat (2024). 

(15)  Les Cahiers de la Grande Région, 8. LISER , 2024. 

5 

-15-10-5051020172018201920202021202220232024International investment position % of GDP (y-o-y%)Real GDP  (y-o-y%) 
  
 
The  market  dynamics  was  affected  by 
interest rate increases, leading to a drop 
in  property  demand  and  a  sharp 
slowdown  in  construction.  The  price  surge 
in  2018-2022  was  mainly  explained  by  the 
long-standing  mismatch  of  high  demand  and 
insufficient  supply  of  housing,  amplified  by 
speculative investment as substantial property 
price  increases  attracted  investors.  In  2023, 
the  housing  market  declined  sharply  due  to 
the lagged effects of higher energy prices and 
monetary 
tightening,  weakening 
consumer confidence and slowing demand.  

policy 

Graph 1.3: Advertised prices of flats for sale 
and to let (Current EUR) 
(Base 100 1st quarter 2005) 

Source: Observatoire de l’habitat, Luxembourg 

Bankruptcies  and  job  losses  mounted  in 
real  estate  and  construction,  requiring 
government  intervention.  Between  2022 
and 2024, bankruptcies in real  estate  rose by 
110% and by 71% in construction. To stabilise 
the market, the government has taken decisive 
measures  to  encourage  housing  demand  and 
support construction firms. For example, it has 
raised  interest  mortgage  deductibility  and 
purchased unsold housing units in the presales 
market segment. Such emergency policies may 
have  succeeded 
in  containing  permanent 
damage  to  Luxembourg’s  economy.  However, 
these  and  previous  housing  policies  have 
largely failed to address structural issues. The 
introduction  of  a  secondary  market  for  non-
performing  loans  in  July  2024  has  helped  to 
improve  banks’ 
it  has  not 
significantly  revived  mortgage  lending  due  to 
still comparatively high interest rates. 

liquidity,  yet 

In  this  context,  the  government  has 
investment,  but  more 
stepped  up 

6 

reform  package 

land  and  property,  while 

reforms  and  a  holistic 
determined 
approach  are  needed  to  ensure  housing 
affordability  and  stability  in  prices.  Lack 
of  recurrent  taxation  favours  the  practice  of 
the 
hoarding 
registration tax, levied  on transactions, lowers 
the  amount  being  placed  on  the  market.  The 
taxationh 
(including  an 
effective  tax  on  property  ownership,  and  two 
new taxes on the unused land and unoccupied 
dwellings),  aims  to  increase  the  supply  of 
housing  and  usage  of  constructible  land  and 
unoccupied  dwellings.  However,  the  package 
has  been  pending  parliamentary  approval 
since 2022 and will only be implemented over 
several  years.  The  government  has  also 
launched new public housing projects on public 
land.  However, 
to  be 
implemented  and  are  burdened  with  delays, 
for 
while 
affordable  housing  development 
remain 
underutilised. The lack of coordinated  housing 
policies  with  neighbouring  regions  has  further 
complicated efforts to stabilise housing costs, 
as price increases in border towns continue to 
push workers further away. 

public-private 

partnerships 

these 

time 

take 

contraction 

in  borrowing 

is 
Household  debt  remains  high  but 
decreasing. The sharp decline in house prices 
in 2022-2024 has been less pronounced than 
the 
capacity. 
Household  debt  for  house  purchase  has  been 
on  a  downward  trajectory  since  2021  and  it 
decreased  by  0.5%  in  2024.  While  mortgage 
debt is low in terms of GDP, at 52% in 2024, it 
remains high in terms of disposable income, at 
123%), compared with 34.7% in the euro area. 
However,  it  was  around  5%  lower  than  pre-
pandemic  levels.  The  median  debt  service-to-
income ratio is relatively low  at 16%. At 35% 
for  those  in  the  lowest  income  quintile,  it 
remains  below  the  40%  threshold  indicating 
financial overburden.  

Interlinked housing and 
transportation challenges 

transportation 
Luxembourg’s 
infrastructure 
to 
accommodate the massive influx of daily 

struggling 

is 

50100150200250300Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3200720082009201020112012201320142015201620172018201920202021202220232024Flat salesFlat rentsNational CPI 
   
Box 1: 

Barriers to private and public investment in Luxembourg 

Luxembourg’s business environment remains attractive and public investment is among 
the highest in the EU at 4-5% of GDP, though capacity constraints cause some delays. 
Structural barriers continue to limit private investment, particularly in innovation-driven 
and high-growth sectors. 

•  Shortage  of  skilled  workers  in  technology,  and  engineering.  The  most  pressing  long-
term  barrier for  businesses  is the  lack  of  skilled  workers,  especially  for  small  and  medium-
sized enterprises (SMEs) that compete with large firms. 

•  High energy costs and market uncertainty. As public support is phased out, energy prices 
have  become  a  significant  barrier for  investment  decisions.  Currently,  uncertainty  about  the 
future is making firms increasingly reluctant to commit to large capital expenditures. 

•  Regulatory  and  administrative  complexity.  Luxembourg’s  regulatory  burden  is  a 

challenge for SMEs, which creates additional costs and slows business operations. 

•  Limited  access  to  risk  capital  for  scale-ups  and  SMEs.  Despite  its  strong  financial 

sector, venture capital and private equity participation is limited. 

The implementation of Luxembourg’s RRP is well underway. At present, Luxembourg has 
fulfilled  42%  of  the  milestones  and  targets  in  its  RRP.  Efforts  are  needed  to  ensure 
completion of all RRP measures by 31 August 2026. 

It remains important to accelerate the implementation of cohesion policy programmes. 
The mid-term review offers opportunities to speed up  progress and better address EU 
strategic priorities related to competitiveness, defence, housing, water resilience and the 
energy transition. 

Luxembourg has not yet taken advantage of the opportunities provided by the Strategic 
Technologies  for  Europe  Platform  under  Cohesion  Policy  and  the  Recovery  and 
Resilience  Facility  to  reallocate  resources  towards  this  priority.  However,  Luxembourg 
can  still  seize  these  opportunities  to  support  the  development  or  manufacturing  of 
critical technologies in the areas of digital and deep tech, clean and resource efficient 
technologies, and biotechnologies. 

220 000 

transport, 

in  public 

commuters  from  neighbouring  countries. 
Nearly 
cross-border  workers 
commute  daily  from  France,  Belgium  and 
Germany,  making  up  close  to  43%  of  total 
employment  in  Luxembourg  and  this  share 
continues  to  increase  strongly.  Despite  major 
investments 
traffic 
congestion  on  major  highways  remains  a 
problem, 
productivity, 
environmental  sustainability  and  work-life 
balance 
of  workers. 
thousands 
is  high  at 
Luxembourg’s  car  ownership 
approximately  678  vehicles  per  1 000 
inhabitants.  This  reflects  a  deeply  ingrained 
car culture exacerbated by high housing costs, 
pushing  many  workers  to  reside  further  away 
from their workplace and also in neighbouring 
countries  and  rely  on  cars.  This  high  figure 

weighing 

for 

on 

could  also,  at  least  partly,  be  explained  by  a 
very high number of non-resident cross border 
workers and their associated company cars. 

Luxembourg’s  transport  system  faces 
significant  challenges  as  it  seeks  to 
accommodate  a  projected  40%  increase 
in  travel  demand  by  2035  compared  to 
2017.  An  estimated  89%  increase  in  the 
demand  for  public  transport  is  expected  by 
2035.  The  National  Mobility  Plan  2035 
outlines  substantial  infrastructure  investment, 
with  up  to  EUR 3 billion  to  expand  and 
modernise  the  rail  network.  Key  initiatives 
include  new  rail  lines  like  the  Luxembourg-
Bettembourg line, expected to reduce network  

7 

 
 
 
delays  by  55%  (16),  and  additional  high 
capacity trains to increase service frequencies 
and overall train capacity. 

policy 

aimed 

market, 

mortgage 

Luxembourg’s  economic  sustainability 
will  depend  on  its  ability  to  reform  both 
housing  and  transportation  policies  in  a 
coordinated  manner.  The  government  aims 
to prioritise housing affordability over housing 
as  an  investment  asset.  The  size  of  the 
challenge calls for a set of reforms in various 
areas such as taxation, land use planning and 
including 
the 
macroprudential 
at 
disincentivising  speculative  housing  demand 
(17),  while  supporting  first-time  homebuyers. 
for  development, 
land 
Unlocking  more 
developing  large  district  projects  on  public 
land,  implementing  the  Housing  Pact  2.0,  and 
adopting  the  housing  tax  reform  remain 
priorities  for  inclusion  in  this  enhanced  policy 
mix.  Stronger  cross-border  urban  planning 
cooperation  with 
France,  Belgium  and 
Germany  is  needed  to  ensure  that  housing 
supply  is  expanded  in  a  sustainable  and 
coordinated  way.  On  transportation,  investing 
in  cross-border  rail  infrastructure,  integrating 
ticketing  systems,  and  improving  last-mile 
transport  connections  should  be  prioritised  to 
reduce  reliance  on  cars.  Effective  monitoring 
of housing market reforms and alignment with 
employment projections will be needed to curb 
the  rapid  rise  in  living  costs  and  address 
growing  risks,  such  as  the  recent  housing 
market instability. Addressing these issues will 
be crucial to ensure that Luxembourg remains 
an  attractive  and  competitive  place,  both  for 
entrepreneurship 
technological 
advancement, as well as for its high standards 
of  living.  Without  these  structural  reforms, 
its  housing 
Luxembourg 
risks  worsening 
affordability  crisis,  exacerbating 
transport 
issues and further eroding  productivity  due to 
inefficient transport systems (see Section 3). 

and 

The sustainability of the pension 
system is at risk in the medium- 
and long-term 

and 

risks 

long-term 

faces 
Luxembourg’s  pension  system 
medium- 
as 
expenditures  are  set  to  start  outpacing 
contributions from the second half of the 
current  decade.  The  2024  Ageing  Report 
in  pension-related 
projects  a  steady  rise 
spending, reaching 17.5% of GDP by 2070 – a 
rise  of  8.1 pps  from  2024  (see  Annex  1).  The 
sizeable  reserves  saved  by  the  system,  the 
largest  in  the  EU  (at  34.5%  of  GDP  in  2023) 
may  temporarily  offset  that  impact,  but  the 
system  is  expected  to  run  growing  deficits  as 
from  2033  (18),  depleting  the  reserve  by 
2047 (19).  Demographic  shifts  are  behind  this 
trend,  with  the  ratio  of  contributors  over 
pensioners  falling  below  one  in  2067  (from 
2.28 in 2024), driven by an ageing population 
in  net-
the  projected  decrease 
and  by 
migration. 

Older  workers  in  Luxembourg  are  more 
likely  to  stop  working  earlier  than  in 
other Member States. Only 51.0% of people 
aged  55-64  in  Luxembourg  were  active  in 
2024,  the  lowest  rate  in  the  EU  (68.2%  (20)). 
The  average  age  at  which  people 
in 
Luxembourg  start  drawing  a  pension  is  also 
one  of  the  lowest  in  the  EU,  at  59.9  in  2023 
(21).  Although  the  statutory  retirement  age  is 
65, early retirement is possible from 57, while 
generous  entitlements  provide  large  financial 
incentives  to  stop  working  early,  with  the 
average  pension  being  78%  of  the  last  wage 
(22).  Participation  rates  and  exit  ages  are 
projected  to  rise  only  modestly  (+4.9 pps  and 
+0.8  years)  between  2022  and  2070,  less 
than  the  respective  EU  averages  (+10.1 pps 
and +2.1 years) according to the 2024 Ageing 
sustainability  measures 
Report.  Current 

(18)  Cahier statistique no 18 – IGSS, 2024. 

(16)  Plan national de mobilité, Ministère de la Mobilité et des 

Travaux publics 

(17)  Institutional investors and house prices. European 

Central Bank, 2025 

(19)  Ibid. 

(20)  Statistics | Eurostat 

(21) Statistics | Eurostat 

(22) Statistics | Eurostat 

8 

 
 
 
Box 2:  UN Sustainable Development Goals (SDGs) 

Luxembourg  performs  well  on  several  SDGs  related  to  macroeconomic  stability  and 
productivity (SDGs 4, 9, 17) and fairness (SDGs 1, 4, 5) but challenges remain for some 
SDGs related to environmental sustainability (SDGs 7, 12, 13). 

Although it shows signs of catching up, Luxembourg is below the EU average on climate 
action  (SDG 13)  due  to  the  high  net  greenhouse  gas  emissions  per  capita  –  partly 
influenced  by  the  220 000  cross-border  commuters  –  and  a  relatively  low  share  of 
renewable energy in gross final energy consumption (see Annex 17). 

government 

limited  steps 

finances. 
and 
taxpayers 
Luxembourg  has 
to 
taken 
address  the  ATP  CSR,  and  its  tax  system 
continues  to  present  certain  risks  that  can 
facilitate  aggressive  tax  planning  practices, 
such  as  the  narrow  scope  of  the  non-
deductibility of interest and royalty payments. 
Besides  the 
implementation  of  Directives, 
Luxembourg has adopted limited measures to 
address  this  issue.  The  scope  of  the  non-
deductibility of interest payments, and royalty 
payments from Luxembourg-based companies 
to  non-EU  jurisdictions,  is  limited  to  those 
included 
list  of  non-
cooperative  jurisdictions  for  tax  purposes  and 
does  not  cover  all  jurisdictions  with  zero  and 
low tax rate. This could still lead to little or no 
taxation,  as 
is  non-exhaustive. 
list 
Currently, Luxembourg has not taken sufficient 
measures  to  address  the  risks  of  aggressive 
tax planning on outbound payments. 

in  the  agreed  EU 

this 

comprise a partial revalorisation adjustment of 
the  pension  for  inflation  and  a  compulsory 
reform whenever reserves fall below 1.5 times 
annual  benefits.  Reforms  need  to  start  ahead 
to  allow  a  gradual 
of 
implementation,  as  the  reserve  would  be 
depleted within five to six years after reaching 
the legal threshold. 

time 

limit 

that 

of 

the 

public, 

experts 

In  2024,  the  government  launched  a 
public consultation on the possible shape 
of a future pension reform. The first phase 
of  consultations  took  place  between  October 
the 
and  December  2024  and  gathered 
opinions 
and 
stakeholders  on  the  future  of  the  pension 
system.  A  second  phase  of  the  consultation 
was launched in February 2025 and will focus 
on 
(adaptability, 
sustainability  and  equity  of  the  pension 
system)  identified  during  the  first  phase  (23). 
The  results  of  the  consultations  will  be 
discussed  within  expert  groups,  which  are 
expected  to  come  forward  with  concrete 
proposals in a summary report, on the reforms 
needed to ensure the financial sustainability of 
the  system  and  its  ability  to  deliver  on 
intergenerational fairness and stability. 

themes 

three 

the 

Tackling aggressive tax planning 

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 

to  a 

fair 

(23)  More details at: https://pensioun.schwätzmat.lu/  

9 

 
 
 
INNOVATION, BUSINESS ENVIRONMENT AND 
PRODUCTIVITY 

Improving  productivity  growth  through 
investment and innovation remains a key 
challenge.  Luxembourg’s  labour  productivity 
is much higher than the EU average. However, 
its  productivity  growth  is  on  a  declining  path, 
below the EU average. 

Limited access to finance for 
scaling-up and R&D investment 

for 

early 

beyond 

Luxembourg’s  start-up  ecosystem  has 
improved  over  the  years,  but  venture 
investments 
high-tech 
capital 
remains  limited  and  businesses  struggle 
to  secure  the  investment  they  need  to 
grow 
stages. 
their 
Government  programmes  such  as  Fit4Start, 
Luxembourg  Future  Fund  and  Digital  Tech 
Fund  provide 
financial  support,  helping 
businesses launch and survive their first years. 
In 2024, start-ups in Luxembourg secured over 
EUR 600 million, up 25% on the previous year. 
Green  tech  led  the  field,  raising  EUR 150 
million.  However,  start-ups  face  difficulties 
when trying to expand, as there is a significant 
drop  in  investment  after  the  initial  funding 
stage.  While  60%  of  start-up  funding  goes  to 
businesses  in  their  earliest  stages,  only  20% 
receive additional investment (24). 

A  key  reason  for  this  investment  gap  is 
Luxembourg’s lack of alternative sources 
of  financing.  Investors  rely  mostly  on  bank 
financing,  which  favours  lower-risk  financial 
options,  such  as  real  estate  and  wealth 
management,  over  long-term  R&D  projects 
and start-up investments. Luxembourg lacks a 
strong financial culture for private investment 

(24)  Luxembourg Startup Ecosystem Assessment and 
Benchmarking Ministère de l’Economie, 2023 

10 

in  start-ups.  Only  25%  of  early-stage  funding 
in Luxembourg comes from angel investors(24). 
This  means  that  businesses  find  it  harder  to 
secure private investment, including small and 
medium-sized  enterprises  (SMEs)  and  start-
ups  that  require  substantial  R&D  investment. 
This makes them more reliant on government 
programmes,  which  do  not  always  provide 
enough for scaling-up. Stronger tax  incentives 
would  encourage 
in  R&D  by 
individual  domestic  firms  with  high  growth 
potential, ensuring that these businesses have 
better access to funding for innovation. 

investment 

The  government  has  launched  an  action 
plan  to  help  foster  and  scale  up  start-
ups.  On  24 March  2025,  Luxembourg 
announced  the  ‘10  Points  of  Action  for  Start-
ups’ plan. It focuses first on fostering start-ups 
by  introducing  tax  credits  for  investment  in 
young  innovative  companies  and  financial  aid 
for  spin-offs  starting  May  2025,  with  up  to 
EUR 200 000 in cofinancing. Second, for scale-
ups,  Luxembourg  will  launch  a  dedicated 
support  programme  by  the  end  of  2025, 
proposing  advantageous 
regimes  for 
employee  stock  options  to  aid  growth.  Lastly, 
Luxembourg intends to set up an AI Experience 
to  enhance  the  overall  innovation  ecosystem 
and  reinforce  its  international  position  as  an 
innovation  hub  supported  by  EUR 300  million 
from  Luxembourg’s  Société  Nationale  de 
Crédit et d’Investissement. 

tax 

Low uptake of public funding for 
R&D and business innovation 

Luxembourg  offers  public  funding  for 
research and innovation, but SMEs do not 
take 
these 
advantage 
programmes.  The  government  provides 
grants  and  financing  through  institutions  like 
the 
Luxinnovation  and 

the  Ministry  of 

full 

of 

 
 
 
Economy,  but  many  businesses  struggle  with 
the  complexity  of  applications  and  delays  in 
receiving  funds.  As  a  result,  fewer  businesses 
engage 
in  R&D,  and  Luxembourg’s  total 
investment  in  innovation  remains  below  that 
of  other  leading  European  economies.    While 
partly  explained  by  Luxembourg’s  services-
based  economy,  business  R&D  spending  is 
substantially  lower  than  in  top-performing 
countries  across  a  broad  range  of  sectors 
(OECD,  2025).  Business  R&D  intensity  has 
been on a downward trend, and fell to 0.48% 
of  GDP in  2023,  far below  the  EU  average  of 
1.47%  (Annex  12).  A  bill  of  law  introducing  a 
new  tax  credit  for  direct 
investment  by 
individuals in young innovative companies has 
been presented to the Luxembourg parliament 
on 4 April 2025. 

In 

is 

technology. 

Collaboration  between  business  and 
still 
communities 
research 
underdeveloped, 
limiting  opportunities 
for  innovation.  Luxembourg’s  economy  is 
dominated by financial services, which are not 
R&D-intensive  compared  to  industries  like 
manufacturing  or 
leading 
innovation hubs, universities play a key role in 
developing  new  technologies  and  supporting 
start-ups,  but  Luxembourg  has  relatively  few 
rate  of 
university  spin-offs  and  a 
collaboration 
and 
research  institutions.  The  recently  announced 
spin-off  aid  of  up  to  EUR  200 000  aims  at 
facilitating  the  creation  and  the  funding  of 
spin-offs.  Expanding  partnerships  between 
universities and businesses could help develop 
industry-specific  training  programmes  and 
strengthen the country’s talent pipeline. 

low 
businesses 

between 

workers  make  up  43%  of  Luxembourg’s 
employed  labour  force  in  2024,  of  which 
around  53%  are  from  France,  24%  from 
Germany and 23% from Belgium. 

and 

retaining 

Despite  these  strengths,  start-ups  and 
small  businesses  face  challenges 
in 
attracting 
skilled 
employees. This is particularly the case when 
competing  with 
corporations  and 
large 
financial  institutions.  The  strong  presence  of 
multinational  companies  and  Luxembourg’s 
dominant  financial  sector  push  up  salary 
expectations,  making  it  difficult  for  SMEs  or 
start-ups to afford the best talent. Many start-
ups report that they struggle  to hire software 
engineers, artificial intelligence specialists and 
experienced marketing professionals, as these 
workers are more likely to choose established 
firms that offer higher wages and greater job 
security. 

and 

entrepreneurs 

Luxembourg’s  high  cost  of  living  and 
expensive  housing  market  also  limit  its 
ability  to  attract  skilled  workers.  The 
absence  of  a  dedicated  start-up  visa 
programme  further  complicates  relocation  for 
skilled 
non-EU 
professionals.  To  counter  these  challenges, 
Luxembourg introduced a more favourable tax 
regime  aimed  at  attracting  highly  skilled 
talent.  Additionally,  the  country  is  initiating 
several  strategies  to  enhance  its  international 
appeal,  including  a  plan  to  launch  a  digital 
portal  for  international  talent  in  the  second 
half  of  2025  to  facilitate  integration  and 
provide resources. 

The  small  size  of  Luxembourg’s  higher 
education  system limits  its  role  in  talent 
development.  The  system’s  small  size  limits 
the  number  of  graduates  available  for  local 
businesses,  and  many  young  Luxembourgers 
study  abroad,  particularly  in  Belgium,  France 
and Germany. While many of these graduates 
return,  others  choose  to  stay 
larger 
economies  where  there  are  more  career 
opportunities,  creating  a  gap 
in  certain 
technical fields.  

in 

SMEs struggle to hire skilled 
workers 

Luxembourg’s  labour  market  is  highly 
dynamic,  benefiting 
from  a  strong 
international  workforce  and  high  wages. 
Luxembourg  experiences  a  ‘brain  gain’  effect, 
attracting  workers  from  abroad, 
including 
skilled workers, due to its strong economy and 
competitive  salaries.  Nearly  half  of 
the 
is  non-native  and  cross-border 
population 

11 

 
DECARBONISATION, ENERGY AFFORDABILITY AND 
SUSTAINABILITY 

is 

navigating 

complex 
Luxembourg 
challenges  and  opportunities  in  its  net-
zero  transition.  Currently  dominated  by 
fossil fuels, a shift to renewables in its energy 
mix  is  vital  to  meet  climate  targets.  Although 
progress has been made, as illustrated by CO₂ 
tax  increases  and  the  setting  of  renovation 
goals,  emissions  from  transport  and  buildings 
remain  high.  Public-private  partnerships  could 
spur innovation and growth in the clean energy 
sector. Yet, regulatory barriers and institutional 
structures need refining to increase non-fossil 
flexibility and consumer engagement. 

Room for growth in renewable 
energy production in Luxembourg 

to 

of 

gross 

gas  13.4% 

energy  mix 

remains 
Luxembourg’s 
dominated by fossil fuels. In 2023, oil used 
in  transportation  accounted  for  61.1%  and 
inland 
natural 
consumption  (Annex  8).  To  meet  its  climate 
targets,  Luxembourg  needs 
increase 
deployment  of  renewables,  especially  solar 
and  wind  power,  and  exploit  the  potential  of 
renewable  hydrogen  for  long-term  energy 
sector  integration.  According  to  Luxembourg’s 
National Energy and Climate Plan, the country 
aims  to  increase  the  share  of  renewable 
energy in the energy mix to  37% by 2030(25). 
This  will  require  significant  investment  in 
renewable  energy 
infrastructure  and  a 
coordinated effort from the public and private 
sectors. 

Significant reductions achieved in 
greenhouse gas emissions from 
transport, but need to keep 
momentum 

Luxembourg  has  achieved  a  remarkable 
43%  reduction  in  greenhouse  gas  (GHG) 
emissions  from  road  transport,  but  the 
target  is  still  a  long  way  off.  Between 
2005  and  2023,  the  country  was  the  best 
performer in the EU in terms of reducing GHG 
emissions from road transport (Annex 7). Fleet 
electrification and initiatives like extending the 
tram  line  and  offering  free  public  transport 
have  contributed  to  this.  Despite  this  positive 
development,  road  transport  still  contributes 
60% of GHG emissions in Luxembourg’s Effort 
Sharing  Regulation 
(ESR)  sectors,  namely 
domestic 
transport,  buildings,  agriculture, 
small  industry  and  waste.  This  is  due  to  the 
country’s  significant  vehicle  density,  reliance 
on  fossil  fuels,  and  fuel  sales  to international 
carriers  and 
from 
neighbouring  regions,  driven  by  lower  indirect 
taxes  compared  to  surrounding  countries.  In 
recent years, however, the price differential in 
favour  of  Luxembourg  has  narrowed,  mainly 
as a result of the CO2 tax. This has contributed 
to  decreased  road  transport  emissions  (26). 
Achieving  the  2030  target  of  50%  emissions 
reductions compared to 2005 levels, as set by 
the  Effort  Sharing  Regulation,  and  further  the 
national  2030  emission  reduction  target  of 
55%  as  set  by  the  national  Climate  Law, 
depends  crucially  on  further  measures  in  the 
transport  sector.  Key  strategies  include  the 
promotion of electric vehicles (EVs), expanding 
further 
EV 

infrastructure,  and 

individuals 

charging 

transit 

in 

(25)  Klima Agence: https://www.klima-

agence.lu/en/luxembourgs-energy-and-climate-policy-
integrated-national-energy-and-climate-plan-necp. 

(26)  Note de conjoncture, 2024 

12 

 
 
 
 
addressing 
decarbonisation. 

fuel 

tourism 

to 

enhance 

reimbursements, 

The  prevalent  use  of  company  cars  and 
commuters’  preferences  result  in  private 
cars  being  the  most  favoured  option. 
Company  cars  account  for  about  22%  of 
Luxembourg’s  vehicle  fleet.  The  widespread 
use  of  company  cars  and  related  allowances, 
with  added  benefits  such  as  fuel  allowances 
and  mileage 
further 
amplifies  car  dependency,  hindering  the  shift 
transport  options.  These 
to  sustainable 
incentives  reduce  the  cost  of  commuting  by 
car,  contributing  to  road  congestion  and 
impacts.  Currently,  public 
environmental 
for  about  17%  of 
transport  accounts 
journeys  and  only  5%  of 
commuter 
commuting 
leaving 
is  made  by 
considerable  room  for  increased  usage.  Yet, 
rural  commuters  face  limited  public  transport 
options,  while  urban  commuters  face  issues 
like  overcrowding,  with  delays  and  limited 
capacity.  Furthermore,  insufficient  park-and-
ride  facilities  prevent  commuters  from  easily 
transitioning from cars to trains, highlighting a 
gap in transport planning. 

rail, 

response 

insufficient 

government’s 

to 
The 
challenges  has  been 
transportation 
significant  but 
to  shift 
commuting  behaviour  away  from  private 
car  use.  Measures  such  as  free  public 
transport  have  not  significantly  reduced  car 
dependency,  as 
this  measure  primarily 
benefits  residents  rather  than  cross-border 
workers,  who  still  pay  train  fares.  Addressing 
these  disparities  requires  a  tailored  approach, 
improving  public  transport  across  regions  and 
promoting  sustainable  commuting  practices. 
Success 
efficient 
depend 
implementation  of 
infrastructure  projects, 
enhancing  service  reliability  and  fostering 
cross-border 
cooperation  with  Germany, 
France and Belgium. 

will 

on 

More efforts needed to improve 
energy efficiency in buildings 

Decarbonising  existing  buildings  remains 
a key challenge. The residential sector saw a 
slight increase in energy consumption in 2023. 
However, in view of the climate targets, more 
building  renovations  and  enhanced  energy 
efficiency  could  still  help  reduce  emissions  in 
this sector. Luxembourg has made progress in 
this  area,  with  a  national  renovation  strategy 
aiming  to  reduce  energy  consumption 
in 
(Annex  8). 
buildings  by  34%  by  2030 
Nevertheless, 
in 
further 
decarbonising  road  transport  and  buildings 
must be prioritised in order to meet the 2030 
target  of  a  50%  reduction 
in  emissions 
compared to  2005  levels  set  by the  ESR,  and 
even more so the 55% reduction target set by 
the national Climate Law. 

progress 

It  mainly  affects 

Luxembourg’s  energy  poverty  levels  are 
among  the  lowest  in  Europe  –  yet  the 
issue  persists. 
lower-
income households living in older rental homes 
that  are  poorly  insulated  and  expensive  to 
heat.  These  tenants  often  have  little  control 
over  energy  improvements  yet  bear  the  full 
cost  of  inefficient  buildings.  While  the  overall 
numbers  are  modest,  this  matters  for  the 
energy  transition:  the  residential  sector  still 
relies  heavily  on  fossil  fuels,  and  reducing 
household  energy  use  by  nearly  a  third  by 
2030  will  require  action  in  precisely  these 
harder-to-reach homes (27). 

relief 

(e.g.  price 

Policy  efforts  to  date  have  combined 
caps, 
emergency 
subsidies)  with 
long-term  renovation 
incentives,  yielding  mixed  results.  While 
short-term  measures  succeeded  in  reducing 
energy  poverty  levels  to  1.9%  in  2023,  (from 
3.3% in 2022) structural programmes like the 
Energy  Efficiency  Obligation  Scheme  and 
Klimabonus have struggled to reach the most 
include 
households.  Obstacles 
affected 

(27)  Luxembourg NECP 2024: 

https://commission.europa.eu/publications/luxembourg-
final-updated-necp-2021-2030-submitted-2024_en. 

13 

 
 
administrative complexity, lack of prefinancing 
and the absence of renovation obligations for 
private  landlords.  Critical  oversight  will  be 
needed given that one third of households are 
that  support 
renters  and  public 
renovations  may  end  up  increasing  rents  or 
excluding those who need them most. 

funds 

tenant 

paired  with 

Moving  forward,  the  transition  could  be 
fostered  by  sharpening  existing  tools 
rather  than  expanding  them.  Introducing 
minimum  standards  for  the  worst-performing 
protection 
rentals, 
measures, would help unlock progress where it 
matters most. Simpler procedures, more direct 
technical  assistance  and  better-targeted 
subsidies would make existing incentives more 
like 
inclusive.  Using  granular 
Luxembourg’s  energy  poverty  metric, 
to 
monitor  progress  could  ensure  the  transition 
remains both fair and effective. 

indicators, 

Leveraging policy and regulation 
key for the energy transition 

Policy  and  regulation  play  a  crucial  role 
in  driving  the  energy  transition 
in 
Luxembourg.  The  country  has  already 
to  promote 
introduced  various  measures 
renewable  energy,  energy  efficiency  and 
electric vehicles, including various investments 
under  the  country’s  recovery  and  resilience 
plan.  However,  more  needs  to  be  done  to 
create  a  level  playing  field  for  renewable 
energy sources and to address the challenges 
posed by fossil fuels. This includes introducing 
the  development  of 
policies 
renewable  energy  as  well  as  phasing  out 
support  measures  that  are  not  targeted, 
temporary and do not preserve price incentives 
to save energy. 

to  support 

Luxembourg  does  not  participate  in  any 
projects  of  common  interest  under  the 
Trans-European  Networks  for  Energy 
(TEN-E)  nor  Trans-European  Transport 
Network  (TEN-T)  Regulations.  This  is  a 
significant obstacle to decarbonisation efforts. 
Clarifying 
institutional 
framework  pertinent  to  these  projects,  and 

legal 

and 

the 

in 

permitting 
Luxembourg  to 
expertise to support its energy transition. 

enable 
particular,  would 
leverage  EU  funding  and 

The  national  carbon  tax  is  a  key  tool  in 
the energy transition. In 2025, the national 
CO2 tax was increased from EUR 35 to EUR 40 
per  tonne  of  CO2.  Introduced  in  2021  at 
EUR 20  per  tonne  of  CO₂  and  subsequently 
increased by  EUR 5  each year, the tax  applies 
to  fuels  (gasoline  and  diesel),  heating  oil,  and 
gas. According to the national legislation, there 
will  be  a  further  EUR 5  increase  in  2026, 
aligning with the anticipated price levels under 
the EU Emissions Trading System 2 (ETS-2) for 
specific  sectors,  including  buildings  and  road 
increase 
transport.  This  progressive 
strategy reflects Luxembourg’s commitment to 
meeting national and EU climate objectives, as 
outlined in the Climate Law.  It is planned that 
the  provisions  relating  to the  evolution  of  the 
CO₂  tax  for  the  period  2027-2030  will  be 
reassessed  in  2026,  according  to  what  is 
reported  in  the  national  energy  and  climate 
plan. 

tax 

The  CO2  tax  in  Luxembourg  is  linked  to 
the  forthcoming  introduction  of  the  EU 
Emissions  Trading  System  2  (ETS-2)  and 
the  observed  fuel  price  differential  with 
neighbouring  countries.  As  carbon  pricing 
evolves,  the  fuel  price  differential  between 
Luxembourg  and  its  neighbouring  countries  is 
a critical factor in meeting the national climate 
target, particularly with the introduction of the 
ETS-2. 

Improving water quality required 

Luxembourg  faces  the  most  significant 
water  quality  challenges  in  the  EU.  All 
surface  water  bodies  are affected  by  nutrient 
pollution and most groundwaters are affected 
by  nitrates  and  pesticide  pollution.  Urban 
development  disrupts  river  flow  and  water 
ecosystems,  restricting  the  availability  of 
water  in  the  face  of  increasing  demand.  This 
poses  risks  to  public  health,  the  environment 
and  the  economy,  particularly  in  agriculture, 
construction,  water  utilities  and  health 
restoring  water 
services.  Protecting  and 

14 

 
competitiveness. 

ecosystems  would  help  mitigate  both  social 
and  environmental  costs  while  maintaining 
long-term 
Luxembourg 
should  reduce  pressures  on  water  bodies' 
shape  and  course  and  further  promote 
sustainable  agriculture.  Luxembourg  has  a 
substantial  annual  shortfall  in  funding  for 
water protection and management of EUR 125 
million,  which  could  be  filled  through  an 
extended  application  of  the  ‘polluter  pays’ 
principle and economic incentives. 

15 

 
SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS 

reported  by  entrepreneurs 

in  vacancies  was  particularly  marked 
in 
business  services,  while  employment  growth 
recently.  Labour 
has  significantly  slowed 
shortages 
in 
business  and  consumer  surveys  are  down 
from  the  historical  peak  reached  at  the 
beginning  of  2022.  These  shortages  concern 
professional,  scientific  and  technical  activities 
(4.4%),  which  remain  above  the  EU  average 
(2.8%). 

Graph 4.1: Beveridge curve (2012-Q1 to 2024-
Q4) 

Source: Eurostat 

skilled 

rates  and  unemployment 

The  persistence  of 
labour 
shortages could be partially explained by 
skills  mismatches,  which  continue  to  be 
higher  than  the  EU  average.  The  match  or 
mismatch between labour supply and demand 
can be gauged by the relationship between job 
vacancy 
rates 
(Graph 4.1).  In  Luxembourg,  both  job  vacancy 
and  unemployment  rates  gradually  increased 
in  2014-2015,  indicating  a  growing  structural 
mismatch.  However,  this  trend  reversed  in 
2016.  In  2021  and  2022,  an  increase  in  the 
demand for labour concurred with a decline in 
unemployment,  while  in  2023-2024  these 
trends reversed. These developments could be 
explained  by  short-term  factors,  but  the 
reported persistence of recruitment difficulties 
could also reflect a skills mismatch. 

challenge. 

The low number of older workers in work 
The 
remains  a  pressing 
employment  rate  for  older  workers  (55-64)  is 
one of the lowest in the EU, with almost half in 
this  age  group  being  long-term  unemployed, 
compared  with  30%  for  the  entire  population 
(Annex 10). Their participation in adult learning 
is  also  behind  the  EU  average.  In  response, 
Luxembourg  has  taken  steps  to  address  this 
and  plans  further  measures.  The  government 
has launched a large-scale public consultation 
for  a  pension  system  reform,  taking  place  in 
two  phases  in  2024  and  2025,  focusing  on 
adaptability, sustainability and equity (28). With 
support  from  the  Recovery  and  Resilience 
Fund,  the 
initiative  targets 
participants aged 45 or over. Better integration 
of  older  workers  in  the  labour  market  –  by 
phasing  out  early 
schemes, 
reducing  financial  incentives  to  leave  the 
labour  market  early  and  introducing  active 
ageing  policies,  for  example  –  is  important  to 
enable  Luxembourg  to  hit  the  2030  national 
employment target, to strengthen the financial 
sustainability  of the  country’s  pension  system 
and to ensure inclusive growth. 

‘Future  Skills’ 

retirement 

High skills shortages challenge 
competitiveness 

Skilled labour shortages in sectors linked 
to  the  green  and  digital  transitions  may 
hinder competitiveness. Some 80% of small 
and  medium-sized  enterprises  encounter 
difficulties in  recruiting  workers  with the  right 
skills,  while  shortages  are  reported  in  several 
occupations  requiring  specific  skills  related  to 
the  digital  and  green  sectors  (Annex  12).  The 
vacancy rate fell to 1.4% in 2024. The decline 

(28)  For more details, see the Luxembourg government's 

Presentation of the second phase of the consultation on 
the pension system. 

16 

2012​​​2013​​​2014​​​2015​​​2016​​​2017​​​2018​​​2019​​​2020​​​2021​​​2022​​​2023​​​2024​​​2012​​​2013​​​2014​​​2015​​​2016​​​2017​​​2018​​​2019​​2020​​​2021​​​2022​​​2023​​​2024​​​0.00.51.01.52.02.53.03.04.05.06.07.08.09.010.011.012.013.0Job vacancy rate (%)Unemployment rate (%)LUEU 
 
 
  
ability, 

through 

Luxembourg’s  employment  agency  has 
taken  several  measures  to  improve  its 
matching 
skills 
forecasting.  For  example,  it  has  set  up  a 
website  that  provides  real-time  data  on  job 
openings  and 
labour  market  trends.  The 
Recovery  and  Resilience  Facility  supports 
vocational  training  programmes  to  address 
skills  mismatches  in  the  job  market.  The 
European  Social  Fund  Plus  (ESF+)  cofinances 
in 
measures  promoting 
connection  with  skills  needs  both 
for 
jobseekers  and  employees.  To  address  skills 
shortages and mismatches, it is important for 
Luxembourg  to  make  progress  in  effectively 
implementing  policy  measures,  such  as  the 
‘Skills  Plang’,  which  is  still  pending  legislative 
approval. 

learning 

lifelong 

is 

crucial 

for  maintaining 

The  deterioration  of  digital  skills  levels 
points  to  the  need  to  further  strengthen 
reskilling  and  upskilling.  Although  above 
the EU average, the percentage of adults with 
at  least  basic  digital  skills  fell  from  63.8%  in 
2021 to 60.1% in 2023 (see Social Scoreboard 
in Annex 13). Similarly, the share of individuals 
with  above  basic  digital  skills  dropped  from 
31.8% to 27.9%. An adequately skilled labour 
supply 
the 
competitiveness  of  Luxembourg’s  growing 
information  and  communications  technology 
sector  (Annex  10).  Under  the  recovery  and 
resilience  plan,  the  ‘Skillsbridges’  programme 
offers  courses  to  facilitate  career  changes  as 
part  of  the  transition  to  a  digital  and  greener 
economy. Overall, 36% of the European Social 
Fund  Plus  allocation  (EUR 5.6  million)  targets 
the development of digital jobs and skills. The 
Just  Transition  Fund  also  supports  specific 
training  measures,  including  reskilling  and 
digital upskilling. The effective implementation 
of  individual  learning  accounts  could  also 
contribute to reskilling and upskilling. 

Low levels of basic skills pose a threat to 
labour  productivity  and  competitiveness. 
The  proportion  of  low  achievers  was  higher 
than  the  EU  average  in  all  three  areas  tested 
in  2018,  the  last  PISA  survey  Luxembourg 
participated 
Student 
(Annex 
performance  also  has  an  equity  aspect:  the 
score 
and 
disadvantaged students was the widest in the 

advantaged 

between 

12). 

gap 

in 

EU.  National  data  show  that  the  performance 
deficit  develops  early,  particularly  among 
pupils  from  disadvantaged  backgrounds  and 
those  who  speak  French  or  Portuguese  at 
home.  Similarly,  while  8th  graders’  scores  in 
digital skills improved between 2018 to 2023, 
pupils  showed  the  largest  performance  gaps 
according  to  the 
level  of  their  parents’ 
occupations.  To  address  performance  gaps,  a 
pilot  initiative  providing  literacy  education  in 
French was launched in four primary schools in 
2022/2023,  to  teach  reading  and  writing  to 
pupils  who  do  not  speak  German  or 
Luxembourgish  at  home. 
primary 
education curriculum is currently being revised 
with  more  focus  on  developing  basic  skills 
(Annex 12). 

The 

Human capital formation is 
essential for economic growth 

The  absence  of  a  unified  school  quality 
framework  at  national  level  prevents 
effective monitoring and may accentuate 
inequalities. 
and 
segmentation 
Luxembourg  has  neither  a  binding  national 
reference framework for school quality nor an 
external  school  evaluation  system(29).  Skills 
levels  and  standards  are  not  sufficiently 
detailed  in  the  curricula  and  there  is  no 
systemic  standardised  data  collection 
in 
schools. The issue is reflected in the significant 
discrepancy  between  internal  measurements 
external 
(teachers’ 
and 
students’ 
standardised  measurement  of 
performance 
a 
Luxembourgish  school  monitoring  tool.      In 
particular,  the  draft  regulation  implementing 
the  school  development  plans  in  secondary 
school  (31)  has  never  been  adopted.  While 
autonomy for individual schools enables them 

evaluations) 

ÉpStan(30) 

using 

(29)  See Observatoire national de l’enfance, de la jeunesse 
et de la qualité scolaire (OEJQS), 2024, Topical report: 
Evidenzorientierte Qualitätsentwicklung im 
Gesamtsystem Schule (German) 

(30)  “Épreuves Standardisées” (ÉpStan) 

(31)  Draft Grand-Ducal regulation relating to the RGD (laying 
down the procedures for drawing up and implementing 
the school development plan in secondary schools). 

17 

 
 
and 

increasingly 

to  better  adapt  to  the  needs  of  rapidly 
changing 
diverse 
communities, the level of autonomy under the 
current  institutional  framework  may  facilitate 
higher  segmentation  and  inequality.  Current 
policies 
reforms 
focusing  on  skills-based  learning  and  digital 
skills but fail to address disparities across the 
school systems. 

emphasise 

curriculum 

instruction 

A focus on basic skills development from 
an early age is needed, with targeted and 
proactive  support  for  disadvantaged 
pupils  and  schools.  Luxembourg  could 
benefit from more personalised and preventive 
support, accompanied by an expert evaluation 
to  optimise  its  impact.  At  the  same  time, 
German-language  activities  in  early  childhood 
education  and  care  could  be  introduced  to 
in 
better  prepare  children  for 
German  at  school.  Targeted  support  for 
disadvantaged  pupils  and  schools  could  help 
reduce the performance gap between students 
from  different  socio-economic  and  linguistic 
backgrounds. This would improve the country’s 
overall skills levels. The implementation of the 
new  skills-oriented  primary  school  curriculum 
does  not  address  disparities.  These  could  be 
addressed at national level by the adoption of 
a  national  quality  framework  in  education 
providing  for  disparities  in  the  curricula,  as 
well  as  providing  adequate  methodological 
preparation  for  teachers.  With  these  tools, 
schools could draw up their own quality policy 
and actions. 

Reducing inequalities is also key 

reflecting  systemic 

The  risk  of  poverty  or  social  exclusion 
(AROPE)  has  been  increasing  in  recent 
inequality 
years, 
issues. The total AROPE rate and the rate for 
children  have  been  growing  overall  since 
2015,  contrary  to  the  EU  average  which  has 
fallen  over  the  same  period.  This  trend  is 
mainly  driven  by 
income  disparities,  as 
measured by the at-risk-of-poverty component 
of  AROPE:  AROP  rate  has  consistently  been 
above  the  EU  average  since  2019..  By 
contrast,  the  rates  (total  rate  and  children's 
rate) for the other two underlying components 

of  the  AROPE,  severe  material  and  social 
deprivation,  remain  well  below  corresponding 
EU  averages,  despite  recent  rises  (Annex  11). 
In-work poverty has consistently surpassed the 
EU average since 2010 and currently affects 1 
in 7 employees. In terms of demographics, in-
work  poverty  is  particularly  prevalent  among 
those  born  outside  the  EU,  the  low-skilled 
(working  in  low-wage  sectors),  and  single-
parents  especially 
those  with  dependent 
children. These factors contribute to inequality, 
including  income  inequality  as  measured  by 
the income quintile share ratio. The impact of 
in 
social 
reducing 
been 
decreasing, 
social 
benefits as well as low take-up rates (32). Low 
awareness  about  eligibility 
support 
measures,  complex  administrative  procedures 
and  psychological  costs  are  among  the  main 
reported  reasons  for  this  low  uptake(33).  The 
inequality-reducing  effect  of 
taxes  and 
transfers  is  also  below  the  EU  average,  with 
limited progressivity of direct taxation when it 
comes to wages(34). 

transfers,  excluding  pensions, 

has 
insufficient 

inequality 

reflecting 

income 

for 

Reducing  inequalities,  is  essential  for 
fostering  social  cohesion  and  supporting 
Luxembourg’s  competitiveness.  Several 
measures  have  been  taken,  including  tax 
breaks  and  increases  in  minimum  wages, 
pensions  and  other  social  benefits.  The 
government  announced  a national  action  plan 
to prevent and combat poverty. The plan is to 
be  drawn  up  with  the  social  partners  by  the 
end  of  2025.  One  of  the  key  measures  will 
include 
to 
increase  social  benefit  take-up,  in  particular 
through  the  creation  of  a  one-stop  shop  for 
social  benefits.  Moreover,  25%  of  the  2021-
(EUR 3.8  million) 
2027 

(ESF+)  allocation 

administrative 

simplification 

(32)  Due to a break in series in 2020, 2021 and 2022 the 
evolution of this indicator should be interpreted with 
some caution. Nevertheless, the latest available data 
indicates that the performance of LU on this indicator 
has not improved and remains significantly below the 
EU average. 

(33)  Luxembourg Institute of Socio-economic Research 
(LISER), 2024, Précarité et (non-)recours aux aides 
financières au Luxembourg – Une étude qualitative 

(34)  Eurofound, 2024, Promoting social cohesion and 

convergence – Developments in income inequality and 
the middle class in the EU 

18 

 
 
supports  the  fight  against  poverty  and  social 
exclusion.  A  more  effective 
tax-benefits 
system  could  also  help  alleviate  high  living 
costs,  as  could  reskilling  and  upskilling  and 
increasing the supply of social housing. 

These  findings  are  consistent  with  the 
second-stage  analysis  in  line  with  the 
The 
Social  Convergence  Framework. 
analysis  points  to  challenges  related  to  the 
increasing  percentage  of  people  at  risk  of 
poverty  or  social  exclusion,  mainly  driven  by 
income  disparities,  but  does  not  point  to 
overall  social  convergence  challenges  for 
Luxembourg, 
the  measures 
even  with 
implemented or planned (35). 

(35)  European Commission, SWD (2025)95. The analysis 

relies on all the available quantitative and qualitative 
evidence and the policy response undertaken and 
planned. 

19 

 
 
KEY FINDINGS 

To  foster  competitiveness,  sustainability  and 
social  fairness,  Luxembourg  would  benefit 
from: 

• 

implementing  the  RRP, 
including  the 
swiftly 
chapter; 
REPowerEU 
implementing  cohesion  policy,  taking 
advantage  of  the  opportunities  under  the 
mid-term  review  and  making  optimal  use 
of EU instruments, including InvestEU and 
STEP, to improve competitiveness; 

•  strengthening the sustainability of the 
pension  system  –  implementing  reforms 
that  ensure  the  financial  sustainability  of 
the 
the  pension 
system, 
the 
retirement 
effective 
employment rate of older workers; 

increasing 
and 

age 

•  taking  stronger  measures  to  tackle 
aggressive  tax  planning,  which  would 
prevent  distortion  of  competition  between 
firms, 
taxpayers  fairly  and 
safeguard government finances; 

treat  EU 

and 

taxes 

•  addressing  housing  market  issues  by 
reforming 
benefits, 
macroprudential policies, land use planning, 
mortgage  market 
regulations,  and  by 
investing  in  public  housing,  strengthening 
coordination  with 
cross-border  public 
transport and urban planning; 

•  enhancing  sustainable  and  efficient 
transportation,  to  achieve  the  necessary 
emissions reductions (towards the target of 
a  55% 
reduction),  by  decarbonising 
transport  and  by  increasing  the  use  of 
public  transport    -which  would  also  tackle 
growing traffic congestion-, in particular by 
investing  in  public  transport  infrastructure, 
strengthening  cross-border  networks 
in 
collaboration  with  regional  authorities  in 
the 'Greater Region', and by improving last-
to  create  a  more 
mile  connections, 

competitive  and  sustainable  transportation 
system; 

•  boosting  competitiveness,  including  by 
promoting  diversification  in  the  financial 
sector,  supporting  investment  in  high  R&D 
intensive  activities,  fostering  productive 
innovation and accelerating digitalisation in 
the  business  sector,  in  particular  in  the 
uptake of advanced digital  technologies by 
SMEs  and  enabling  business  scale-up  and 
productivity growth.  

•  reducing  reliance  on  fossil  fuels  and 
accelerating  the  green  transition,  in 
particular by increasing energy efficiency in 
residential  and  commercial  buildings  and 
supporting  municipalities 
in  deploying 
renewable energy, and by stimulating skills 
development,  particularly  for  those  key 
skills that are necessary for the green and 
digital transition.  

•  further  supporting  renewable  energy 
and 
deployment, 
by 
modernising the high-voltage grid capacity, 
improving 
with 
neighbouring 
easing 
permitting procedures. 

interconnections 
and 
countries, 

Increasing 

school 

to support upward social convergence, 
improving  performance  and  ensuring 
equal  opportunities 
in  schools  – 
addressing 
the  effects  on  students’ 
performance  of  economic  background, 
language  differences  and  disparities 
among 
systems,  notably  by 
implementing  a  unified  national  school 
quality 
common 
objectives,  qualification  benchmarks  and 
monitoring  procedures.  This  would  help 
develop  human  capital  potential  and 
innovation  capacity,  key 
for 
country’s 
sustainably 
competitiveness. 

framework 

improving 

factors 

with 

the 

• 

20 

 
 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

Fiscal 

A1.  Fiscal surveillance and debt sustainability 

A2.  Taxation 

Productivity 

A3. 

Innovation to business 

A4.  Making business easier 

A5.  Capital markets, financial stability and access to finance 

A6.  Effective institutional framework 

Sustainability 

A7.  Clean industry and climate mitigation 

A8.  Affordable energy transition 

A9.  Climate adaptation, preparedness and environment 

Fairness 

A10.  Labour market 

A11.  Social policies 

A12.  Education and skills 

A13.  Social Scoreboard 

A14.  Health and health systems 

Horizontal 

A15.  Sustainable development goals 

A16.  CSR progress and EU funds implementation 

A17.  Competitive regions 

LIST OF TABLES 

General government balance and debt 
Net expenditure 
Net expenditure (outturn and forecasts), deviations vis-à-vis the recommendation 
Defence expenditure 

A1.1. 
A1.2. 
A1.3. 
A1.4. 
A1.5.  Macroeconomic developments and forecasts 
A1.6. 
A1.7. 
A1.8. 
A1.9. 

General government budgetary position 
Debt developments 
RRF – Grants 
Projected change in age-related expenditure in 2024-2040 and 2024-2070 

23 

25 

25 

31 

34 

34 

38 

44 

53 

58 

58 

64 

69 

75 

75 

79 

83 

87 

88 

91 

91 

93 

100 

27 
27 
28 
28 
28 
29 
29 
30 
30 

 
 
 
Financial Indicators 
Luxembourg. Selected indicators on administrative burden reduction and simplification 
Digital Decade targets monitored through the Digital Economy and Society Index 
Key clean industry and climate mitigation indicators: Luxembourg 
Key Energy Indicators 
Key indicators tracking progress on climate adaptation, resilience and environment 

A1.10.  Fiscal Governance Database Indicators 
A2.1. 
Taxation indicators 
A3.1. 
Key innovation indicators 
A4.1.  Making Business Easier: indicators. 
A5.1. 
A6.1. 
A6.2. 
A7.1. 
A8.1. 
A9.1. 
A13.1.  Social Scoreboard for Luxembourg 
A14.1.  Key health indicators 
A16.1.  Selected EU funds with adopted allocations - summary data (million EUR) 
A16.2.  Summary of 2019-2024 CSRs 
A17.1.  Socio-economic indicators by degree of urbanisation, 2024 

LIST OF GRAPHS 

Tax revenue shares in 2023 
Tax wedge for single and second earners, % of total labour costs, 2024 
Use of SPEs for FDI in Luxembourg and in the rest of the EU, 2023 
Business R&D investment as % of GDP, 2013-2023 

A2.1. 
A2.2. 
A2.3. 
A3.1. 
A4.1.  Making Business Easier: selected indicators. 
A5.1. 
Net savings-investment balance 
A5.2. 
International investment position 
A5.3. 
Capital markets and financial intermediaries 
A5.4. 
Composition of NFC funding as % of GDP 
A5.5. 
Composition of household financial assets per capita and as % of GDP 
A6.1. 
Trust in justice, regional / local authorities and in government 
A6.2. 
Indicators of Regulatory Policy and Governance (iREG) 
A6.3. 
Participation rate of 25-64 year olds in adult learning (%) by occupation 
A7.1. 
GHG emission intensity of the manufacturing and energy-intensive sectors, 2022 
A7.2. 
Greenhouse gas emissions from the effort sharing sectors, 2005 and 2023 
A8.1. 
Retail energy price components for household and non-household consumers, 2024 
A8.2.  Monthly average day-ahead wholesale electricity prices and European benchmark natural gas prices (Dutch TTF) 
A8.3. 
A9.1. 
A10.1.  Key labour market indicators 
A10.2.  Employment rate by age group (annual) 
A10.3.  Labour market outcomes of young people (15-24) 
A11.1.  At-risk-of-poverty or social exclusion rate (AROPE) by age group 
A11.2. 
A11.3. 
A12.1.  Evolution of writing comprehension in German in grade 3, depending on the socio-economic status, between 2018 and 

Luxembourg's installed renewable capacity (left) and electricity generation mix (right) 
Direct dependency(1) on ecosystem services(2) of the gross value added generated by economic sector in 2022 

In-work poverty rate (by group) 
Impact of social transfers (other than pensions) on poverty reduction 

2020 

A12.2.  Education and labour market for youth 
A14.1.  Life expectancy at birth, years 
A14.2.  Treatable mortality 
A15.1.  Progress towards the SDGs in Luxembourg 
A16.1.  Distribution of RRF funding in Luxembourg by policy field 
A16.2.  Distribution of cohesion policy funding across policy objectives in Luxembourg 
A17.1.  Labour productivity per hour worked 

24 

31 
32 
38 
44 
53 
55 
56 
64 
69 
75 
88 
90 
96 
97 
102 

32 
33 
34 
35 
40 
45 
46 
46 
48 
50 
54 
54 
57 
60 
61 
65 
66 
67 
73 
76 
77 
77 
80 
81 
82 

84 
85 
89 
89 
92 
94 
95 
101 

 
 
 
 
 
FISCAL 
ANNEX 1: FISCAL SURVEILLANCE AND DEBT SUSTAINABILITY 

This Annex contains a series of tables relevant for the assessment of the fiscal situation in Luxembourg, 
including  how  Luxembourg  is  responding  to  Council  recommendations  issued  under  the  reformed 
Economic Governance Framework. 

The  reformed  framework,  which  entered  into  force  on  30  April  2024(36),  aims  to  strengthen 
debt  sustainability  and  promote  sustainable  and  inclusive  growth  through  growth-enhancing 
reforms  and  priority  investments.  The  medium-term  fiscal-structural  plans  (hereinafter,  MTPs  or 
plans) constitute the cornerstone of the framework, setting the budgetary commitment of Member States 
over  the  medium  term.  The  latter  is  defined  in  terms  of  net  expenditure  growth,  which  is  the  single 
operational indicator for fiscal surveillance.  

Luxembourg  submitted  its  plan  on  15  October  2025.  The  plan  covers  the  period  until  2029, 
presenting  a  fiscal  adjustment  over  four  years.  On  21  January  2025,  the  Council  adopted  the 
Recommendation endorsing Luxembourg’s plan.(37)  

The  assessment  of  the  implementation  of  the  Council  Recommendation  is  carried  out  on  the 
basis of outturn data from Eurostat and the Commission Spring 2025 Forecast, and taking into 
account  the  Annual  Progress  Report  (APR),  that  Luxembourg  submitted  on  25  April  2025. 
Furthermore, in the context of the Commission Communication of 19 March 2025(38), on accommodating 
defence  expenditure  within  the  Stability  and  Growth  Pact,  the  Annex  reports  the  projected  increase  in 
defence expenditure based on the Commission Spring 2025 Forecast.  

The Annex is organised as follows. First, developments in  government deficit and debt are presented 
based  on  the  figures  reported  in  Table  A1.1.  Then,  the  assessment  of  the  implementation  of  the 
Council  Recommendation  endorsing  the  plan  follows,  based  on  the  relevant  figures  presented  in 
Tables A1.2 to A1.8, including data on defence expenditure.  

The Annex also provides information on the cost of ageing and the national fiscal framework. Fiscal 
sustainability risks are discussed in the Debt Sustainability Monitor 2024.(39) 

Developments in government deficit and debt  

Luxembourg’s government surplus amounted to 1.0% of GDP in 2024. Based on the Commission’s 
Spring 2025 Forecast, it is projected to turn to a deficit of 0.4% of GDP in 2025. The government debt-to-
GDP  ratio  amounted  to  26.3%  at  the  end  of  2024  and,  according  to  the  Commission,  is  projected  to 
decrease to 25.7% end-2025 due to the snow-ball effect as GDP growth is projected to be higher than 
interest payment.   

(36)  Regulation (EU) 2024/1263 of the European Parliament and of the Council (EU) on the effective coordination of economic policies 
and on multilateral budgetary surveillance, together with the amended Regulation (EC) No 1467/97 on the implementation of the 
excessive deficit procedure, and the amended Council Directive 2011/85/EU on the budgetary frameworks of Member States are the 
core elements of the reformed EU economic governance framework. 

(37)  OJ C, C/2025/650, 10.02.2025, ELI: https://eur-lex.europa.eu/eli/C/2025/650/oj/eng. 

(38)  Communication from the Commission accommodating increased defence expenditure within the Stability and Growth Pact of 19 

March 2025, C(2025) 2000 final. 

(39)  European Commission (2025) ‘Debt Sustainability Monitor 2024,’ European Economy-Institutional Papers 306. 

25 

 
 
 
 
 
Table A1.1:  General government balance and debt 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

Developments in net expenditure  

The net expenditure(40) growth of Luxembourg in 2025 is forecast by the Commission(41) to be 
above  the  recommended  maximum  corresponding  to  a  deviation  of  0.5%  of  GDP.  Considering 
2024  and  2025  together,  the  cumulative  growth  rate  of  net  expenditure  is  projected  below  the 
recommended maximum cumulative growth rate. The annual deviation in 2025 is above the 0.3% of GDP 
threshold. 

Table A1.2:  Net expenditure 

(1) The cumulative growth rates are calculated by reference to the base year of 2023. 
Source: Council Recommendation endorsing the national medium-term fiscal-structural plan of Luxembourg (Rec.), Annual 
Progress Report (APR), and Commission Spring 2025 Forecast (COM). 

General  government  defence  expenditure  in  Luxembourg  remained  stable  at  0.5%  of  GDP 
between  2021  and  2023(42).  According  to  the  Commission  2025  Spring  Forecast,  expenditure  on 
defence is projected at 0.6% of GDP in 2024 and 0.7% of GDP in 2025. 

(40)  Net expenditure is defined in Article 2(2) of Regulation (EU) 2024/1263 as government expenditure net of (i) interest expenditure, 
(ii) discretionary revenue measures, (iii) expenditure on programmes of the Union 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-off and other temporary measures.  

(41)  Commission Spring 2025 Forecast, European Economy-Institutional paper 318, May 2025. 

(42)  Eurostat, government expenditure by classification of functions of government (COFOG).  

26 

2024OutturnAPRCOMAPRCOM1General government balance% GDP1.0-0.6-0.4n.a.-0.52General government gross debt% GDP26.326.425.7n.a.26.2Variables20252026RECAPRCOMRECAPRCOM2024n.a.6.7%6.2%n.a.n.a.n.a.20255.8%7.1%6.8%14.2%14.3%13.5%20264.7%n.a.5.3%19.6%n.a.19.5%AnnualCumulative*Growth rates 
 
                            
 
 
                            
 
 
  
 
Table A1.3:  Net expenditure (outturn and forecasts), deviations vis-à-vis the recommendation 

*  The growth rate for 2024 is not a recommendation but serves to anchor the base, as the latest year with outturn data when 
setting the net expenditure path is year 2023.  
Source: Commission Spring 2025 Forecast and Commission's calculation. 

Table A1.4:  Defence expenditure 

Source:  Eurostat (COFOG), Commission Spring 2025 Forecast 

Table A1.5:  Macroeconomic developments and forecasts 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

27 

2023202420252026OutturnOutturnCOMCOM1Total expenditurebn NAC38.140.443.045.32Interest expenditurebn NAC0.20.30.30.33Cyclical unemployment expenditurebn NAC-0.10.10.10.14Expenditure funded by transfers from the EUbn NAC0.10.20.20.25National co-financing of EU programmesbn NAC0.00.10.10.16One-off expenditure (levels, excl. EU funded)bn NAC0.00.00.00.07=1-2-3-4-5-6Net nationally financed primary expenditure (before discretionary revenue measures, DRM)bn NAC37.839.842.444.68Change in net nationally financed primary expenditure (before DRM)bn NAC2.02.62.29DRM (excl. one-off revenue, incremental impact)bn NAC-0.4-0.10.010=8-9Change in net nationally financed primary expenditure (after DRM) bn NAC2.42.72.311Outturn / forecast net expenditure growth% change6.23%6.8%5.3%12Recommended net expenditure growth*% change8.0%5.8%4.7%13=(11-12) x 7Annual deviationbn NAC-0.70.40.314 (cumulated from 13)Cumulated deviationbn NAC-0.7-0.30.015=13/17Annual balance% GDP-0.80.50.316=14/17Cumulated balance% GDP-0.8-0.30.017p.m. Nominal GDP  bn NAC81.086.189.894.1Variables2021202220232024202520261Total defence expenditure% GDP0.50.50.50.60.70.62of which: gross fixed capital formation% GDP0.10.10.00.10.40.22024OutturnAPRCOMAPRCOM1=7+8+9Real GDP% change1.02.51.7n.a.2.02Private consumption% change1.32.42.0n.a.2.43Government consumption expenditure% change4.93.94.4n.a.2.64Gross fixed capital formation% change-7.36.12.5n.a.3.95Exports of goods and services% change0.33.23.1n.a.3.26Imports of goods and services% change-0.33.83.8n.a.3.8Contributions to real GDP growth 7- Final domestic demandpps0.23.61.9n.a.1.98- Change in inventoriespps-0.3-1.90.0n.a.0.09- Net exportspps1.10.8-0.2n.a.0.110Output gap% pot GDP-3.6-3.3-3.1n.a.-2.511Employment % change1.11.41.3n.a.1.712Unemployment rate%6.45.96.6n.a.6.413Labour productivity% change-0.11.10.4n.a.0.214HICP % change2.32.02.1n.a.1.815GDP deflator% change5.22.02.5n.a.2.816Compensation of employees per head% change2.23.33.8n.a.3.317Net lending/borrowing vis-à-vis the rest of the world% GDP1.6n.a.-0.2n.a.-0.620252026Variables 
 
                            
 
 
 
      
 
 
 
                            
 
 
Table A1.6:  General government budgetary position 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

Table A1.7:  Debt developments 

*  End of period.  
** The 'snow-ball' effect captures the impact of interest expenditure on accumulated general government debt, as well as the 
impact of real GDP growth and inflation on the general government debt-to-GDP ratio (through the denominator). The stock-flow 
adjustment includes differences in cash and accrual accounting (including leads and lags in Recovery and Resilience Facility grant 
disbursements), accumulation of financial assets, and valuation and other residual effects. 
Source: Commission Spring 2025 Forecast and Commission's calculation (COM), Annual Progress Report (APR) 

28 

2024OutturnAPRCOMAPRCOM1=2+3+4+5Revenue47.947.347.5n.a.47.6of which:2- Taxes on production and imports11.611.811.6n.a.11.53- Current taxes on income, wealth, etc.19.118.418.7n.a.18.94- Social contributions12.112.512.2n.a.12.25- Other (residual)5.14.65.1n.a.5.08=9+16Expenditure 46.948.048.0n.a.48.2of which:9- Primary expenditure46.647.647.6n.a.47.8of which:10- Compensation of employees 11.211.711.7n.a.11.811- Intermediate consumption4.64.74.6n.a.4.512- Social payments19.520.019.9n.a.20.113- Subsidies1.31.21.3n.a.1.214- Gross fixed capital formation4.54.64.7n.a.4.615- Other5.55.45.6n.a.5.616- Interest expenditure0.30.40.3n.a.0.318=1-8General government balance1.0-0.6-0.4n.a.-0.519=1-9Primary balance1.3-0.2-0.1n.a.-0.220Cyclically adjusted balance2.7n.a.1.0n.a.0.621One-offs0.00.00.0n.a.0.022=20-21Structural balance2.70.91.0n.a.0.623=22+16Structural primary balance3.01.31.3n.a.0.9Variables (% GDP)202520262024OutturnAPRCOMAPRCOM1Gross debt ratio* (% of GDP)26.326.425.7n.a.26.22=3+4+8Change in the ratio (pps. of GDP)1.30.1-0.7n.a.0.5Contributions**3Primary balance-1.30.20.1n.a.0.24≈5+6+7'Snow-ball' effect-1.2-0.8-0.8n.a.-0.9of which:5- Interest expenditure0.30.40.3n.a.0.36- Real growth effect-0.2-0.6-0.4n.a.-0.57- Inflation effect-1.2-0.5-0.6n.a.-0.78'Stock-flow' adjustment3.80.60.0n.a.1.220252026Variables 
 
                            
 
 
 
 
                            
 
 
Table A1.8:  RRF – Grants 

Source: Annual Progress Report 

Cost of Ageing 

Total age-related spending in Luxembourg is projected to rise from about 17% of GDP in 2024 
to about 20% in 2040 and 28% in 2070 (see Table A1.9).  The overall increase of more than 10 pps 
is driven by the projected rise in pension spending and, to a lesser extent, long-term care and healthcare.    

Public  pension  spending  is  projected  to  increase  continuously  over  the  next  decades.  The 
pension  expenditure-to-GDP  ratio  would  rise  from  about  9.5%  of  GDP  in  2024  to  17.5%  by  2070,  the 
highest projected increase among EU Member States. By 2040, pension spending would rise by 1.8 pps of 
GDP. 

Public healthcare expenditure is projected at 4.1% of GDP in 2024 (below the EU average of 
6.6%)  and is  expected to  increase by 0.4 pps by  2040  and  by a further  0.7 pps  by  2070 (43). 
Public expenditure on long-term care is projected at 1.1% of GDP in 2024 (below the EU average of 1.7%) 
and is expected to increase by 0.3 pps of GDP by 2040 and by a further 1.3 pps of GDP by 2070. These 
expenditure increases, due to an ageing population, pose a risk to fiscal sustainability in the long term. 

Table A1.9:  Projected change in age-related expenditure in 2024-2040 and 2024-2070 

Source: 2024 Ageing Report (EC/EPC). 

(43)  Key performance characteristics, recent reforms and investments of the Luxembourgish healthcare system are discussed in Annex 

14 ‘Health and health systems’. 

29 

Revenue from RRF grants (% of GDP)20202021202220232024202520261RRF grants as included in the revenue projectionsn.a.0.00.00.00.00.10.12Cash disbursements of RRF grants from EUn.a.0.00.00.00.00.00.020202021202220232024202520263Total current expenditure0.00.00.00.00.00.00.04Gross fixed capital formation0.00.00.00.00.00.00.05Capital transfers0.00.00.00.00.10.10.06=4+5Total capital expenditure0.00.00.00.00.10.10.020202021202220232024202520267Reduction in tax revenue0.00.00.00.00.00.00.08Other costs with impact on revenue0.00.00.00.00.00.00.09Financial transactions0.00.00.00.00.00.00.0Expenditure financed by RRF grants (% of GDP)Other costs financed by RRF grants (% of GDP)LU17.41.80.30.3-0.22.319.8LUEU24.30.50.30.4-0.30.925.2EULU17.48.11.01.6-0.310.527.9LUEU24.30.20.60.8-0.41.325.6EUage-related expenditure 2024 (% GDP)change in 2024-2040 (pps GDP) due to:age-related expenditure 2040 (%GDP)pensionshealthcarelong-term careeducationtotalage-related expenditure 2024 (% GDP)change in 2024-2070 (pps GDP) due to:age-related expenditure 2070 (%GDP)pensionshealthcarelong-term careeducationtotal 
 
                            
 
 
 
   
 
 
National fiscal framework 

Institutions  (IFIs) 

Independent  Fiscal 

Luxembourg’s  framework  for 
leaves  room  for 
improvement.  The  two  IFIs  are  the  National  Council  of  Public  Finance  (CNFP),  which  focuses  on 
monitoring the compliance with fiscal rules, and the National Institute of Statistics and Economic Studies 
of  the  Grand  Duchy  of  Luxembourg  (STATEC),  which  produces  the  macroeconomic  forecast.  The 
independence  of  the  CNFP  could  be  strengthened  by  giving  it  greater  control  over  its  budget  and  by 
emphasising the fiscal and economic expertise of members. Recruitment of staff is currently also limited 
to  civil  servants.  In  addition,  its  impact  could  be  strengthened  by  developing  an  explicit  communication 
strategy  and  by  intensifying  its  outreach  activities.  Contrary  to  the  CNFP,  STATEC  has  been  subject  of 
external review and its forecasts are subject to ex post assessments by the CNFP. The government has a 
strong  influence  over  the  appointments  to  STATEC  leadership  and  there  are  no  formal  expertise 
requirements.  

Table A1.10:Fiscal Governance Database Indicators 

The Country Fiscal Rule Strength Index (C-FRSI) shows the strength of national fiscal rules aggregated at the country level based 
on i) the legal base, ii) how binding the rule is, iii) monitoring bodies, iv) correction mechanisms, and v) resilience to shocks. The 
Medium-Term Budgetary Framework Index (MTBFI) shows the strength of the national MTBF based on i) coverage of the 
targets/ceilings included in the national medium-term fiscal plans; ii) connectedness between these targets/ceilings and the 
annual budgets; iii) involvement of the national parliament in the preparation of the plans; iv) involvement of independent fiscal 
institutions in their preparation; and v) their level of detail. A higher score is associated with higher rule and MTBF strength. 
Source: Fiscal Governance Database 

30 

2023LuxembourgEU AverageCountry Fiscal Rule Strength Index (C-FRSI)10.9114.52Medium-Term Budgetary Framework Index (MTBFI)0.780.73 
 
     
 
 
 
ANNEX 2: TAXATION 

This  annex  provides  an 
indicator-based 
overview  of  Luxembourg’s  tax  system.  It 
includes  information  on:  (i)  the  tax  mix;  (ii) 
competitiveness  and  fairness  aspects  of  the  tax 
system;  and  (iii)  tax  collection  and  compliance.  It 
also provides information on the risk of aggressive 
tax planning in Luxembourg. 

or  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.  However,  revenues  from  recurrent 
property  taxes  which  are  considered  to  be  a 
particularly growth-friendly type of tax, are among 
the lowest in the EU. 

Luxembourg’s  tax  revenues  in relation  to its 
GDP  are  above  the  EU  average.  Table  A2.1 
shows  that  Luxembourg’s  tax  revenues  as  a 
percentage  of  GDP  (40.5%)  were  above  the  EU 
aggregate (39.0%)  in  2023,  a  noticeable increase 
since  2022  (when  they  were  equivalent to  39.3% 
of  GDP,  below  the  EU  average  of  39.7%).  They 
further increased to 41.6% in 2024. Luxembourg’s 
tax  revenues  from  labour  taxation  in  2023  as  a 
share  of  GDP  were  20.2%,  a  substantial  increase 
from  2022  (18.6%)  and  the  first  time  that  they 
were  above  the  EU  average  for  2023  (20.0%). 
Luxembourg’s  revenues  from  consumption  and 
environmental taxes as a share of GDP are among 
the  lowest  in  the  EU.  Environmental  taxation  is 
limited and mostly consists of transport fuel taxes. 
This  suggests  there  is  scope  to  better  incentivise 
environmentally  friendly  behaviour,  including  by 
developing pollution and resources taxes (which at 
present  do  not  cover  NOx  emissions,  waste 
landfilling  and  incineration,  fertilisers,  pesticides, 

Table A2.1:  Taxation indicators 

Graph A2.1: Tax revenue shares in 2023 

Source: Taxation Trends Data, DG TAXUD 

corporate-income-tax 

Luxembourg’s 
(CIT) 
rate  is  high  and  getting  closer  to  the  EU 
average. After three successive years of declines, 
Luxembourg’s  statutory  corporate-tax  rate  was 
stable at 24.9% (which includes a 7% surcharge – 
to  support  a  national 
added  since  2013 

(1) Forward-looking effective tax rate (KPMG).       
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average. 
(**) Forecast value for 2023. For more details on the VAT gap, see European Commission, Directorate-General for Taxation and 
Customs Union, VAT gap in the EU - 2024 report,  https://data.europa.eu/doi/10.2778/2476549 
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, OECD 

31 

51.226.921.950.023.029.2Tax revenue shares in 2023, Luxembourg (outer ring) and EU (inner ring)Taxes on labourTaxes on consumptionTaxes on capitalLUMedian (EU-27)2010202120222023202420102021202220232024Tax structureTotal taxes (including compulsory actual social contributions) (% of GDP)35.738.439.340.541.637.840.239.739.0Taxes on labour (% of GDP)15.818.218.620.219.820.520.120.0of which, social security contributions (SSC, % of GDP)10.310.610.711.512.913.012.712.7Taxes on consumption (% of GDP)9.99.09.29.310.911.210.910.5of which, value added taxes (VAT, % of GDP)6.36.26.76.56.87.37.47.1Taxes on capital (% of GDP)10.011.611.111.87.18.58.78.5Personal income taxes (PIT, % of GDP)7.410.110.411.68.69.69.49.3Corporate income taxes (CIT, % of GDP)5.44.54.45.02.22.93.23.2Total property taxes (% of GDP)1.02.62.62.41.92.22.11.9Recurrent taxes on immovable property (% of GDP)0.10.10.10.11.11.11.00.9Environmental taxes (% of GDP)2.31.51.21.32.52.42.12.0Effective carbon rate in EUR per tonne of CO2 equivalentsNA112.4NA112.9NA86.0NA84.8Tax wedge at 50% of average wage (single person) (*)25.326.126.026.225.933.931.831.531.531.8Tax wedge at 100% of average wage (single person) (*)35.339.839.941.240.340.939.939.940.240.3Corporate income tax - effective average tax rates (1) (*)27.724.624.624.621.319.319.118.9Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)9.75.35.35.98.68.27.97.7Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)9.99.835.532.6VAT gap (% of VAT total tax liability, VTTL) (**)7.43.76.76.67.0Progressivity & fairnessTax administration & complianceBy tax baseSome tax typesLuxembourgEU-27 
 
 
        
 
  
 
 
 
employment  fund)  between  2019  and  2024, 
above  the  EU  average  of  21.2%.  The  country’s 
aggregated  statutory  CIT  rate  was  reduced  to 
23.9%  in  2025  in  an  attempt  by  the  government 
to  bring  it  closer  to  the  EU  and  OECD  averages. 
Luxembourg’s average effective corporate-tax rate 
stood  at  24.6%  in  2023,  still  above  the  EU 
average of 18.9%.   

Graph A2.2: Tax wedge for single and second 
earners, % of total labour costs, 2024 

to 

Since 

provisions 

companies. 

legislation  and  other 
applicable 

Luxembourg’s  tax  framework  provides  for 
various  incentives  that  effectively  lower 
companies’  tax  burden  and  make  it  more 
2018, 
attractive 
Luxembourg  has  offered  an  intellectual  property 
(IP)  regime  where  eligible  net 
income  from 
qualifying 
IP  assets  benefits  from  an  80% 
exemption from income tax  – thus decreasing the 
overall  tax  rate  (made  up  of  CIT  plus  municipal 
business  tax)  to  an  effective  rate  on  that  income 
of  4.8%  in  2025.  Luxembourg  also  offers  tax 
credits for investment, such as an 18% tax credit 
for  investments  and  operating  expenses  that 
support  the  green  and  digital  transformation 
(excluding:  (i)  assets  that  are  depreciable  over  a 
period  of  less  than  three  years;  (ii)  automotive 
vehicles  and 
(iii)  operating 
investments;  and 
expenses  to  bring  the  company  into  compliance 
from  environmental 
with  obligations  arising 
legal  and 
protection 
regulatory 
the 
establishment  and  operation  of  industrial  and 
commercial  companies).  There  is  also  a  12%  tax 
credit based on the acquisition price or production 
costs  of  new  qualifying  assets  for  overall 
investment applicable to: (i) depreciable intangible 
assets  other  than  buildings,  livestock  and  mineral 
and fossil deposits; (ii) sanitary and central heating 
installations  incorporated  into  hotel  buildings;  (iii) 
certain  buildings  qualifying  as  social  investment; 
(iv) fixed assets qualifying for special depreciation; 
and  (v)  acquisitions  of  software,  insofar  as  they 
have  not  been  acquired  from  a  related  company. 
Furthermore,  Luxembourg  entities  subject 
to 
specific  regulatory  requirements  can  benefit  from 
a full CIT exemption (such as investment funds) or 
a near-full tax exemption (such as private wealth-
management  companies,  which  need  only  pay  a 
yearly  subscription  tax  of  0.25%  of  income). 
Luxembourg  has  experienced  the  second  highest 
growth  rate  in  venture-capital  financing  since 
2013  and  its  venture-capital  vehicle  (SICAR)  is 
from 
to 
subject 
exemptions 
from 
transferable securities qualifying as investment in 
risk capital and from net wealth tax).    

tax  but  benefits 
income  and  gains 

income 
(on 

to 

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

burden 

Luxembourg’s 
is 
income-tax 
relatively low across the income distribution. 
Luxembourg’s  tax  wedge(44)  in  2024  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  equal  to  the  EU  average  at 
100% and higher than the EU average at 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 largest 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-and-benefit  system  as  a  whole 
has  a  relatively  small  impact  in  reducing  income 
inequality  as  measured  by  the  difference  in  the 
Gini  coefficient  before  and  after  taxes  and  social 
transfers.  

Luxembourg scores well  on indicators of the 
effectiveness  and  efficiency  of 
its  tax 
administration.  Outstanding  tax  arrears  were 
stable  (down  0.1pp)  between  2021  and  2022  at 
9.9%  of  total  net  revenue,  which  is  significantly 
below the EU-27 average of 32.6%. However, the 
VAT  gap  increased  noticeably  from  3.7%  in  2022 
to  6.7%  in  2023  according  to  the  fast  estimates, 

(44)  The  tax  wedge  is  defined  as  the  sum  of  personal  income 
social-security 
taxes  and  employee  and  employer 
contributions  net  of  family  allowances,  expressed  as  a 
percentage of total labour costs (the sum of the gross wage 
and social-security contributions paid by the employer). 

32 

25.932.540.346.644.52025303540455050100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - LUSingle earner - EU averageSecond earner -  LUSecond earner -  EU average 
      
 
to 

the  EU 

deductibility  of  interest  and  royalty  payments  in 
2021.  However,  the  scope  of  this  measure  is 
limited 
list  of  non-cooperative 
jurisdictions,  which  are  not  Luxembourg’s  main 
economic  partners,  and  the  measure  does  not 
specifically target low- or zero-tax jurisdictions, so 
the  expected  economic  impact  of  the  measure  is 
small.  Moreover,  as  most  Member  States  have 
introduced – or are in the process of introducing – 
defensive measures targeting interest and royalty 
payments made to zero- and low-tax jurisdictions. 
This  increases  the  risk  that  Luxembourg  be  as  a 
conduit  country.  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 
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. . 

limited 

Graph A2.3: Use of SPEs for FDI in Luxembourg and 
in the rest of the EU, 2023 

Source: European Commission 

while  the  EU-27  average  stood  at  7.0%  in  2022 
(data  unavailable  for  2023).  This  indicates  a 
deteriorating level  of VAT compliance. There is no 
indication  that  tax  collection  is  inefficient  in 
Luxembourg.  The  cost-of-collection  ratio,  which 
reflects annual total operating expenditure for the 
tax  administration  as  a  share  of  the  annual  net 
revenue  collected,  stood  at  0.9%  in  2021.  The 
estimated, average, total tax-compliance costs for 
SMEs  in  Luxembourg  are  similar  to  the  EU 
average.  Only  15.9%  of  personal-income-taxation 
returns  were  filed  electronically  in  2021,  the 
lowest  share  in  the  EU.  However,  the  cost  of 
compliance  for  taxpayers  is  set  to  improve  with 
the  generalisation  of  e-filing  of  personal-income 
taxes. 

the 

inward  FDI  stock 

Luxembourg’s  legal  tax  provisions  combined 
with 
indicators 
relevant  economic 
strongly suggest that the country is used as 
a  conduit  for  aggressive  tax  planning.  In 
2023,  Luxembourg’s  net  inward  stock  of  foreign 
direct investment (FDI) stood at EUR 2.593 billion, 
and its outward stock at EUR 3 513 billion, making 
it the second largest origin and destination country 
in  absolute  terms  for  FDI  in  the  EU-27  after  the 
Netherlands.  The  net 
in 
Luxembourg was about 327 times larger than the 
size  of  its  economy  (equivalent  to  3  296%  of  its 
GDP),  and  its  net  outward  stock  of  investment 
about  443 
its  economy 
larger 
(equivalent to 4 429% of its GDP), making it by far 
the  largest  origin  and  destination  country  for  FDI 
in the EU-27 relative to the size of its GDP. Around 
60%  of  Luxembourg’s  inward  and  outward  stock 
of  FDI  is  held  through  special  purpose  entities 
(SPEs).  Luxembourg  is  also  a  major  conduit  for 
dividend  and  interest  flows  (see  Graph  XXX).  It  is 
the  destination  of  13%  of  all  dividends  and  21% 
of all interest received in the EU and the origin of 
13% of all dividends and 16% of all interest paid 
from the EU.  

times 

than 

Luxembourg  is  a  major  financial  hub  in  the 
EU  and  globally,  even  if  but  the  scale  of 
these  figures  suggests  a  risk  of  aggressive 
tax planning in Luxembourg, especially when 
compared  with  other  Member  States, 
Luxembourg  is  a  major  financial  hub  in  the 
EU  and  globally,  but  even  if  the  scale  of 
these figures suggests that there is might be 
a high risk of aggressive tax planning. As part 
of  its  recovery  and  resilience  plan,  Luxembourg 
introduced  a  conditional  measure  of  non-

33 

0200040006000800010000120001400016000LUEU26LUEU26Inward FDI stockOutward FDI stockEUR billionSPEsNon-SPEs 
      
 
 
PRODUCTIVITY 
ANNEX 3: INNOVATION TO BUSINESS  

(EIS) 

remains 

innovation 

Innovation  Scoreboard 

Luxembourg  has  a  solid  science  base,  but 
business 
limited, 
hampering  productivity  growth  and  the 
diversification  of  the  economy.  The  2024 
European 
ranks 
Luxembourg  as  a  strong  innovator;  at  112.1%  its 
is  above  the  EU  average  but 
performance 
decreasing  (by  six  percentage  points  between 
2017 and 2024 (45)). Luxembourg has been unable 
to  raise  its  R&D  intensity,  which  has  been  on  a 
downward  trend  over  the  past  two  decades 
(dropping  to  1.01%  of  GDP  in  2023  compared  to 
1.57%  in  2007), mainly  due  to  declining  business 
R&D  investments.  To  foster  competitiveness  and 
the  emergence  of  a  more  diversified  economic 
base, it would be  beneficial  to promote disruptive 
innovation 
in  key  sectors  and  better  exploit 
Luxembourg’s  scientific  excellence.  This  could  be 
done  by  fostering  a  stronger  connection  between 
Luxembourg’s  science  base  and  the  business 
ecosystem and stimulating stronger business R&D 
investments  through  enhanced  public  support 
schemes. 

Science for innovative ecosystems 

Luxembourg’s  solid  and  internationally  well-
connected  science  base  is  a  key  asset,  but 
low  and  stagnant  public  R&D  investments 
risk undermining its scientific excellence. The 
quality  of  Luxembourg  research  outputs,  as 
measured by the share of scientific publications as 
a  percentage  of  its  total  publications  within  the 
top  10%  most  cited  scientific  publications 
worldwide,  is  above  the  EU  average  (10.7%  vs 
9.6% in 2021). Luxembourg’s researchers are very 
well connected internationally, as evidenced by the 
high share of international  co-publications among 
the  country’s  scientific  publications  (78.3%  in 
2023 vs the EU average of 55.9% (46), the highest 
rate in the EU. The robustness of the Luxembourg 
research system and its integration in international 
research  networks  makes  Luxembourg  an 

(45)  European  Innovation  Scoreboard  2024:  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). 

for 

foreign 

attractive  hub 
students  and 
researchers.  In  particular,  Luxembourg  performs 
very  well  when  it  comes  to  attracting  foreign 
doctorate  students,  as  shown  in  the  2024  edition 
of  the  EIS.  More  generally,  Luxembourg  ranked 
particularly  high  (11th  out  of  134)  in  the  2023 
Global  Talent  Competitiveness  Index (47).  However, 
public  R&D  investment  has  remained  stagnant 
over  the  last  years,  at  a  level  well  below  the  EU 
average (0.55% of GDP in 2023 compared to the 
EU  average  of  0.72%).  In  a  context  of  fierce 
international  competition  and  very  rapid  research 
and 
innovation  developments,  these  low  and 
stagnating  levels  of  public  R&D  investment  could 
ultimately weaken Luxembourg’s scientific position 
worldwide and its attractiveness for foreign talent. 

Business innovation 

Business  R&D 
intensity  has  been  on  a 
declining  trend  over  the  last  two  decades 
and  is  among  the  lowest  in  the  EU.  Over  the 
last two decades, business R&D intensity has been 
on a downward trend, and fell to 0.47% of GDP in 
2023, far below the EU average of 1.49%. This is 
in  stark  contrast  to  the  investment  levels  and 
trends  observed  in  neighbouring  countries  which 
are  also  classified  as  strong  R&I  performers  or 
innovation 
the  EIS 
(Graph A3.1). 

leaders  according 

to 

Graph A3.1: Business R&D investment as % of 
GDP, 2013-2023 

Source: Eurostat 

The  low  business  R&D  intensity,  which  is  partly 
due  to  the  country’s  economic  structure  and 

(46)  Indicators table. 

(47)  Global talent competitive index 2023. 

34 

00.511.522.53LuxembourgEUBelgiumFranceGermany20132023 
 
 
 
     
 
 
in 

(as  opposed 

specialisation 
to 
services 
manufacturing,  which  is  generally  more  R&D-
intensive),  hampers  productivity  growth.  Low 
private  R&D 
investments  also  weigh  on 
Luxembourg’s  innovation  output,  as  measured  by 
patents. Patent applications filed under the Patent 
Cooperation  Treaty  per  billion  GDP  (in  PPS €), 
which  stands  at  1.6  PPS €,  is  well  below  the  EU 
average of 2.8. 

as 

and 

Sustainability (48) 

Public  support  for  business 
innovation 
remains  critically low.  Over the  last  few  years, 
Luxembourg  has  progressively  developed  and 
expanded 
its  policy  mix  aimed  at  fostering 
business innovation, through small-scale schemes 
such  as  the  ‘Fit  4’  performance  programmes, 
which  targeted  86  small  and  medium-sized 
enterprises in 2023 and to which new components 
such 
Innovation 
Healthtech  Market (49)  have  recently  been  added. 
Three  companies  joined  the  Fit  4  Innovation-
Healthtech  Market  programme  that  opened  for 
applications  in  March  2023,  and  23  companies 
joined  ‘Fit  4  sustainability’  that  year.  However, 
public  support  for  business  innovation  is  still 
marginal (0.037% of GDP in 2019, compared to an 
EU average of 0.100%). Unlike most EU countries, 
Luxembourg  does  not  provide  indirect  support  to 
R&D  in  the  form  of  tax  credits,  only  ‘direct’ 
support, i.e. in the form of grants or procurements. 
Going forward, assessing the efficiency and impact 
of the ‘Fit4 programmes’, while further fine-tuning 
and expanding the policy mix aimed at stimulating 
business R&D and innovation, will be key. 

Despite  the  high  quality  of  Luxembourg’s 
public  research  system,  linkages  with  the 
business  sector  remain  underexploited (50). 

(48)  Fit 4 sustainability: This is a support and co-financing 

programme that offers businesses the possibility of having 
an environmental impact assessment carried out on their 
activities, followed by various recommendations for reducing 
the environmental impact. Topics include lower energy 
consumption, a reduced carbon footprint and reduction of 
waste. The programme was launched in 2022 and is open to 
all Luxembourg companies, regardless of their size or sector 
of activity. 

(49)  https://luxinnovation.lu/resources/annual-report-2023. 

(50)  Through the national PEARL programme, EUR 4 million was 
allocated in 2023 to develop quantum computing, while 
through the national BRIDGE programme, Luxembourg 
launched specific calls for industry partnerships between 
public research institutions and national or international 
companies as well as thematic calls with Luxembourg 
ministries in the fields of agriculture, health tech, high 
performance computing, defence and development aid.  

linkages 

Science-business 
remain  weak,  as 
evidenced  by  the  low  share  of  public  expenditure 
on R&D financed by businesses (0.013.% in 2022, 
compared to an EU average of 0.050%). To tackle 
this  challenge,  Luxembourg  has  put  in  place 
several schemes over the last years to encourage 
public-private  cooperation,  many  of  which  are 
managed  by  the  Luxembourg  National  Research 
Fund (FNR). For example, since 2021 the FNR and 
relevant  ministries  have  jointly  issued  calls  under 
the  BRIDGES  programme  aimed  at  strengthening 
public-private  partnerships  in  priority  areas  (such 
as  Health  tech,  high-performance  computing, 
defence, 
lightweight  materials). 
Furthermore, the innovation fund provides specific 
incentives  for  private-sector  companies  entering 
innovation 
public-private 
partnerships. While these schemes are expected to 
reinforce  science-business  ties,  there  has  been 
little assessment of their efficiency and impact so 
far.  To  take  full  advantage  of  Luxembourg’s 
scientific  excellence  as  a  key  driver  of  innovation 
and  economic  diversification,  it  will  be  key  to 
further  strengthen  links  between  science  and 
in  a 
business 
sustainable manner. 

in  key  strategic  sectors  and 

space  and 

research 

and 

is 

lagging  behind  on 

Luxembourg 
the 
digitalisation  of  SMEs  and  the  take-up  of 
advanced  technologies  by  businesses 
in 
general but shows clear potential. In 2024, the 
country performed below the EU average (70.27% 
vs 72.91%) in its level of basic digital intensity for 
SMEs.  Although  the  proportion  of  businesses 
adopting  AI  has  risen  by  almost  10 percentage 
points,  from  14.45%  in  2023  to  23.73%  in  2024 
(compared  with  the  EU  average  of  13.48%),  the 
adoption  of  data  analytics  and  advanced  cloud 
services  is  far  below  the  Digital  Decade  EU-level 
target  of  75%  adoption  by  2030.  To  promote 
further  adoption  and  development  of  digital 
technologies,  Luxembourg  makes  use  of  national 
measures (51)  and  investment  under  its  recovery 
and resilience plan (52). 

(51)  Luxembourg  is  developing  interoperable  and  accessible 
European  data  processing  technologies  via  major  approved 
integrated  projects  of  common  European  interest  (IPCEI)  on 
next generation cloud infrastructure and services. 

(52)  The  first  payment  request  was  made  by  the  Luxembourg 
Quantum  Communication  Infrastructure  Laboratory  (LuxQCI) 
in  June  2023  for  EUR 20.2  million,  and  included  digital 
milestones for advanced digital technologies. 

35 

 
 
 
Financing innovation 

Luxembourg  is  taking  concrete  steps  to 
consolidate  its  start-up  ecosystem  and  to 
facilitate  access  to  finance  for  innovative 
firms.  In  June  2023  Luxembourg  adopted  a 
roadmap entitled ‘from seed to scale’ and in March 
2025 the government presented the “10 Points of 
Action  for  Start-ups"  plan  to  strengthen  its  start-
up  ecosystem.  The  roadmap  and  the  Action  Plan 
encompass  both  existing  and  new  measures  to 
help  start-ups  on  their  development  journey.  One 
of  the  existing  schemes  is  the  ‘Fit  4  Start’ 
programme (53), 
in  place  since  2015,  which 
provides coaching and funding for start-ups at an 
early  stage  of  their  development.  Considering  the 
large  financing  needs  of  start-ups  and  scale-ups, 
the  growing  availability  of  venture  capital  in 
Luxembourg over the last decade is a very positive 
development  (venture  capital  investment  as  a 
percentage  of  GDP  increased  eight-fold  between 
2012  and  2023).  Luxembourg  has  been  active  in 
supporting  the  growth  of  its  venture  capital 
market (54).  For  example,  in  March  2023,  the 
Ministry  of  Finance,  the  Ministry  of  the  Economy, 
the  National  Credit  and  Investment  Company 
(SNCI)  and  the  European  Investment  Fund  (EIF) 
launched  the  Luxembourg  Future  Fund  2  (LFF  2), 
with a total capital of EUR 200 million, building on 
the experience of the first edition (55). 

Innovative talent 

Despite  concrete  steps  to  foster  tertiary 
education,  skills  shortages  are  a  key 
challenge  for  Luxembourg,  whose  research 

(53)  Scale-up support pilot programme, support programmes for 
innovation, digitisation and sustainability. Fit 4 innovation: fit 
4 innovation - health tech market, fit 4 digital, fit 4 
sustainability, SME package. 

(54)  Active seed and venture capital funds: Société Nationale de 
Crédit et d’Investissement (SNCI), Eurefi, Digital Tech Fund, 
Luxembourg Future Fund (LFF), Luxembourg Future Fund 2 
(LFF 2), Orbital Ventures Fund (space). Private funds: 
Mangrove Capital Partners, Expon Capital. 

(55)  LFF  2  will  fund  investments  that  further  stimulate  the 
the 
diversification  and 
Luxembourg  economy.  The  scope  of  LFF  2  currently  covers 
venture  capital  but  will  be  extended  to  also  include  hybrid 
debt equity investments. 

sustainable  development  of 

engineering  graduates 

and innovation performance relies heavily on 
the country’s ability to attract foreign talent. 
The  shortage  of  skilled  workers  has  worsened  in 
recent  years,  accentuating  the  mismatch  between 
available  skills  and  the  profiles  sought  on  the 
market.  Skills  mismatches  across  all  sectors have 
reached  23.8%,  above  the  EU  average  of  20.2% 
(see  Annex  on  education  and  skills).  In  2022 
Luxembourg  had  the  lowest  proportion  in  the  EU 
(3.1  vs  the  EU  average  of  17.6)  of  new  science 
and 
thousand 
population aged 25-34). In the field of computing 
specifically,  Luxembourg  has  the  second  lowest 
proportion  of  graduates  per  thousand  population 
aged 25-34, while the proportion of ICT graduates 
out  of  all  graduates  is  remarkably  higher  (see 
Annex  on  education  and  skills).  Luxembourg 
therefore  relies  extensively  on  foreign  talent.  The 
country  has  various  schemes  in  place  to  attract 
outstanding researchers to Luxembourg (56)  and is 
contemplating,  as  part  of  its  2023  ‘from  seed  to 
scale’  strategy,  the  creation  a  talent  desk,  i.e.  a 
single  contact  point  for  foreign  talent  wishing  to 
join a Luxembourg start-up or scale-up. 

(per 

a 

and 

national 

Luxembourg has various promising initiatives 
and programmes to support entrepreneurship 
lacks  a  common  policy 
education  but 
framework 
strategy. 
Entrepreneurship  education  is  offered  to  students 
in upper secondary school as either a stand-alone 
subject  or  a  component  of  other  courses,  while 
schools  can  also  participate  in  national  initiatives 
such  as  the  ‘sustainable  entrepreneurial  school’ 
project. At higher-education level, the University of 
Luxembourg  has  set  up  an  entrepreneurship 
programme  which  is  open  to  all  students  and 
staff.  While  these  initiatives  exist,  the  absence  of 
strategic planning and the lack of a common legal 
framework  for  entrepreneurship  education  may 
limit  development  in  this  area.  Additionally,  the 
absence  of  data  and  the  fact  that  there  is  no 
evaluation of existing initiatives may pose barriers 
to policy development. 

(56)  The  FNR  operates 

the  ATTRACT,  PEARL  and  CORE 
to 

researchers 

to  attract  outstanding 

programmes 
Luxembourg.  

36 

 
 
 
 
Table A3.1:  Key innovation indicators 

(1) EU average for the last available year or the year with the largest number of country data 
Source: Eurostat, DG JRC, OECD, Science-Metrix (Scopus database), Invest Europe, European Innovation Scoreboard 

37 

R&D intensity (gross domestic expenditure on R&D as % of GDP)1.211.241.11.041.051.01:2.243.45Public expenditure on R&D as % of GDP0.540.550.550.510.540.55:0.720.64Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 11.811.113.910.7:::9.612.3Researchers (FTEs) employed by public sector (Gov+HEI) per thousand active population5.65.86.46.66.87:4.2:International co-publications as % of total number of publications74.275.277.378.679.278.3:55.939.3Business enterprise expenditure on R&D (BERD) as % of GDP0.670.690.550.530.510.47:1.492.7Business enterprise expenditure on R&D (BERD) performed by SMEs as % of GDP:0.19:0.13:::0.40.3Researchers employed by business per thousand active population34.53.63.23.73.3:5.7:Patent applications filed under the Patent Cooperation Treaty per billion GDP (in PPS €)1.61.72.21.61.6::2.8:Employment share of high-growth enterprises measured in employment (%)9.0211.6411.9::::12.51:SMEs with at least a basic level of digital intensity% SMEs (EU Digital Decade target by 2030: 90%)::::66.25:70.2772.91:Data analytics adoption% enterprises (EU Digital Decade target by 2030: 75%):::::32.41:33.17:Cloud adoption% enterprises (EU Digital Decade target by 2030: 75%):::28.99:32.63:38.86:Artificial intelligence adoption% enterprises (EU Digital Decade target by 2030: 75%):::13:14.4523.7313.48:Public-private scientific co-publications as % of total number of publications8.69.91113.513.413.4:7.78.9Public expenditure on R&D financed by business enterprise (national) as % of GDP0.0170.0090.0120.0130.013::0.050.02Total public sector support for BERD as % of GDP:0.049:::::0.2040.251R&D tax incentives: foregone revenues as % of GDP:::::::0.1020.141Business entreprise expenditure on R&D BERD financed by the public sector (national and abroad) as % of GDP:0.049:::::0.1000.110Venture capital (market statistics) as % of GDP, total (calculated as a 3-year moving average)0.0150.0120.0330.0390.1290.120:0.0780:Seed funding (market statistics) as % of GDP 9.60.716.32.82.63.1:7.3:Start-up and early-stage funding (market statistics) as % of GDP 55.193.982.195.492.882.0:44.0:Later stage and scale-up funding (market statistics) as % of GDP 35.35.41.61.84.614.9:48.7:New graduates in science and engineering per thousand population aged 25-342.52.52.52.73.1::17.5:Graduates in the field of computing per thousand population aged 25-340.70.91.21.61.8::3.6:2023EU average (1)USA2024Headline indicatorScience and innovative ecosystemsR&D investment & researchers employed in businessesPublic support for business innovationInnovative outputsDigitalisation of businessesAcademia-business collaborationFinancing innovationInnovative talent20222021Luxembourg 201220172020 
 
 
 
 
 
       
 
ANNEX 4: MAKING BUSINESS EASIER 

Luxembourg  offers  an  attractive  business 
investment, 
environment,  although  firms’ 
innovative  potential  and  entrepreneurship 
could benefit from further improvements. Its 
economy  is  well  integrated  into  the  EU  and  its 
administrative  and 
regulatory  hurdles  are 
moderate overall. Luxembourg can rely on a digital 
infrastructure  with  very  high  level  of  VHCN  (very 
high-capacity  network)  and  5G  coverage,  in  line 
with  the  Digital  Decade  targets.  However,  several 
factors  constrain  business  investment.  One  of 
them  is  the  scarcity  of  skilled  workers  and  their 
higher  labour  costs,  while  regulatory  barriers  for 
various professions and non-tariff trade barriers to 
services  are  higher  in  Luxembourg  than  in  other 
Member States, potentially hindering market entry. 
investment  are 
Other  obstacles  to  business 
financial constraints and delayed payments, which 
are  more  prevalent  here  than 
in  other  EU 
countries.  Finally, 
the  economy’s  dynamism, 
entrepreneurship  and  innovative  potential  could 
also benefit from further enhancement. 

Economic framework conditions 

In  2023, 

investment 

in  Luxembourg 

is 
Business 
significantly  low,  harming  innovation  and 
productivity  growth. 
business 
investment stood at just 8% of the country’s GDP, 
compared  to  13%  in  the  European  Union (57), 
placing Luxembourg among the lowest in both the 
EU  and  the  OECD (58).  Investment  in  equipment 
increased by just 3.4% in 2023 and is projected to 
decrease  by  5.5%  in  2024,  against  the  EU’s 
respective  growth  of  3%  and  expected  decline  of 
2.2% (59).  Furthermore,  business  expenditure  on 
research  and  development  has  been  consistently 
decreasing and was as low as less than one third 
in  2023 (60).  A  factor 
of 
contributing 
level  of  business 
low 
investment, particularly in research and innovation, 
is Luxembourg’s sectoral structure, which features 
a  low  proportion  of  industrial  activity  and  a  high 
proportion  of  financial  services.  Another  factor  is 

the  EU  average 
this 

to 

(57)  Eurostat, SDG_08_1.1 

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

(59)  European  Commission,  Autumn  forecasts  statistical  annex, 

p. 187, 11/2024. 

(60)  European  Commission, 
Luxembourg, 6/2024. 

the  low  level  of  public  support  for  business 
notwithstanding 
research  and  development, 
several 
business 
to 
initiatives 
innovation (61)  (see  Annex 3).  Other  factors  are 
lack of skills and financing constraints  (see below 
and Annexes5 and 12). 

support 

to 

cited 

investment  most 

Firms  see  the  lack  of  skilled  staff  and  the 
high  labour  cost  as  the  main  obstacles  to 
their  activity  and  investments.  Despite  the 
high number of cross-border workers (43% of the 
workforce),  the  availability  of  skilled  staff  is  the 
by 
obstacle 
Luxembourgish  firms  (88%  vs  77%  in  the  EU), 
according to the EIB Investment Survey (62). Labour 
shortages are particularly high in the construction 
sector  (see  Annex 10).  This  constraint  is  however 
decreasing,  as  shown  by  the  fall  of  the  vacancy 
rate (from 3.2% in Q3 2022 to 1.8% in 2024) (63). 
The cost of labour is seen by Luxembourgish firms 
as the other main challenge for 2025 (64). In 2023, 
the  hourly  labour  rate  in  Luxembourg  was  the 
highest  in  the  EU  (EUR 53.9  against  EUR 31.8  in 
the EU) (65). An increase in the cost of labour could 
harm Luxembourgish firms’ competitiveness if it is 
not matched by an increase in labour productivity. 

in  other  Member  States 

A greater proportion of firms in Luxembourg 
finds  they  experience  finance  constraints 
and late payments than for the EU overall. In 
2023,  although  access  to  loans  was  much  easier 
(European 
than 
Investment  Fund  access to  finance  index  loans  at 
0.75  vs  0.38  in  the  EU),  a  greater  proportion  of 
firms  in  Luxembourg  than  in  the  EU  as  a  whole 
said  that  they  were  facing  financing  constraints, 
mainly due to the borrowing costs (66) (Annex 5). In 
addition,  the  proportion  of  SMEs  that  experienced 
late  payments  was  higher  in  Luxembourg  than  in 
In  2024,  25.4%  of 
other  Member  States. 
Luxembourgish  firms  experienced  late  payments 
from public entities (against 16.6% in the EU) and 
60.9% from private entities (against 47.9% in the 

(61)  European  Commission, 
Luxembourg, 6/2024. 

Innovation 

scoreboard  2024, 

(62)  European  Investment  Bank,  EIB  Investment  Survey  2024, 

p. 26. 

(63)  Eurostat, Job vacancy statistics [jvs_q_nace2]. 

(64)  Luxembourgish  Chamber  of  Commerce,  baromètre  de 

l’économie 2eme semestre 2024. 

Innovation 

scoreboard  2024, 

(65)  Eurostat. 

(66)  EIB Investment survey 2024, 10/2024, p. 35. 

38 

 
 
 
 
 
EU) (67).  Late  payments  disrupt  cash  flows  and 
may  increase  finance  constraints,  which  harms 
investment. 

Graph A4.1: Making Business Easier: selected 
indicators. 

Share of (1) enterprises, (2) average intra-EU exports and 
imports in GDP, (3) firms, (4) SMEs. 
Sources: (1) EIB IS, (2) Eurostat, (3) ECFIN BCS, (4) SAFE 
survey. 

For  most  Luxembourgish  firms,  digital  and 
transport infrastructures are not an obstacle 
to  investment.  Only  29%  of  Luxembourgish 
firms  found  transport  infrastructure  to  be  an 
obstacle to investment, against 45% in the EU (68), 
with  5.8%  reporting  it  as  a  major  obstacle  (EU 
13.4%,  see  table  A2.1).  On  digital  infrastructure, 
34% of Luxembourgish firms found it an obstacle 
to investment, against 45% in the EU. Luxembourg 
has  made  substantial  progress,  especially  in  the 
area  of  connectivity.  Fibre  to  the  premises  (FTTP) 
coverage  increased  substantially,  reaching  78.9% 
in  the  EU) (69). 
in  2023  (compared  to  64% 
increased 
also 
Coverage 
considerably,  with  FTTP  coverage  at  60%  against 
an  EU  average  of  53%.  Luxembourg’s  VHCN 

areas 

rural 

in 

(67)  European Central Bank, 2024 SAFE survey,1/2025. 

(68)  EIB Investment Survey 2024, p. 26. 

in 

enterprises 

coverage  stands  at  94.7%  nationwide  and  80.3% 
in rural areas, both surpassing the EU averages of 
78.8%  and  55.6%, 
respectively.  For  mobile 
connections,  overall  5G  coverage  increased  to 
99.6%  (above  the  EU  average  of  89.3%),  and  5G 
coverage  on  the  3.4-3.8  GHz  spectrum  band (70) 
stands  at  63%  (above  the  EU  average  of  51%). 
Cybersecurity  awareness 
is 
increasing,  which  is  improving  the  resilience  of 
digital  infrastructure.  The  number  of  enterprises 
that  experienced  ICT  security  incidents  leading  to 
unavailability  of  ICT  services  due  to  attack  from 
outside  decreased  in  Luxembourg,  from  4.34%  in 
2022  to  3.34%  in  2024,  falling  below  the  EU 
average  (3.43%),  while  86.80%  of  enterprises 
deployed  some  ICT  security  measures  (slightly 
under  the  EU  average  of  92.76%)  and  only 
54.12%  of  them  made  their  employees  aware  of 
their  obligations  in  ICT  security  related  issues, 
below the EU average (59.97%). 

Regulatory and administrative 
barriers 

firms 

Regulatory  and  administrative  obstacles  to 
investment  are  moderate,  but  there  is  still 
room  for 
in 
improvement.  Fewer 
Luxembourg  than  in  the  EU  overall  find  that 
business  regulations  constitute  an  obstacle  to 
investment  (52%  vs  66%) (71),  including  deeming 
them  a  major  obstacle  (13.3%  vs  24.5%,  see 
graph  A2.1).  This  also  holds  true  for  labour 
regulations,  although  the  difference  with  the  EU 
average is much smaller (60% vs 62%). However, 
compared to other OECD countries, the regulatory 
and  administrative  burden  is  slightly  higher  in 
Luxembourg  than  the  OECD  average  (1.77  vs 
1.68) (72).  One  reason  for this  is  that  Luxembourg 
scores  badly  on 
impact  evaluation  of 
regulations  (3.85  vs  1.84  on  average  in  the 
OECD) (73).  Another  reason  is  that  at  the  time  of 
data collection, Luxembourg did not require public 
bodies  to  comply  with  the  ‘once-only  principle’  or 

the 

(70)  3.4-3.8  GHz  spectrum  band 

is  essential  for  enabling 

advanced applications requiring large spectrum bandwidth. 

(71)  EIB Investment Survey 2024, p. 26. 

(72)  OECD,  Product  Market  Regulation  indicators,  Medium  level 

indicator: administrative and regulatory burden. 

(73)  OECD,  Product  Market  Regulation  indicators,  Medium  level 

(69)  Fibre networks have completely overbuilt the cable networks. 

indicator: Regulations Impact Evaluation. 

39 

60.925.45.7120.713.347.916.61041.624.5020406080100120140from private entitiesfrom public entitiesMaterial shortages as afactor limiting productionEU Trade IntegrationRegulation as a majorobstacle to investment(4) Late payments(3) Shortages(2) SingleMarket(1) RegulatoryburdenShare (%)EU27LU 
     
 
 
regularly  review  whether  permits  and  licences 
issued  to  businesses  were  still  required  or  should 
be  removed.  Since  then,  reforms  to  reduce  the 
administrative  burden  of  enterprises  have  been 
announced (74). They include simplified procedures 
for  applying  for  state  aid,  an  online  tool  for 
sustainability reporting and for the implementation 
of the once-only principle. The Parliament has also 
been  examining  a  bill  that  aims  at  optimising  the 
use  of  personal  data  and  provides  for  the 
exchange  of  data  between  administrations  (75) 
(see Annex 6).  

Tax compliance costs are in line with the EU 
average.  According  to  an  ECstudy (76),  in  2019, 
the  average  total  cost  of  tax  compliance  for  a 
business  represented  a  little  less  than  2%  of  its 
turnover, in line with the EU aggregate mean (see 
Annex 2).  Business  organisations  however  stated 
that  streamlining  tax  law  was  a  priority  for 
reducing  the  administrative  burden  on  businesses 
and  fostering  an  environment  more  conducive  to 
investment (77). 

Luxembourg  has  modernised  its  insolvency 
arrangements.  In  2022,  Luxembourg  had  the 
second  worst  insolvency  procedures  in  the  EU 
according to the OECD (78). Since then, Luxembourg 
has improved how it handles insolvency. The 2023 
law  on  the  preservation  of  businesses  and 
law (79)  has  been 
modernising  bankruptcy 
assessed  positively  by  business  organisations. 
Authorities  and  business  organisations  are  now 
discussing  how  to  better  accompany  the  firms  in 
difficulty. Another topic which needs to be tackled 
is how to facilitate the handover of businesses, as 
many  entrepreneurs  will  retire  in the  next  coming 
years. 

Entrepreneurship  is  insufficiently  developed. 
Luxembourg  ranks  just  33rd  out  of  46  countries 

(74)  Luxembourg, press release, 21/3/2025.  

(75)  Luxembourg, Projet de loi 8395 

lower 

for  total  early-stage  entrepreneurial  activity (80). 
The enterprise birth rate was lower in Luxembourg 
than  the  EU  average  in  2021  (8.6%  vs  10.8%  in 
the  EU  in  2021) (81).  Since  then,  the  increase  in 
business 
in 
registrations  has  been 
Luxembourg  than  in  the  EU overall (82).  The  gap 
between  Luxembourg  and  the  EU  average  has 
therefore 
the 
deterioration  of  the  quality  of  Luxembourg’s 
entrepreneurship  environment.  According  to  the 
Global  Entrepreneurship  Monitor (83),  Luxembourg 
ranked  13th  out  of  46  economies  for  the  quality 
of its overall entrepreneurial environment in 2019. 
By  2021,  it  had  fallen  to 20th,  and  by  2023  was 
down to 23rd. 

increased. 

It  may 

reflect 

in  2023, 

In  addition, 

Luxembourg  has  taken  several  measures  to 
boost  entrepreneurship.  It  has  launched  new 
entrepreneurship  initiatives,  particularly  for  those 
starting  from  unemployment,  as  well  as  for  the 
young  people (84). 
to 
modernise  the  right  of  establishment  and  to 
stimulate entrepreneurship, Luxembourg amended 
the  law  governing  access  to  occupations  in  craft 
trades, business and industry and to certain liberal 
professions (85).  The 
include 
digitalising  some  business  start-up  procedures, 
facilitating  the  right  to  start  a  second  business 
after  bankruptcy,  simplifying  the  requirements  on 
holding a business licence and business transfers, 
and facilitating access to several craft professions. 
However,  this  law  also  contains  restrictions,  as 
pointed out by the Chamber of Commerce (86). 

law's  provisions 

While construction activity has declined since 
lack  of  housing, 
is  a 
2022  and  there 
Luxembourg  has  adopted  measures  to  speed 
up  construction  permits.  Between  2022  and 
in 
2024, 

shortage 

housing 

despite 

the 

(80)  Global  Entrepreneurship  Monitor  2023/2024,  2/2024,  pp. 

142-143. 

(81)  Eurostat, Birth rate, 2021. 

(82)  Eurostat, business registrations (2021=100). 

(83)  Global  Entrepreneurship  Monitor  2023/2024,  2/2024,  pp. 

(76)  European Commission, Tax compliance costs for SMEs report, 

142-143. 

1/2022, p. 39, p. 51, p. 106. 

(77)  Meeting  between  European  Commission’s  services  and 

business organisations, 13/1/2025. 

(78)  OECD,  Enhancing 

insolvency 

frameworks 

to  support 

economic renewal, 12/2022, p. 9. 

(84)  OECD, The missing entrepreneurs 2023, p. 289. 

(85)  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. 

(79)  Loi du 7 août 2023 relative à la préservation des entreprises 

et portant modernisation du droit de la faillite. 

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

40 

 
 
 
Luxembourg,  activity  in  the  construction  sector 
dropped sharply. To improve the situation, in June 
2024, 
the  government presented  a  set  of 
administrative simplification measures, as well as 
a  new  public-private  partnership  (PPP)  for  the 
construction  of  affordable  housing (87).  In  January 
2025,  Luxembourg  adopted  a  package  of  40 
measures  to  speed  up  granting  construction 
permits.  It  includes  bringing  in  the  principle  of 
‘silence is equivalent to agreement’ in two phases, 
simplified procedures for smaller works, a revision 
of  urban  planning  rules  for  areas  of  economic 
activity  and  the  harmonisation  and  simplification 
of environmental investigation procedures (88). 

sectors,  Luxembourg  had  the  highest  non-tariff 
barriers  to  intra-EEA  service  trade  among  all  EU 
Member  States  for  three  key  sectors  of  the 
economy: construction, wholesale and retail trade, 
and  accounting.  The  OECD (93)  points  out  that 
certain  rules  regulating  the  entry  of  individuals 
seeking to provide services in Luxembourg remain 
international  best 
more 
than 
practice. 
labour 
In  fact,  Luxembourg  applies 
market  tests  to  individuals  seeking  to  provide 
services  in  the  country  temporarily  as  contracted 
service  suppliers  or  independent  service  suppliers. 
Employees transferred to Luxembourg within their 
own company are subject to the same tests. 

cumbersome 

to 

the  EU  average (94).  According 

For several regulated professions, regulatory 
barriers  are  more  stringent  in  Luxembourg 
than in other Member States. Luxembourg has 
a  slightly  higher  number  of  regulated  professions 
than 
the 
the  European  Commission (96), 
OECD (95)  and 
regulatory restrictions remain particularly  high for 
lawyers,  notaries,  architects,  civil  engineers,  and 
accountants.  For  notaries,  the  restrictions  are 
among  the  strictest  in  the  EU.  The  regulation 
imposing  the  legal  form  of  their  business,  and 
regulation  of  entry  into  the  profession  were 
highlighted  as  very  strict.  Entry  regulations  for 
lawyers  are  also  particularly  restrictive (97).  The 
European  Commission (98)  has  also  found  real 
estate agents to be stringently regulated (99). 

In  the  retail  sector,  regulatory  restrictions 
remain slightly higher than in peer countries, 

(93)  OECD, Luxembourg’s country note, 2025. 

(94)  EC, Regulated Professions Database. 

(95)  OECD, Product Market Regulation indicators, 2024. 

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

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

(97)  OECD, Product Market Regulation indicators, 2024. 

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

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

the  EC 

(99)  For  real  estate  agents,  the  OECD  indicator  provides  a 
indicator.  Despite 
than 
different  assessment 
methodological  similarities  between  the  EC  and  OECD 
indicators  (de  jure  analysis  of  overall  restrictiveness  of 
regulation for entry and exercise of certain professions, scale 
1  to  6),  certain  differences  (e.g.  weighting  of  restrictions, 
level),  combined  with  different 
regulation  at 
reference  time  points  (OECD:  2023;  EC:  2021),  may  lead  to 
divergences  between  the  results  of  the  EC  and  OECD 
indicators. See EC, SWD (2021)185, p. 227. 

regional 

The single market  

Luxembourg  has  the  strongest  EU  trade 
integration of  any Member  State.  The volume 
of  its  exports  and  imports  of  goods  and  services 
to/from other EU countries represented 120.7% of 
its  GDP  in  2024  (EU  average  41.6%).  This  is 
mainly  explained  by  Luxembourg’s 
in 
services,  especially  financial  services:  in  2023, 
service  exports  and  imports  stood  at  90.5%  of 
GDP,  far  ahead  of  the  EU  average  (15%).  By 
contrast,  exports  and  imports  of  goods  only 
represented  25.9%  of  GDP,  which  was  slightly 
below the EU average (28%) (89). According to the 
OECD,  barriers  to  trade  with  EU  and  non-EU 
countries  are  lower  in  Luxembourg  than  in  the 
OECD overll (90) and that includes for services (91). 

trade 

Luxembourg’s 

non-tariff 
Nonetheless, 
barriers  to  intra-European  Economic  Area 
(EEA) trade in services are the highest in the 
EU (92).  They  were  the  highest  in  the  EU  in  2024, 
as  well  as  over  the  five last  years,  and  increased 
in 2024 compared to 2023 (0.068 vs 0.060 – see 
the  indicators  in  Table  A2.1).  Looking  at  specific 

(87)  Luxembourg, press release, 19/06/2024. 

(88)  Luxembourg, press release, 10/01/2025. 

(89)  Eurostat, bop_c6_a. 

(90)  OECD, PMR indicators, barrier to trade facilitation, 2024 (0.53 

in Luxembourg vs 0.71 in the OECD on average). 

(91)  OECD, STRI – Luxembourg , 2023. 

(92)  EC  staff  calculation  based  on  the  OECD,  2024  STRI 
database: the average (0.068) of Luxembourg’s 2024 intra-
EEA STRI values was the highest in the EU in 2024. 

41 

 
 
 
to 

and 

shops 

operating 

although  they  have  significantly  decreased 
the  European 
since  2018.  According 
Commission,  the  regulatory  restrictions  on  both 
establishing 
have 
significantly  gone  down  since  2018 (100).  This 
improvement  is  confirmed  by  the  OECD (101),  with 
Luxembourg’s  indicator  for  restrictions  in  retail 
going down from 1.73 to 1.31 from 2018 to 2023. 
But it  is  still  higher  than  the  EU  average (1.31  vs 
1.17). In addition, territorial supply constraints still 
affect  consumer  choice  and  prices.  In  2023,  the 
price level for food in Luxembourg was the highest 
in the EU (124.7 vs 100) (102). 

represented  4%  of  procurement  procedures  in 
2024 (against 7% in the EU).  

that 

reports 

Luxembourg  would  benefit  from  further 
developing  the  strategic  use  of  public 
the 
procurement.  Luxembourg 
implementation  of  green  public  procurement, 
socially  responsible  procurement  and  innovation 
the 
procurement  are 
that 
reached (104). 
objectives  have  been  partially 
Luxembourg  could  benefit  from  adopting  a 
strategy or action plan to encourage those uses of 
public procurement. 

in  progress  and 

on 

except 

indicators, 

Luxembourg  performs  very  well  on  single 
market 
the 
transposition deficit. The share of single market 
directives  not  transposed  by  Luxembourg  (the 
‘transposition  deficit’)  is  higher  than  for  other 
Member  States:  in  2024,  it  was  at  1.2%  against 
0.8% for the EU average. All other indicators show 
a  very  good  performance.  In  2024,  Luxembourg 
transposed  only  0.3%  of  the  single  market 
directives  incorrectly  (EU  average:  0.9%) (103).  It 
had  only  11  open  infringements,  against  an  EU 
average  of  24.  Luxembourg  ranked  third  among 
Member  States  for  the  shortest  average  duration 
to solve single market infringement proceedings at 
31.1  months,  well  below  the  EU  average  at  45.8 
months.  In  the  SOLVIT  service,  set  up  to  help 
businesses  and  citizens  resolve  breaches  of  EU 
law  by  public  authorities  in  another  EU  country, 
Luxembourg  solved  100%  of  the  34  cases  it 
handled as lead centre (EU average of 84.9%). 

Public procurement  

in 

of 

level 

competition 

public 
The 
procurement  procedures  is  satisfactory.  The 
share  of  single  bids  was  below  the  EU  average 
between  2019  and  2023,  which  was  positive,  but 
this  share  increased  in  2023  and  came  closer  to 
the  EU  average  (27%  vs  28.8%  in  the  EU  on 
average  in  2023) (see  Table  A2.1).  Direct  awards 

(100) European  Commission,  2022  update  of 

the  Retail 

Restrictiveness Indicator. 

(101) OECD, Product Market Regulation indicators, 2024. 

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

services for 2023. 

(104) EC,  Article  83-  public  procurement  monitoring  reporting,  – 

(103) European Commission, Single Market Scoreboard, 1/2025 

2021-2023, p. 33. 

42 

 
 
 
 
Table A4.1:  Making Business Easier: indicators. 

*Change in methodology in 2024: reporting late payments from public and private entities separately. 
** No data on single bids available for 2024. Due to missing data, the EU average of direct awards data is calculated without 
Romania. 
Sources: (1) ECFIN BCS, (2) Eurostat, (3) EIB IS, (4) Digital Decade Country reports, (5) Intrum Payment Report, (6) SAFE survey, 
(7) OECD, (8) up to 2023: Single Market and Competitiveness Scoreboard, 2024: Public procurement data space (PPDS). 

43 

POLICY AREA20202021202220232024EU-27 average4.618.314.210.75.710.012.016.427.019.619.820.21.82.33.12.31.72.312.818.717.612.05.813.4-92.693.394.7-78.8-75.276.278.9-64.0-12.793.299.6-89.3Regulatory environment10.412.310.714.513.324.5-----15.6-----15.1from public or private entities in the last 6 months39.168.753.269.6--from private entities in the previous or current quarter----60.947.9from public entities in the previous or current quarter----25.416.6109.5117.5117.6116.4120.741.60.0600.0600.0600.0600.0680.0501.91.81.51.01.20.80.90.80.80.50.30.993.876.980.083.010084.918.013.012.010.011.024.420182327--866447.0LuxembourgINDICATOR NAMEInvestment climateShortagesMaterial shortage, firms facing constraints, %1Labour shortage, firms facing constraints, %1Vacancy rate, vacant posts as a % of all available ones (vacant + occupied)2InfrastructureTransport infrastructure as an obstacle to investment, % of firms reporting it as a major obstacle3VHCN coverage, %4FTTP coverage, %45G coverage, %4Reduction of regulatory and administrative barriersImpact of regulation on long-term investment, % firms reporting business regulation as a major obstacle3Late paymentsPayment gap - corporates B2B, difference in days between offered and actual payment5Payment gap - public sector, difference in days between offered and actual payment5Share of SMEs experiencing late payments, %*6Single MarketIntegrationEU trade integration, % (Average intra-EU imports + average intra EU exports)/GDP2EEA Services Trade Restrictiveness Index7ComplianceTransposition deficit, % of all directives not transposed8Conformity deficit, % of all directives transposed incorrectly8SOLVIT, % resolution rate per country8Number of pending infringement proceedings8Competition and transparency in public procurementSingle bids, % of total contractors**8Direct awards, %**8Public procurement 
 
 
 
 
      
 
ANNEX 5: CAPITAL MARKETS, FINANCIAL STABILITY AND ACCESS TO FINANCE 

and 

the 

their 

small 

global 

finance 

internal 

financial 

to  external 

Luxembourg  is an important financial  centre 
system. 
within 
Multinational  companies  use  Luxembourg  as  a 
finances. 
financial  centre 
for 
Domestic  firms  seem  to  derive  only 
limited 
benefits  from  Luxembourg’s  status  as  a  financial 
centre,  as  access 
for 
companies, 
and  medium-sized 
enterprises (SMEs) in particular, does not seem to 
be better than the EU average. Retail participation 
in  capital  markets  is  above  the  EU  average  and 
supported  by  high  household  wealth.  Domestic 
institutional  investors  are  conservative  and  invest 
only  a  small  share  in  venture  and  growth  capital. 
Luxembourg has attractive schemes for the scale-
up  of  innovative  start-ups,  but,  as  is  the  case 
throughout the EU, more could be done to improve 
the availability of venture and growth capital. 

Availability and use of domestic 
savings 

investment 

the  net  private 

Since  2020,  Luxembourg’s  declining  private 
savings  and  strong  private  investment  have 
led to greater reliance on external financing, 
with  the  country shifting  from a  net lending 
to  a  net  borrowing  position.  Since  2020, 
Luxembourg’s  private  savings  ratio  (net  of  fixed 
capital consumption) has declined steadily from a 
peak of 8.6% of GDP to negative territory in 2024, 
reaching  -0.4%  of  GDP  (see  Graph  A5.1).  In 
contrast, 
ratio—
measuring  the  net  contribution  of  the  private 
sector  to  capital  accumulation—remained  robust, 
averaging 4.2% of GDP over the past decade. Over 
the same period, the government maintained fiscal 
recording  either  general  budget 
discipline, 
surpluses  or  relatively  small  deficits.  On  average, 
the  general  government  balance  posted  a  surplus 
of  0.9%  of  GDP  over  the  past  ten  years.  The 
shrinking  role  of  domestic  private  savings  in 
financing  strong  private  investment  levels  has 
increased 
funding. 
on 
Luxembourg’s external balance shifted from a net 
lending position of 3.2% of GDP in 2020 to a net 
borrowing  position  of  5.6%  in  2024.  This  trend 
highlights a structural gap: net domestic savings—
after  accounting  for  the  investment  needed  to 
preserve the existing capital stock—are insufficient 
to  finance  investment  projects  domestically.  As  a 
result, an increasing share of investment must be 
financed by international creditors. 

external 

reliance 

44 

Graph A5.1: Net savings-investment balance 

Source: AMECO 

international 

Luxembourg's 
investment 
position  is  shaped  by  its  large  financial 
sector,  with  a  significant  net  creditor 
investments  and  a 
position 
in  direct 
substantial  negative  portfolio 
investment 
position  due  to  investment  fund  shares  held 
by  non-residents.  Luxembourg's  international 
investment  position  is  significantly  influenced  by 
the  activities  of  multinational  companies  and  the 
financial sector. The country maintains a very high 
net  creditor  position  in  direct  investments,  largely 
driven  by  special  purpose  vehicles.  However, 
Luxembourg  also  exhibits  a  very  large  negative 
portfolio  investment  position,  primarily  due  to  a 
substantial  stock  of  investment  fund  shares  held 
by  non-residents.  In  fact,  Luxembourg  is  home  to 
an internationally-oriented, market-based financial 
sector,  which  is  several  times  the  size  of  its 
domestic  economy.  The  key  institutions  forming 
this  sector 
investment  funds,  money 
market  funds,  and  special  purpose  entities. 
Luxembourg  has  positioned  itself  as  the  leading 
investment  fund  hub  in  the  EU  and  the  second 
largest  globally,  after  the  United  States.  Many  of 
these  institutions  have  limited  or  no  exposure  to 
Luxembourg's domestic economy; their assets and 
liabilities are located abroad, and they operate on 
a cross-border basis. This international orientation 
is  reflected  in  the  fact  that  Luxembourg’s  assets 
and  liabilities  to  foreign  entities  stand  at  almost 
equal 
the  size  of 
Luxembourg's  GDP.  As  of  Q3-2024,  Luxembourg 
recorded assets of EUR 6 956 billion and liabilities 
investments, 
of  EUR 8 398 billion 
primarily 
issuance  of 
the 
fund  shares.  These  assets  and 
investment 
liabilities represented approximately 14 515% and 
14 518%  of  GDP,  respectively.  Due 
the 
to 
dominance  of 
fund  sector, 
the 
Luxembourg was the largest net debtor in foreign 

levels,  multiple 

in  portfolio 

investment 

through 

include 

raised 

times 

-5051015202017201820192020202120222023% of GDPPrivate investment, netLending to the governmentPrivate saving, netPrivate saving, grossBorrowing from the rest of the world 
 
  
 
 
recording 
The 

portfolio investment assets among all EU countries 
of 
2024, 
in 
EUR 1 442 billion. 
of 
Luxembourg’s  international  assets  and  liabilities 
as a percentage of GDP over the past decade can 
be partially attributed to revaluation corrections of 
financial assets in international markets. 

net 
a 
shrinking 

deficit 
size 

Graph A5.3: Capital markets and financial 
intermediaries 

Graph A5.2: International investment position 

Source: ECB, EIOPA, AMECO 

Source: ECB 

Resilience of the banking sector 

Structure of the capital markets and 
size of the financial sector 

to 

the 

fund 

is  home 

investment 

largest 
Luxembourg 
investment  fund  sector  in  the  EU,  benefiting 
from its position as the leading European and 
an  important  global  fund  domicile.  In  2023, 
in  Luxembourg 
investment 
funds  domiciled 
managed  assets  equivalent 
to  8 055%  of 
Luxembourg’s  GDP.  The  second  most  significant 
sector  in  Luxembourg  is  the  assets  held  by 
monetary  financial  institutions,  with  international 
banks  playing  a  crucial  role  in  supporting  the 
leading  European 
industry 
through  services  such  as  custody,  fiduciary,  and 
post-trading services. In addition to its dominance 
in  the  investment  fund  industry,  Luxembourg  has 
one  of  the  largest  secondary  markets  for  bonds 
globally,  positioning  itself  as  the  preferred  listing 
destination 
public 
international  bodies,  sovereigns,  and  public 
agencies.  The  volume  of 
in 
Luxembourg  reached  an  amount  equivalent  to 
988%  of  GDP  in  2023.  In  contrast,  Luxembourg's 
stock  exchange  for  equities  is  relatively  small  by 
EU  standards,  with  only  18  listed  companies, 
ranking  as  the  8th  largest  in  the  EU  by  market 
capitalization  and  with  total  shares  amounting  to 
215% of GDP by 2023. 

listed  bonds 

issued 

bonds 

for 

by 

remains 

The  Luxembourg  banking  sector  remains 
resilient  despite  modest  economic  growth 
and  rising  credit  risks.  Weak  economic 
environment 
the  key  challenge  for 
Luxembourg  domestic  banks,  following  a  GDP 
contraction  in  2023  and  modest  real  GDP  growth 
in  Luxembourg  in  2024.  Below-average  growth, 
compounded  by  adverse  financing  conditions  and 
geopolitical  uncertainty  triggers  concerns  despite 
high  capital  buffers.  So  far  Luxembourg  banks' 
solvency  remains  relatively  robust,  with  the 
Common Equity Tier 1 (CET1) ratio, reflecting high-
quality loss-absorbing capital, increasing to 18.4% 
in  2024,  1.8%  higher  than  the  EU  average. 
However,  total  capital  adequacy  is  slightly  below 
the  EU  average,  standing  at  19.7%  compared  to 
20.1%  in  the  EU.  According  to  the  IMF’s  2023 
stress  testing  exercise  conducted  under  the 
Program (105), 
Financial 
Luxembourg’s banking system would remain well-
capitalised  even  under  an  adverse  scenario, 
despite  a  significant  decline  in  the  system-wide 
capital  ratio.  The  resilience  largely  reflects  strong 
initial  capital  buffers,  which  provide  a  substantial 
the 
cushion  against  shocks,  notwithstanding 
heterogeneity across banks. In the stress scenario, 
the  capital  of  only  four  banks  (representing  less 
than 10% of total sector assets) would fall below 

Assessment 

Sector 

(105) IMF “Luxembourg: Financial Sector Assessment Program—

Technical Note on Stress Testing and Systemic Risk Analysis”, 
June 24, 2024. 

45 

-25000-20000-15000-10000-5000050001000015000200002500020172018201920202021202220232024-Q3% of GDPForeign Direct Investment, AssetsPortfolio Investment, AssetsOther investment, AssetsOfficial reserve assetsForeign Direct Investment, LiabilitiesPortfolio Investment, LiabilitiesOther investment, LiabilitiesNon-financial corporationsFinancial corporationsNon-financial corporationsMFIsInsurance  and pension fundsOther financialsGovernmentMFIsPension fundsInsurance corporationsInvestment funds0100020003000400050006000700080009000   Listed equity                         Bonds                       Assets by sector% of GDP 
  
  
 
banks’ 

aggregate 

the  CET1  hurdle  rate  of  8%,  requiring  moderate 
to  0.6%  of  GDP. 
recapitalisation  equivalent 
According  to  the  latest  EBA  MREL  dashboard, 
Luxembourg 
Minimum 
Requirement for Own Funds and Eligible Liabilities 
(MREL)  stood  at  36.8%  of  risk-weighted  assets 
(RWA) in June 2024—2.3 percentage points above 
the  EU  average  (34.5%)  and  significantly  above 
the  binding  requirement  of  25.8%.  These  high 
loss-
levels  reflect  the  sector’s  solid 
MREL 
absorbing and recapitalisation capacity. In parallel, 
the countercyclical capital buffer (CCyB) continues 
to  be  set  at  0.5%  to  further  strengthen  resilience 
against emerging cyclical risks. 

loans 

Despite  signs  of  gradual  deterioration, 
banks’  asset  quality  remains  relatively 
sound.  Non-performing 
(NPLs)  have 
gradually increased from 0.6% in 2021 to 0.9% in 
2024,  although  they  remain  well  below  the  EU 
average  of  1.9%.  The  NPL  ratio  has  been  rising 
steadily over the past five years from the level of 
0.6%  in  2021,  and  pockets  of  vulnerability  are 
emerging. Notably, NPLs on loans to non-financial 
corporations  (NFCs)  reached  3.3%,  approaching 
the  EU  average  of  3.5%  while  the  five  largest 
banks  directly  supervised  under 
the  Single 
Supervisory  Mechanism  reported  an  elevated 
overall  NPL  ratio  of  3.1%,  above  the  EU  average 
for Significant Institutions (Sis) (2.3%). The upward 
pressure  on  NPLs  could  persist  in  the  coming 
quarters,  amid  growing  signs  of  stress  in  the 
corporate  sector.  In  Q3-2024,  the  number  of 
corporate  bankruptcies  surged  by  71%  year-on-
year,  reaching  273  cases,  according  to  STATEC's 
"Bankruptcies  and  Liquidations"  Dashboard”  (106). 
Even  when  excluding  holding  companies  and 
investment  funds,  bankruptcies  rose  by  60%, 
signalling  mounting  difficulties 
real 
economy.  The  construction  sector  was  particularly 
affected,  with  147  insolvencies  (+24%  year-on-
year). If this trend continues, it could put additional 
pressure  on  banks’  asset  quality,  particularly  in 
sectors  with  high  credit  concentration  such  as 
construction. 

the 

in 

Luxembourg  banks  maintain  robust  liquidity 
positions  and  exhibit  a  strong  alignment 
between  assets  and  liabilities.  Both  SIs  and 
Less  Significant  Institutions  (LSIs)  in  Luxembourg 
comfortably  exceed  the  regulatory  minimums  for 

the  Liquidity  Coverage  Ratio  (LCR)  and  the  Net 
Stable  Funding  Ratio  (NSFR),  with  no  bank  facing 
individual  shortfall.  As  of  Q3-2024,  the 
an 
aggregate  LCR 
for  SIs  stood  at  178.2%, 
significantly above the EU average of 158.5%, and 
at  191.7%  for  LSIs,  below  the  EU  average  of 
216.8%. Although above the EU average of 89.6%, 
the  loan-to-deposit  ratio  remains  well  within 
acceptable  bounds  at  98.3%  for  Q3-2024,  and 
well  below  its  peak  of  129.6%  in  Q2-2018. 
Regarding  the  NSFR,  which  assesses  whether 
banks’  funding  is  sufficiently  stable  to  cover  its 
longer-term  horizon, 
liquidity  needs  over  a 
Luxembourg  banks  are  also  in  a  strong  position. 
The  aggregate  NSFR  stands  at  128.1%,  with 
136.1%  for  SIs  and  166.8%  for  LSIs,  both 
comfortably  above  the  EU  average  and  the 
minimum legal requirements. 

Resilience of the non-bank financial 
intermediaries  

Risks  stemming  from  Luxembourg’s  large 
and diverse investment fund sector primarily 
relate  to  liquidity  mismatches  and  leverage, 
which can amplify market stress and lead to 
disorderly  asset  sales.  The  presence  of  open-
ended  funds  offering  daily  redemptions,  despite 
holding  relatively  illiquid  assets,  may  lead  to 
potential  challenges  during  periods  of  market 
volatility.  Moreover,  given  the  sector’s  large  size 
and 
interconnectedness  with  global 
financial  markets,  stress  in  Luxembourg  funds 
could,  if  not  mitigated,  have  significant  spillover 
effects  across 
the  EU  financial  system.  A 
mitigating  factor  is  the  broader  availability  and 
use  of  liquidity  management  tools  (LMTs)  for 
alternative investment funds (AIFs), including joint 
guidance  issued  by  Ireland  and  the  CSSF  (107), 
which  has  proven  effective 
in  recent  stress 
episodes—such as during the gilt market turmoil 

strong 

Luxembourg’s insurance sector remains solid 
and  highly  internationalised,  with  strong 
capital buffers. As of 2024, the country hosts 43 
non-life 
insurers  and  195 
reinsurers, all supervised by the Commissariat aux 
Assurances.  Both  the  life  and  non-life  segments 

insurers,  33 

life 

(106) STATEC's "Bankruptcies and Liquidations" Dashboard, 

(107) CSSF communication on Liability Driven Investment Funds, 3 

published on 10 Ocotber 2024. 

April 2023 

46 

 
 
 
have seen some consolidation in recent years, with 
most insurers operating as subsidiaries of foreign 
groups. Many of them serve clients across the EU, 
and  over  90%  of  gross  premiums  stem  from 
foreign  policyholders.  The  sector  remains  well 
capitalised.  At  end-2023,  the  median  solvency 
capital requirement (SCR) coverage stood at 178% 
for  life  insurers  and  199%  for  non-life  insurers, 
although  the  latter  has  declined  slightly  since 
traditionally  maintain  even 
2020.  Reinsurers 
capital  buffers,  albeit  with  more 
higher 
heterogeneity  across 
investment 
firms.  The 
strategy  of  insurers  reflects  a  prudent  stance, 
especially  among  non-life  companies,  and 
is 
shaped  by  the  strong  presence  of  unit-linked  life 
insurance  products.  In  2023,  46%  of  insurers’ 
assets  were  held  in  UCITS,  followed  by  corporate 
bonds  (17%).  In  recent  years,  life  insurers  have 
gradually shifted their portfolios away from bonds 
towards  investment  funds.  According  to  EIOPA’s 
protection  gap  assessment  against  climate  risks, 
Luxembourg  faces  medium  to  high  risks  of 
windstorms  and  flooding,  but  the 
insurance 
protection gap remains limited. 

Sources of business funding and the 
role of banks 

Luxembourg  is an important financial  centre 
internationally  oriented  banking 
with  an 
sector  and  a 
large  fund  management 
industry.  Luxembourg  has  long  played  a  major 
role  in  international  banking  and  finance.  It  has 
grown  to  the  largest  fund  domicile  in  the  EU  and 
the  second  largest  in  the  world.  Luxembourg’s 
economy  is  therefore  dominated  by  its  financial 
sector,  which  accounts  for  23%  of  the  country’s 
gross value added. 

Many multinational non-financial enterprises 
use  Luxembourg  as  their  corporate  finance 
hub.  Large  non-financial  companies  (NFCs)  make 
use of Luxembourg’s financial centre by setting up 
a  subsidiary  that  issues  debt  or  takes  out  bank 
loans  in  Luxembourg  for  their  global  operations. 
This  explains  the  large  balance  sheet  of  the  NFC 
sector  of  five  times  GDP,  and  the  larger  share  of 
bond  financing  of  7.9%  of  the  aggregate balance 
sheet versus the EU average of 4.7%. Bank loans 
also  play  a  significant  role,  with  46.6%  of  the 
balance  sheet  vs  a  27.2%  EU  average.  Listed 
shares  represent  only  8.9%  of  funding  sources, 

compared to the EU average of 19.1% (see Graph 
A5.4) 

large  share  of 

Luxembourg’s  companies  have  good  access 
to  external  finance  but  also  rely  on  internal 
funding.  According  to  the  2024  EIB  Investment 
Survey,  a 
investments  by 
companies,  namely  87%,  was  financed  internally 
or  from  intra-group  sources,  compared  to  an  EU 
average  of  75%.  This  is  likely  explained  by  the 
large  number  of  multinational  companies 
in 
Luxembourg.  At 
time,  82%  of 
the  same 
Luxembourg’s firms believed that their investment 
activities over the previous three years were about 
the right amount, slightly above the EU average of 
80%. A share of 13% of firms said they invested 
little,  suggesting  that  there  could  be  a 
too 
financing  gap  relative  to  investment  demand. 
According  to  the  same  survey,  the  share  of 
finance-constrained  firms  is  around  10%  (above 
the  EU  average  of  around  7%).  The  most 
important  reason  cited  by  these  firms  is  the  high 
cost  of  bank  credit.  But, 
in  point  of  fact, 
Luxembourg’s interest rates are among the lowest 
in the EU. The interest rate for corporate loans of 
up  to  EUR 1 million  stood  at  4.28%  in  November 
2024,  which  was  the  lowest  in  the  euro  area.  In 
the  last  SAFE  Access  to  Finance  Survey  (108),  the 
share  of  SMEs  reporting  that  access  to  finance 
was a constraint for them was 6%, which is in line 
with the EU average. 

Graph A5.4: Composition of NFC funding as % of 
GDP 

(1) The sum of NFC liabilities only reflects the total for the 
NFC liabilities considered. Reference period2023. 
Source: Eurostat and FISMA E2 calculations 

(108) ECB SAFE Access to Finance Survey, Q4-2024. 

47 

0100200300400500600LUEU% of GDPLoansTrade credit and advancesBondsListed sharesUnlisted sharesOther equity 
  
 
involved 

Only a small number of Luxembourg’s banks 
in  financing  the  domestic 
are 
economy.  Although  there  are  115  banks  in 
Luxembourg,  fewer  than  10  of  them  are  actually 
involved in financing the national economy. These 
are typically the domestic banks. The international 
banks  cater  to  the  needs  of  the  Europe-leading 
investment  fund  industry  by  providing  custody, 
fiduciary  and  post-trading  services.  This  also 
explains 
that 
large  extent 
Luxembourg  banks  rely  much  more  on  fees  and 
commissions 
income, 
compared  to  their  EU  peers.  Luxembourg  has  the 
second  highest  share  of  fee  and  commission 
income in the EU (after Lithuania), which accounts 
for  35%  of  banks’  revenues,  compared  to  the  EU 
average  of  27%.  Overall,  the  banking  sector 
remains  resilient,  with  good  liquidity  and  capital 
positions, but profitability has not been in the top 
tier (see Table A5.1). 

than  on  net 

interest 

to  a 

fact 

the 

the 

total  outstanding 

Luxembourg’s 
international 
role  as  an 
financial  centre  is  reflected  in  the  banks’ 
lending  portfolio.  Most  of  Luxembourg’s  bank 
loans  are  extended  to  companies  domiciled 
abroad.  Of 
loans  of 
EUR 773 bn in June 2024, only 34.4% was lent to 
domestic customers, while 45% was lent to other 
euro  area  countries  and  the  balance  was  lent 
outside  the  euro  area.  Also,  only  a  fraction  was 
actually 
‘real’  economy:  most 
outstanding  credit,  about  76.5%,  was  to  other 
banks  and  financial  institutions.  Just  13.6%,  or 
EUR 104.7 bn,  was  lent  to  NFCs,  domestic  and 
abroad,  and  EUR 73.3 bn,  or  9.5%,  to  households. 
Therefore only 9.4% of Luxembourg’s bank lending 
is for the non-financial, domestic, private sector. 

lent 

the 

to 

The rise in interest rates towards the end of 
2022  led  to  a  slowdown  in  lending  and 
worsening  of  asset  quality.  On  the  whole, 
Luxembourg’s banks have always had outstanding 
asset  quality.  The  aggregate  non-performing  loan 
(NPL)  ratio  for  the  entire  banking  sector  stood  at 
0.9%  in  June  2024  which  is the  second  lowest in 
the  EU.  This  is  largely  thanks  to  the  international 
banks, which, by the nature of their business, have 
a very low NPL ratio. For the subgroup of domestic 
banks,  which  are  more  exposed  to  the  local 
economy,  the  NPL  ratio  for  loans  to  households 
stood at 2.5% and the NPL ratio for NFCs stood at 
6.4%  in  June  2024,  both  above  the  EU  average. 
This is after a significant deterioration towards the 
end  of  2023,  related  partly  to  difficulties  in  the 
commercial real estate sector. 

48 

Lending  to  businesses  slowed  as  interest 
rates started to rise but has since stabilised. 
Lending to  NFCs  slowed  slightly in  nominal  terms 
at the end of 2022, as interest rates were rising at 
the  same  time.  The  outstanding  amount  of  bank 
loans  to domestic  NFCs  peaked  at  EUR 30.6 bn in 
September  2022  and  then  shrank  to  EUR 24.6 bn 
in  November  2024.  As  these  are  nominal  figures, 
and  given  elevated  inflation  during  that  time,  it 
means  that  outstanding  credit  was  declining  in 
real  terms,  during  the  time  when  interest  rates 
were rising and banks were tightening their credit 
standards.  Lending  to  SMEs  also  slowed,  with  an 
outstanding  amount  of  EUR 7.3 bn  at  the  end  of 
2023.  SMEs  report  that  slowing  economic  growth 
and the uncertainty of the macro environment has 
made them more hesitant to invest. 

Lending  to  households  has  been  driven  by  a 
buoyant  housing  market  in  recent  years. 
House prices started to recede after peaking in the 
third  quarter  of  2023,  as  the  housing  market 
slowed  down.  Meanwhile,  outstanding  credit  to 
domestic  households  remained  stable.  In  this 
segment,  NPLs  are  still  very  low.  For  households, 
the  annual  credit  growth  rate  for  adjusted  loans 
gradually  edged  up  from  4.1%  in  April  2024  to 
5.1% in September 2024. 

Capital markets and the participation 
of retail investors 

the 

important 

issued  by  public 

Luxembourg’s  stock  exchange  is  a  leading 
marketplace  for  the  listing  of  international 
debt  securities.  Since 
introduction  of 
Eurobonds  in  the  1960s,  Luxembourg  has  grown 
trading  place  for 
to  become  an 
international  debt  securities,  in  particular  for 
bonds 
international  bodies, 
sovereigns  and  public  agencies.  The  exchange  for 
equities is rather small, with a total number of 18 
listed  companies,  making  it  the  eighth  largest  by 
market  capitalisation 
the  EU.  The  stock 
in 
exchange’s  Euro  MTF  market  is  designed  to  be 
more  accessible  for  SMEs,  however  only  a  few 
SMEs  have  used  it  to  list  their  stocks.  The  Euro 
MTF is primarily  used for debt securities. Still, the 
share  of  SMEs  using  equity  as  a  financing  tool  is 
quite large, as 30% of SMEs indicated in the 2024 
SAFE  survey  that  equity  was  relevant  for  them, 

 
compared  to  an  EU  average  of  12.0% (109),  but 
this,  of  course,  does  not  refer  only  to  listed 
equities. There were 28 listed companies domiciled 
in Luxembourg in 2022 (110). 

Luxembourg’s  households  hold  a  substantial 
share of their financial wealth in marketable 
securities. Average financial household wealth in 
Luxembourg  is  estimated  at  EUR 185 800,  which 
is the among highest in the EU. On the other hand, 
Luxembourg’s  households  also  have  high  debt 
levels,  but  these  are  matched  by  correspondingly 
larger  cash  holdings.  In  fact,  most  of  their  gross 
wealth (45%) is in deposits. Looking at net wealth 
only, after debt has been deducted, the share they 
hold  in  marketable  securities  (listed  and  unlisted 
shares,  bonds  and  investment  funds)  stands  at 
42.8%,  slightly  above  the  EU  average  of  37.7%. 
They  report  less  enthusiasm  for  insurance  and 
pension  funds,  with  25.3%  held  in  these  asset 
classes,  compared  to  an  EU  average  of  36.9%. 
This 
indicates  that  households  prefer  direct 
participation  in  financial  markets  rather  than 
relying  on  intermediaries  like  pension  providers 
and insurance companies. 

Graph A5.5: Composition of household financial 
assets per capita and as % of GDP 

The role of domestic institutional 
investors 

is  the 

largest  domicile  for 
Luxembourg 
investment funds in the EU. In December 2024 
investment  funds  domiciled  in  Luxembourg  held 
EUR 5.8 trillion  of  assets  under  management 
(AUM),  which  represents  a  steady  growth  from 
EUR 1.4 tn  assets  under  management  in  2008. 
Global  asset  management  groups  with  fund 
ranges  in  Luxembourg  make  use  of  delegation 
arrangements as permitted under the relevant EU 
legal 
framework,  where  asset  management 
functions are handled from the groups’ main asset 
management centres, which may not be located in 
Luxembourg.  Looking  at  the  asset  exposures  for 
funds  broken  down  by  investment,  the  largest 
funds  are  equity  funds,  with  EUR 1 858 bn,  the 
income  funds  with 
second  group  are  fixed 
EUR 1 293 bn, and the third are mixed funds with 
EUR 1 016 bn. Funds of funds hold EUR 364 bn in 
assets  and  real  estate  funds  EUR 134 bn.  This 
largest  fund 
makes  Luxembourg  the  second 
domicile  for  real  estate  funds  in  the  EU,  covering 
4% of the EU’s commercial real estate market. 

their 

important  hub 

is  an 
insurance  businesses 

for 
Luxembourg 
that 
international 
invest 
globally.  Most 
reserves 
Luxembourg  insurers  are  subsidiaries  of  foreign 
groups. Many of these insurers use Luxembourg as 
their  base  from  where  they  cater  to  their  clients 
across  the  EU.  In  fact,  over  90%  of  gross 
premiums underwritten by Luxembourg insurers in 
2024  stemmed  from  foreign  policyholders.  The 
sector  is  therefore  large  compared  to  the  size  of 
the  country  and  its investments  are  equivalent  to 
240%  of  GDP  vs  55.3%  of  GDP  in  the  EU. 
Investment funds accounted for 43.3% of insurers’ 
portfolio. Of these, 33.5% were equity funds and a 
notable  2.7%  were  private  equity  funds.  The  rest 
of  the  portfolio  is  split  across  government  bonds 
(9.4%  vs  19.0%  in  the  EEA  as  a  whole)  and 
corporate  bonds  (19.7%),  equities  (11.5%),  and 
8.3% held in cash and deposits (111). 

(1) The sum of household assets only reflects the total for the 
HH assets considered. Reference period 2023. 
Source: Eurostat and FISMA E2 calculations 

(109) Data  and  surveys  -  SAFE  -  European  Commission,  2024, 

Results by country, T27. 

Luxembourg’s  public  pension  scheme  works 
on  a  pay-as-you-go  basis.  At  end-2023  it  had 
reserves  of  EUR 26.2 billion.  The  assets  of  the 
the  Fonds  de 
scheme  are  managed  by 

(110) World Bank, Global Development Indicators. 

(111) Source: EIOPA Insurance Statistics. 

49 

050100150200LUEUper capita (000 EUR)Currency and depositsInsurance and pension fundsInvestment fundsBondsListed sharesUnlisted sharesOther equityHH Debt (liability) 
  
 
 
Compensation.  This  fund  was  created  in  2004  in 
order  for  pensions  to  benefit  from  the  growth  in 
financial  markets.  It  invests  in  a  mix  of  equities, 
fixed  income,  and  alternative  investments.  The 
reserves  are  not  intended  as  a  capital  stock  from 
which  pensions  are  to  be  paid  in  the  future.  It  is 
merely  fed  by 
the  difference  arising  from 
contributions  and  disbursements  (112).  To  further 
develop  capital  markets  and  make  the  pension 
system  more  sustainable  in  light  of  demographic 
challenges,  the  pay-as-you-go  system  could  be 
progressively supplemented with a funded system, 
which  would  invest  contributions  into  a  highly 
diversified  financial  portfolio.  Public  pensions  are 
complemented  by  privately 
run  occupational 
pension  schemes  that  invest  mainly in  bonds  and 
mutual funds. 

industry 

Luxembourg’s  pension  funds 
is 
relatively  small  and  domestically  oriented. 
With  12  registered  pension  funds  and  total 
investments of EUR 1.2 bn, the sector represented 
a  0.05%  share  of  assets  of  the  total  EU  pension 
funds  sector  in  Q2-2024.  A  share  of  28.7%  of 
their assets are invested in bonds, 0.9% in equities 
and  a  sizeable  45.4%  in  investment  funds.  Of 
these,  52.1%  are  allocated  to  equity  funds,  and 
2.0% to private equity funds. 

A  set  of  alternative  investment  funds  that 
have  come  into  focus  recently  as  a  growing 
group  are  private  credit  funds.  Private  credit 
funds  belong  to  the  non-bank  financial  sector.  A 
characteristic  feature  of  this  kind  of  financial 
intermediation  is  the  long  chain  of  institutions 
involved  in  channelling  funds  from  the  ultimate 
creditors 
the  ultimate  borrowers,  which 
constitutes a network of leveraged and wholesale-
funded off-balance sheet vehicles. 

to 

The  participation  of  domestic  institutional 
investors  in  providing  funding  for  start-ups 
and venture capital investors is small. A 2024 
paper by the think tank CEPS showed that pension 
funds  in  Luxembourg  accounted  for  13%  of 
private  equity  and  venture  capital  funds  raised 
annually over 2007-2023, which falls short of the 
15%  EU  average  and  markedly  below  the  20% 
shares  for  Nordic  Member-States  (113).  Following 

(112) https://delano.lu/article/the-fonds-de-compensation-will-not-

save-pensions-alain-reuter 

(113) Source: Closing the gaping hole in the capital market for EU 

start-ups – the role of pension funds – CEPS. 

the announcement  of the "10 Points of Action for 
Start-ups"  plan  in  March  2025,  the  government 
will assess the opportunity  and the most  relevant 
and  innovative  financial  programs  to  channel 
further  investment  to  venture  capital  help  direct 
to  high-potential 
resources 
more 
businesses.  The  depth  of  available  venture  and 
growth capital.  

financial 

intelligence,  machine 

Luxembourg  offers  some  attractive  start-up 
support  programmes  for  young  innovative 
businesses. Luxembourg benefits from its role as 
a  financial  centre  and  is  able  to  offer  some 
attractive start-up-support programmes. The start-
up  acceleration  programme  Fit4Start 
targets 
digital ventures with innovative technologies at the 
core of their business: the internet, blockchain, big 
data,  artificial 
learning, 
robotics,  cyber,  telecom,  open-source  technology 
and/or  emerging 
technologies.  The  national 
promotional  bank,  Société  Nationale  de  Crédit  et 
d’Investissement  (SNCI)  is  a  public-law  banking 
institution  specialised  in  medium-  and  long-term 
financing of Luxembourg-based companies. SNCI’s 
financing  instruments  are  investments  in  fixed 
assets,  innovations  and  exports.  SNCI  also  grants 
start-up/transmission  loans  to  newly  incorporated 
or inherited SMEs. It may also finance investments 
of domestic companies abroad. SNCI may finance 
equity  operations  either  directly,  by  taking  equity 
positions  or  granting  strategic  loans,  or  through 
affiliated financing companies. 

strategic 

There  are  also  funds  that  invest  equity  into 
start-ups,  such  as  the  Luxembourg  Future 
Fund  and  the  Digital  Tech  Fund.  They  invest 
directly  or  indirectly  in  venture  capital  funds  and 
SMEs  to  foster  the  sustainable  development  of 
Luxembourg’s 
sectors.  Luxembourg 
Future Fund 1 is a EUR 150 million fund that aims 
to  stimulate  the  diversification  and  sustainable 
development  of  the  Luxembourg  economy  by 
attracting  venture  capital  fund  managers  and 
early-  to  later-stage  innovative  businesses  to 
Luxembourg.  It  was  set  up  by  the  European 
Investment  Fund  (EIF)  and  SNCI  and  combines  a 
EUR 120 million  contribution  from  SNCI  with 
EUR 30 million from the EIF (See the Innovation to 
Business  Annex).  In  March  2023,  the  Ministry  of 
Finance, the Ministry of the Economy, the SNCI and 
the  EIF  launched  the  Luxembourg  Future  Fund  2, 
with a total capital of EUR 200 million, building on 
the  experience  of  the  first  edition.  In  addition,  in 
March  2025  the  government  announced  that  the 
National  Credit  and  Investment  Institution  will 

50 

 
 
devote EUR 300 million over a five-year period to 
financing start-ups and innovation in Luxembourg 

Financial literacy 

Financing the green transition 

outlines 

priorities 

Luxembourg  performs  well  on  several 
indicators, 
sustainable  development  goal 
although  challenges remain in  certain areas. 
Luxembourg  launched  a  roadmap  for  sustainable 
finance  in  2018,  with  the  aim  of  integrating 
sustainable finance into all areas of Luxembourg’s 
financial centre. In April 2024, the Luxembourgish 
government introduced  a  comprehensive  10-point 
action  plan  for  sustainable  finance.  This  strategic 
roadmap 
enhancing 
Luxembourg’s  role  as  a  sustainable  finance  hub 
and  mobilising  private  capital  for  sustainable 
fostering 
initiatives.  Key  objectives 
innovation 
investments,  promoting 
in 
digitalisation  within  sustainable  finance,  and 
broadening  the  scope  of  sustainable  investments 
to  encompass  biodiversity,  gender  finance  and 
underscores 
social 
The 
governance. 
Luxembourg’s  commitment 
its 
financial  expertise  to  drive  global  sustainability 
efforts  towards  achieving  the  UN  Sustainable 
Development Goals by 2030 and transition to net-
zero by 2050. 

leveraging 

plan 
to 

include 

impact 

for 

Financial  literacy  is  above  the  EU  average, 
but more could be done to improve financial 
education  in  wider  parts  of  the  population. 
Luxembourg  scores  above  the  EU  average  in 
financial  literacy  with  33%  of  the  population 
achieving  a  high  score  in  the  Eurobarometer 
financial  knowledge  survey,  compared  to  an  EU 
average of 26%. Still, the same share as in the EU 
as  a  whole,  namely  24%,  have  a  low  score.  As 
regards  the  use  of  digital  financial  services,  85% 
of  the  population  report  being  comfortable  or 
somewhat  comfortable  with  the  use  of  digital 
financial  services,  which  is  above  the  EU  average 
but not among the highest ranking group (116). This 
leads  to  an  overall  financial  literacy  indicator  of 
49.0 vs an EU average score of 45.5 (117). In 2017, 
the  Financial  Consumer  Protection  Committee, 
chaired  by 
the  Financial  Sector  Supervisory 
Commission  (CSSF)  developed  a  national  strategy 
the  entire 
for  financial  education 
awareness 
population. 
campaigns,  educational  initiatives,  workshops  and 
seminars, online resources, and collaborations and 
partnerships.  Importantly,  it  integrates  financial 
education into the school curriculum  

targeting 
public 

includes 

It 

Luxembourg  is  a  leading  hub  for  green 
finance within the EU, a status reaffirmed by 
its  top  position  in  the  Global  Green  Finance 
Index.  The  latest  rankings,  published  in  October 
2024, placed Luxembourg eighth out of 97 global 
financial centres, marking a small downgrade from 
its fifth place in 2023. Luxembourg’s economy has 
below  average  emissions  intensity,  and estimated 
investment  needs  of  EUR 10.6 bn  for  the  green 
transition (114).  Luxembourg  is  also  home  to  the 
leading 
the 
Luxembourg  Green  Exchange  (LGX),  which  lists 
half of the world’s green bonds (115). 

sustainable 

platform, 

finance 

(114) European Commission Climate Action Progress Report, 2023 

(116) Source: Monitoring the level of financial literacy in the EU - 

(115) Source: AFME CMU Key Performance Indicators, Seventh 

Edition, November 2024. 

July 2023 - Eurobarometer survey. 

(117) CMU Dashboard, August 2023. 

51 

 
 
 
 
Table A5.1:  Financial Indicators 

(1) Annualized data 
Credit growth and pension funds EU data refers to the EA average. 
Source: ECB, ESTAT, EIOPA, CMU Dashboard, AMECO 

52 

20172018201920202021202220232024-Q3EUTotal assets of MFIs (% of GDP)1784.71787.81861.81935.61913.71772.21847.31823.6248.4Common Equity Tier 1 ratio21.320.318.819.518.317.618.018.416.6Total capital adequacy ratio22.521.419.721.720.518.819.519.720.1Overall NPL ratio (% of all loans)0.70.80.60.70.60.70.80.91.9NPL (% loans to NFC-Non financial corporations)1.72.31.72.41.92.22.73.33.5NPL (% loans to HH-Households)2.01.91.41.51.41.32.12.32.2NPL-Non performing loans coverage ratio37.336.835.131.434.037.231.831.642.1Return on Equity15.75.55.24.45.55.28.39.410.0Loans to NFCs (% of GDP)41.043.845.043.838.836.332.529.430.0Loans to HHs (% of GDP)56.658.660.763.661.560.358.355.844.5NFC credit annual % growth13.88.26.51.0-1.2-0.3-8.3-6.80.8HH credit annual % growth7.27.07.48.38.55.1-1.20.40.7Stock market capitalisation (% of GDP)251.2231.6236.0288.6291.1186.8215.8231.069.3Initial public offerings (% of GDP)0.205.771.522.7020.660.250.11-0.05Market funding ratio84.283.282.182.181.680.880.5-49.6Private equity (% of GDP)0.420.270.320.370.090.520.26-0.41Venture capital (% of GDP)0.020.020.020.060.040.280.04-0.05Financial literacy (composite)------49.0-45.5Bonds (as % of HH financial assets)4.33.83.82.82.53.03.6-2.7Listed shares (as % of HH financial assets)4.74.54.85.26.05.25.5-4.8Investment funds (as % of HH financial assets)11.810.711.712.514.312.412.2-10.0Insurance/pension funds (as % of HH financial assets)14.414.915.414.914.913.414.1-27.8Total assets of all insurers (% of GDP)375.9370.8441.9445.8428.8368.9379.8384.654.8Pension funds assets (% of GDP)--3.63.63.42.72.42.423.41-34-1011-1718-2425-27Colours indicate performance ranking among 27 EU Member States.Banking sectorNon-banks sector 
 
   
 
ANNEX 6: EFFECTIVE INSTITUTIONAL FRAMEWORK 

its 

institutional 

competitiveness. 

Luxembourg’s 
framework 
Public 
influences 
institutions  in  Luxembourg  enjoy  a  high  level  of 
trust  with  improvements  in  transparency  and 
accountability, and in the provision of online public 
services.  However,  the  country  could  strengthen 
regulatory 
reduce 
administrative  burdens.  Although  Luxembourg’s 
civil  service  is  performing  well,  improvements 
could  be  made  in  recruitment  and  in  the  learning 
and skills development of civil servants. The justice 
system 
its 
digitalisation remains slow.  

is  performing  efficiently,  but 

practices 

further 

and 

Graph A6.1: Trust in justice, regional / local 
authorities and in government 

(1) EU27 from 2019; EU28 before 
Source: Standard Eurobarometer surveys 

Public perceptions 

Trust in public institutions remains above the 
EU average (Graph A4.1). Less bureaucracy, more 
transparency about decisions and the use of public 
money and more communication with citizens can 
trust  with 
help 
(118).  The 
Luxembourg’s  public  administration 
perceived  quality  of  government  has  also 
improved and remains above the EU average (119).  

increase 

citizens’ 

further 

(118) Understanding Europeans’ views on reform needs - April 
2023 - - Eurobarometer survey, Country Fact Sheet. 

(119) Inforegio - European Quality of Government Index 

53 

Quality of legislation and regulatory 
simplification 

is  stronger  for  ex-ante 

Performance  in  developing  and  evaluating 
legislation remains below the EU average and 
slightly  over  2021-2024. 
has  deteriorated 
impact 
Performance 
assessments  and  stakeholder  engagement  than 
for  ex  post  evaluation  of  legislation.  The  use  of 
regulatory  tools  like  public  consultation  practices, 
reviews  of 
ex-ante 
existing  regulations  is  broadly  similar  for  primary 
laws  and  subordinate 
regulations.  However, 
performance  remains  in  all  three  aspects  visibly 
relatively 
below 
underdeveloped  methodology,  oversight  and 
quality control mechanisms (Graph A6.2). 

impact  assessment  and 

the  EU  average,  due 

to 

Graph A6.2: Indicators of Regulatory Policy and 
Governance (iREG) 

Source: OECD (2025), Regulatory Policy Outlook 2025 and 
Better Regulation across the European Union 2025 
(forthcoming). 

There  is  scope  to  further  strengthen  its 
mechanisms  for  simplifying  regulations.  For 
example,  when  developing  new  primary  laws, 
regulators are not required to identify substantive 
compliance 
costs.  Ex  post  evaluations  of 
legislation  do  not  have  to  cover  substantive 
costs  and  an  assessment  or 
compliance 
administrative  burdens  either.  Moreover,  periodic 
ex post evaluations of existing regulations are not 
mandatory,  nor  has  the  government  conducted 
recently  in-depth  reviews  of  specific  regulatory 
areas  and  public  stocktakes  of  legislation  (Table 
A4.1).  The  latest  efforts  to  simplify  regulation 
include  the  ‘Zesumme  Vereinfachen:  pour  des 

00.10.20.30.40.50.60.70.80.9AutumnSpringAutumnSpringAutumnSpringAutumnSpringAutumnSpringAutumnSummerWinterSummerWinterSpringAutumnSpringAutumn2014201520162017201820192020202220232024Justice,  legal system EU27Justice,  legal system LURegional or local public authorities EU27Regional or local public authorities LUGovernment  EU27Government  LU0.00.51.01.52.02.53.03.54.0Primary lawsSubordinateregulationsPrimary lawsSubordinateregulationsPrimary lawsSubordinateregulationsLU_StakeholderengagementLU_Regulatory ImpactAssessmentLU_Ex-post evaluation oflegislationMethodologySystematic adoptionTransparencyOversight and quality control2021EU-27 
 
       
 
     
 
 
Table A6.1:  Luxembourg. Selected indicators on administrative burden reduction and simplification 

(1) This table presents a subset of iREG indicators focusing on regulatory costs. The indicators refer to primary legislation.  
Source: OECD (2025), Regulatory Policy Outlook 2025 [https://doi.org/10.1787/56b60e39-en] and Better Regulation across the 
European Union 2025 (forthcoming). 

services  publics  qui  facilitent  votre  quotidien’ 
platform (120).  Its  aim  is  to  simplify  interactions 
with  citizens  and  companies,  and  foster  further 
administrative improvement in a participative and 
co-creative way. 

The  OECD  product  market 
regulation 
indicators  show  that  Luxembourg’s  licensing 
system is slightly more burdensome than the 
EU average and could be further aligned with 
best  practices.  Although  the  government  keeps 
an up-to-date inventory of all permits and licences 
required/issued  to  businesses  by  public  bodies, 
there  is  no  requirement  for  it  to  regularly  review 
the  inventory  and  assess  whether  such  licences 
and  permits  are  still  required  or  should  be 
withdrawn.  Moreover, 
at 
central/federal  level  are  not  required  to  observe 
the once-only principle (see also Annex 4). 

bodies 

public 

Social dialogue 

is 

is 

in 

(which 

social 

dialogue 

Committee 

Luxembourg. 

highly 
Tripartite 
institutionalised 
Social 
dialogue  takes  place  in  a  number  of  permanent 
bodies  such  as  the  Economic  Committee,  the 
the  Tripartite 
Economic  and  Social  Council, 
Coordination 
also 
complemented  by  sectoral  tripartite  committees) 
and  the  Standing  Committee  on  Labour  and 
Employment.  All  members  of  a  given  socio-
professional  category  are  compulsorily  affiliated 
to  one  of  five  professional  Chambers.  These 
Chambers  are  associated  with  the  adoption  of 
laws and regulations and play an important role in 
the  legislative  field  through  their  opinions.  In 
addition,  the  ESF+  supports  capacity  building  of 
social  partners,  allocating  EUR  126  500  in  the 
2021–2027 programming period (121). 

(120)https://gouvernement.lu/fr/dossiers.gouv2024_mindigital+fr+

dossiers+2022+zesumme-vereinfachen.html 

(121) For  an  analysis  of  the  involvement  of  Luxembourg’s  social 
partners at national level in the European Semester and the 
Recovery  and  Resilience  Facility,  see  Eurofound  (2025), 
National-level  social  governance  of  the  European  Semester 
and the Recovery and Resilience Facility. 

54 

Ex ante impact assessment of legislationEx post evaluation of legislationIdentify and assess the impacts of the baseline or ‘do nothing’ option.Is required to consider the consistency of regulations and address areas of duplication.Identify and assess the impacts of alternative non-regulatory options.Is required to contain an assessment of administrative burdens.Quantify administrative burdens of new regulations.Is required to contain an assessment of substantive compliance costs.Quantify substantial costs of compliance of new regulations.Compares the impact of the existing regulation to alternative options.Assess macroeconomic costs of new regulations. Periodic ex post evaluation of existing regulations is mandatory.Assess the level of compliance.Government uses stock-flow linkage rules when introducing new regulations (e.g., one-in one-out).Identify and assess potential enforcement mechanisms.A standing body has published an in-depth review of specific regulatory areas in the last 3 years.In the last 5 years, public stocktakes have invited businesses and citizens to assess the effectiveness, efficiency, and burdens of legislation.When developing new legislation, regulators are required to …Yes /  For all primary laws For major primary laws For some primary lawsNo / Never 
 
 
 
   
 
Table A6.2:  Digital Decade targets monitored through the Digital Economy and Society Index 

Source: State of the Digital Decade report 2024r 

in 

terms 

persist 

Challenges 
of 
representation,  especially  for  smaller  firms. 
There  has  been  a  strong  decline  in  unionisation 
over  the  past  15  years:  union  density  among 
resident  workers  declined  from  41%  in  2010  to 
28% in 2019 (122). Micro firms with fewer than 10 
employees  have  lower  affiliation  rates  within 
employers'  organisations, although  they  represent 
87%  of  Luxembourgish  enterprises.  Collective 
agreement  coverage  rate  for  small  firms  (10-49 
employees)  is  only  30%,  compared  to  the  overall 
coverage rate of 59% (123).  

Digital public services 

Luxembourg  has  made  substantial  progress 
in  the  provision  of  online  public  services 
(Table  A6.2).  On  both  public  services  for  citizens 
(94.8)  and  businesses  (96.7),  Luxembourg  ranks 
well above the EU average. Luxembourg have also 
made  improvement  in  the  access  to  e-health 
records  in  the  past  years.  The  country  had  an 
overall  e-health  maturity  score  of  76.1  in  2023, 
which is slightly under the EU average (79.1).   

The share of e-government users is also very 
high.  94.7%  of  internet  users  in  Luxembourg 
engage  with  digital  government  services  (EU 
79.4%) and 75.3% had used existing eID systems 

(122)https://statistiques.public.lu/en/actualites/population/travail/2

022/03/20220314.html?utm. 

(123) The latest national data about collective bargaining coverage 

were published in 2013 and refer to 2010. See 
Statistiques.lu. 

(EU  41.1%) 

(124).  However, 
to  access  them 
Luxembourg  has  not  yet  set  up  and  notified  eID 
schemes  for 
legal  persons  under  the  eIDAS 
Regulation  (125).  This  means  that  Luxembourgish 
businesses  cannot  authenticate  themselves  to 
access  public  services  provided  by  other  Member 
States,  including  those  enabled  by  the  Once-Only 
Technical  System,  part  of  the  EU  Single  Digital 
Gateway (126). 

is  finalising  the  necessary 
Luxembourg 
infrastructure 
for  seamless,  automated 
exchange  of  authentic  documents  and  data 
across the EU. There are still additional steps to 
be  taken  by  Luxembourg  to  become  technically 
ready  to  connect  to  the  Once-Only  Technical 
System (127). 

advancing 

administrative 

The  digital  transformation’s  priorities  focus 
on 
reform, 
promoting  digital  inclusion,  and  integrating 
new  technologies (128).  Electronic  document  and 
case  management  in  the  public  administration  is 
the  largest  funding  item  under  Luxembourg’s 
recovery and resilience plan (EUR 22.2 million). The 
recovery  and 
includes 
EUR 12.7 million of investment in modernising the 
public  administration  and  digitalisation  of  public 
services  to  improve  accessibility  for  individuals 

resilience  plan  also 

(124) European Commission. Digital Decade 2024: Country reports 

(125) European Commission, eIDAS Dashboard. 

(126) European Commission, The Once Only Principle System: A 

breakthrough for the EU’s Digital Single Market. 

(127) European Commission, The Once Only Principle System: A 

breakthrough for the EU’s Digital Single Market. 

(128) Government of Luxembourg (n.d.), Ministry of Digitalisation.. 

55 

Digital Decadetarget by 20302022202320242024EU-27Digitalisation of public services193959579100Score (0 to 100)20212022202320232030297979785100Score (0 to 100)202120222023202320303na677679100Score (0 to 100)20212022202320232030LuxembourgEU-27Digital public services for citizensDigital public services for businessesAccess to e-health records 
 
 
 
  
 
and  businesses.  As  part  of  its  e-government 
strategy,  Luxembourg  intends  to  make  legislation 
more  digitally  user-friendly.  Continued  efforts  are 
needed  to  apply  the  once-only  principle  to  the 
public  sector  to  address  the  challenges  of  an 
overwhelming  amount  of  data  and  potential 
interoperability  issues.  Measures  like  awareness-
raising  measures  and  training  for  SMEs  on 
adopting AI and data analytics could help to SMEs 
pursue  digital  transformation  in  order  to  boost 
growth and competitiveness. 

procedures. 

government revamped the GovJobs (131) website in 
job  vacancies  and 
early  2024  to  centralize 
application 
GovCampus 
The 
programme  (132),  focuses  on  continuous  learning 
by offering digital solutions for managing training 
and  skills  development.  This  initiative  aims  to 
provide a modern, technology-based learning hub. 
Additionally,  a  new  scheme  enables  public 
employees  to  use  coworking  spaces,  which  is 
expected to boost motivation among civil servants. 

Graph A6.3: Participation rate of 25-64 year olds 
in adult learning (%) by occupation 

Integrity 

Companies  consider  corruption  to  be  a 
business,  while 
doing 
problem  when 
enforcement  of  foreign  bribery  could  be 
improved.  In  Luxembourg,  46%  of  companies 
consider that corruption is widespread (EU average 
64%),  while  40%  consider  that  corruption  is  a 
problem  when  doing  business 
(EU  average 
36%) (133).  Moreover,  52%  of  companies  believe 
that  people  and  businesses  caught  for  bribing  a 
senior  official  are  appropriately  punished  (EU 
average  31%) (134).  There  are  plans  to  increase 
recruitment to the police  force and to prosecution 
services  dealing  with  economic  and  financial 
crime (135).  An  additional  proposal  to  create  a 
reserve  pool  of  magistrates 
is  still  under 
discussion (136). The OECD has expressed concerns 
over  the  weak  enforcement  of  the  OECD  Anti-
Bribery  Convention  in  Luxembourg  and  has  called 
on  Luxembourg  to  better  identify  foreign  bribery 
risks to which companies are exposed and to take 
a  more  proactive  approach  to  the  investigation 
and  prosecution  of  bribery  of  foreign  public 
officials (137).  Furthermore,  public  procurement 
continues to be  an area at high risk of corruption 
in  Luxembourg  (138).  34%  of  companies  (EU 
average 27%) think that corruption has prevented 

(131) https://govjobs.public.lu/fr.html  

(132) https://govjobs.public.lu/fr.html. 
(133) Flash Eurobarometer 543 on businesses’ attitudes towards 

corruption in the EU (2024).   

(134) Ibid. 

(135) See Bill No 8299A, adopted on 11 July 2024  

(136) Bill No 8299B  

Source: European Commission, based on the Labour Force 
Survey 

Civil service  

is  below 

Luxembourg  has  been  implementing  broad 
reforms  of  its  civil  service  to  meet  the 
pressing  challenges  it  faces.  In  Luxembourg, 
civil  servants  are  generally  younger  than  the  EU 
average,  but  the  share  of  staff  with  higher 
(129). 
education 
rate  of  public 
Additionally, 
administration  employees 
learning 
lifelong 
stood below that of the EU and the total economy 
in 2023 and 2024 (Graph A6.3). The proportion of 
public administration workers who frequently work 
from  home  is  also  below  the  EU  average.  To 
enhance  its  appeal  as  an  employer  (130),  the 

the  participation 
in 

the  EU  average 

(129) Eurostat. Labour Force Survey. 

(137) See the 2024 country-specific chapter for Luxembourg of 

(130) Government of Luxembourg (n.d.), Ministry of Civil Service 

(accessed 15/12/2024) 

the Rule of Law Report, p. 8. 

(138) Ibid., pp. 15-16. 

56 

02468101214161820LUEU-27LUEU-27LUEU-27LUEU-272021202220232024Public administration and defence; compulsory social securityHigh-skilled occupationsMedium-skilled occupationsUnskilled occupationsArmed forcesTotal economy 
  
 
 
them  from  winning  a  public  tender  or  a  public 
procurement  contract  in  practice  in  the  last  three 
years (139). 

Luxembourg has implemented a transparency 
register  for  lobbyists,  but  the  information 
included  could  be  expanded.  As  with  most 
Member  States,  Luxembourg  has  a  transparency 
lobby  register.  Moreover,  significant  progress  was 
made  in  increasing  the  transparency  of  lobbying 
and of interactions between parliamentarians and 
lobbyists  following  a  revision  of  the  Code  of 
the 
Conduct 
register  –  which  is  part  of  the  framework  of  the 
OECD  2024  Recommendation  of  the  Council  on 
Transparency  and 
in  Lobbying  and 
Integrity 
Influence  –  does  not  cover  additional  important 
information  such  as  the  policy  or  piece  of 
(140). 
legislation 
Strengthening  the  legislation  can  help  ensure  a 
in  companies’  access  to 
level  playing  field 
decision-makers. 

for  Parliamentarians.  However, 

targeted  by 

lobbying 

the 

Justice 

time 

The  courts  are  continuing  to  perform 
efficiently,  and  the  clearance  rate  remains 
stable.  The  disposition 
in  civil  and 
commercial cases at first instance increased from 
182  in  2022  to  221  in  2023.  In  administrative 
cases  at  first 
instance,  the  disposition  time 
decreased from 528 in 2022 to 479 in 2023. The 
quality  of  the  justice  system  is  considered  to  be 
good  overall.  Digitalisation  of  justice  continues  to 
be  slow,  although  some  progress  has  been  made 
in  administrative  justice.  Despite  this  progress, 
digitalisation  of  justice  is  still  lagging  behind 
overall.  As  regards 
independence,  no 
systemic deficiencies have been reported (141). 

judicial 

(139) See the 2024 country-specific chapter for Luxembourg of 

the Rule of Law Report, p. 16. 

(140) Ibid., pp. 11-12. 

(141) For more detailed analysis of the performance of the justice 
system in Luxembourg, see the upcoming 2025 EU Justice 
Scoreboard and the 2024 Rule of Law Report. 

57 

 
 
SUSTAINABILITY 
ANNEX 7: CLEAN INDUSTRY AND CLIMATE MITIGATION 

Luxembourg  faces  challenges  regarding  its 
clean  industry  transformation  and  climate 
mitigation.  The  development  of  the  net  zero 
industry suffers from skills shortages and a lack of 
public  support.  Despite  progress 
in  climate 
mitigation  efforts,  the  country  must  intensify  its 
through 
decarbonisation  strategies, 
fostering  clean  mobility.  The  transition  to  a 
sustainable industry demands greater investments 
in  the  circular  economy  and  advanced  waste 
management  practices  to  balance  environmental 
impact  with  economic  growth.  To  address  those 
challenges,  providing  for the  relevant  skills  of  the 
workforce will be key.  

including 

Strategic autonomy and technology 
for the green transition  

Net zero industry 

clean 

The  development  of  the  net  zero  industry 
suffers  from  skills  shortages  and  a  lack  of 
public  support.  The  net  zero  manufacturing 
output  remains  very  limited (142)(143).  Luxembourg 
has  a  small  production  capacity  for  solar  PVs, 
amounting  to  between  25  and  75  MW/y  (a 
negligible  share  of  EU  capacity) (144).  There  are 
also  a  few  small  manufacturers  who  supply 
material 
instance 
for 
batteries (145). 
In  terms  of  policy  framework, 
incentive 
investment  or 
Luxembourg  has  no 
schemes to support the manufacturing of net zero 
technologies. It has submitted to the Parliament a 
draft law (Bill n° 8284) to support the build-up of 
manufacturing  capacity  for  net-zero  technologies, 
focusing  on  the  acceleration  of  administrative 
procedures.  Labour  shortages  and  a 
lack  of 
relevant  skills  for  the  transition  to  a  net-zero 
economy,  specifically  in  research  and  innovation, 
remains an acute issue.  

industry, 

for 

(142) Bruegel, European clean tech tracker, update: 14/7/2024. 

(143) EC, Net zero technologies monitoring dashboard. 

(144) EC, The net-zero manufacturing industry landscape across 

Critical raw materials  

sector 

Luxembourg’s  manufacturing 
is 
heavily dependent on imports of critical raw 
materials.  Luxembourg  is  among  the  member 
states  with  the  third  highest  material  footprint  in 
the  EU,  with  32.05  tonnes  of  raw  material 
consumption  per  capita  in  2023  (against  an  EU 
average  of  14.2) (146).  This  reflects  the  high 
demand  of  material  extraction  of  Luxembourg’s 
economy  which  heavily  impacts  the  environment. 
Reflecting  the  small  size  of  the  country,  its 
material  import  dependency is  the  highest  in  the 
EU  (88.7%  in  2023  against  an  EU-average  of 
22%) (147). In 2023, the main critical raw materials 
imported  from  non-EU  countries  were  PGMs 
(148)(mainly  from  Iran,  Lebanon,  UAE  and  Iraq), 
aluminium  (mainly  from  the  UK  and  Kazakhstan) 
and  copper  (from  Switzerland  and  China)  (149). 
Imports from some countries might be affected by 
geopolitical 
instability.  However,  Luxembourg’s 
sources of supply are relatively well diversified, as 
shown  by  the  import  concentration  index,  whose 
value  for  Luxembourg  is  slightly  below  the  EU 
average (O.19 vs. 0.22) (150). 

import  dependency 

Luxembourg performs well in several sectors 
of  the  circular  economy  that  are  essential 
for  reducing 
in  raw 
materials.  The  recycling  rate  for  e-waste  (151),  a 
key  source  of  critical  raw  materials,  is  above  the 
EU  average,  at  85%  in  2022.  The  reuse  and 
recycling rate for end-of-life vehicles (152) is above 
the EU average (96.9% vs. 89.1% in 2022).  

(146) Eurostat, Material footprints, last updated 31.03.2025. 

(147) Eurostat, Dataset [env_ac_mid], 2024 

(148) Platinum, palladium, rhodium, ruthenium and iridium. 

(149) EC,  Raw  material 
Luxembourg.  

Information  System,  country  profile 

(150) The import concentration measures how much a country 

relies on a limited number of sources for a basket of critical 
raw materials. The scale is 0-1, where 0 would mean no 
dependence. Source: COMEXT. 

the Member States, 14/1/2025. 

(151) Eurostat, Dataset [cei_wm60], 2024. 

(145) Meeting with the Ministry of the Economy, 14/01/2025. 

(152) Eurostat, Dataset [env_waselvt], 2024. 

58 

 
 
 
 
 
 
 
Climate mitigation 

Industry decarbonisation 

from 

In  2022, 

industry (153). 

manufacturing 

Energy  use  dominates  greenhouse  gas 
emissions 
in 
Luxembourg,  but  lately  progress  has  been 
made  in  reducing  them.  About  a  tenth  of 
Luxembourg’s  total  greenhouse  gas  emissions 
come  from 
industrial 
production in Luxembourg emitted 380 g CO2eq of 
greenhouse  gases  per  euro  of  gross  value  added 
(GVA),  slightly  above  the  EU  average  (270  g/€). 
Since  2017, 
of 
Luxembourg’s  industry  declined  by  24%,  much 
more  than  in  the  EU  as  a  whole  (20%).  In 
Luxembourg’s 
greenhouse 
emissions, the shares of energy- and non-energy-
related  emissions  (the  latter  primarily  relate  to 
industrial  processes)  are  at  about  65  to  35;  the 
dominance  of  energy-related  emissions  is  the 
fourth highest in the EU.  

emissions 

industrial 

intensity 

overall 

the 

improving 

The manufacturing sector in Luxembourg has 
been 
in  terms  of  emissions 
intensity,  but  less  than  the  EU  as  a  whole. 
Between  2017  and  2022,  the  energy-related 
emissions 
Luxembourg’s 
manufacturing  industry  declined  by  14%,  slightly 
less  than  in  the  EU  as  a  whole  (16%) (154).  The 
emissions  intensity  of  manufacturing  regarding 
industry processes and product improved by 17%, 
less  than  in  the  EU  overall  (23%).  At  the  same 

intensity 

of 

in 

time,  after  years  of  stability,  the  share  of 
final  energy 
renewables 
electricity  and 
consumption  in  manufacturing  increased  by  8 
percentage  points  in  2022,  reaching  52%.  On  the 
energy efficiency side too, Luxembourg saw major 
improvements,  with  final  energy  consumption  per 
gross  value  added  falling  from  2.4  GWh/€  to  2.0 
GWh/€ between 2017 and 2022.  

Graph A7.1: GHG emission intensity of the 
manufacturing and energy-intensive sectors, 
2022 

Source: Eurostat. 

industry", 

Luxembourg 

Luxembourg  has  put  in  place  policies  to 
support  the  decarbonisation  of 
industry. 
Starting  from  the  roadmap  "Decarbonisation  of 
Luxembourg 
has 
implemented  some  support  measures  to  promote 
decarbonisation  in  the  industrial  sector,  such  as 
the 
the 
Fit4Sustainability  programme,  some  aid  schemes 
packages 
for 
sustainability”.  Further  effort  is  still  needed,  in 
particular  to  replace  fossil  fuels  with  electricity 
and hydrogen.  

businesses, 

companies 

climate 

“SME 

pact 

and 

the 

for 

(153) In  2023.  Manufacturing  includes  all  divisions  of  the  “C” 
section  of  the  NACE  Rev.  2  statistical  classification  of 
economic  activities.  In  the  remainder  of  this  section,  unless 
indicated  otherwise,  data  on  manufacturing  refer  to  the 
divisions  of  the  NACE  section  C  excluding  division  C19 
(manufacture  of  coke  and  refined  petroleum  products),  and 
the  year  2022.  The  source  of  all  data  in  this  section  is 
Eurostat;  data  following  the  UNFCCC  Common  Reporting 
Framework (CRF) are from the European Environment Agency 
(EEA), republished by Eurostat. 

(154) For the GHG emissions intensity of GVA related to energy use 
and  industrial  processes  and  product  use  respectively,  GHG 
emissions  are  from  inventory  data  in  line  with  the  UNFCCC 
Common  Reporting  Format  (CRF),  notably  referring  to  the 
source sectors CRF.1.A.2 –  fuel combustion in manufacturing 
industries and construction and CRF.2  – industrial processes 
and  product  use.  The  CRF.1.A.2  data  broadly  correspond  to 
the NACE C and E sectors, excluding C-19. GVA data (in the 
denominator  for  both  intensities)  are  aligned  with  this 
sectoral  coverage.  Therefore,  they  are  not  fully  consistent 
with the data referred to in other part of this section. 

Reduction  of  emissions  in  the  effort  sharing 
sectors 

To  attain  its  2030  effort  sharing  target, 
Luxembourg  needs  to  swiftly  adopt  and 
implement  the  planned  climate  mitigation 
measures (155).  In  2023,  GHG  emissions  from 
Luxembourg’s  effort  sharing  sectors  are  expected 
to  have  been  31.7%  below  those  of  2005, 
significantly  higher  than  its  target  set  by  the 
Effort-Sharing Regulation (ESR) for 2030, -50%. If 
implemented,  by  2030,  additional  policies 

(155) The national greenhouse gas emission reduction target is set 

out in Regulation (EU) 2023/857 (the Effort Sharing 
Regulation). It applies jointly to buildings (heating and 
cooling); road transport, agriculture; waste; and small 
industry (known as the effort sharing sectors). 

59 

00.511.522.533.54C-C19C17C20C23C24KG CO2eq / €LuxembourgEU-27 
 
  
 
for 

the 

considered in Luxembourg’s final updated National 
Energy  and  Climate  plan  are  projected  to  reduce 
them  by  55.6%  relative  to  2005  levels  (156), 
providing 
of 
Luxembourg’s emission reduction target set by the 
Effort-Sharing  Regulation  by  5.6  percentage 
points.  Given  the  large  impact  of  the  additional 
measures that are not yet implemented, swift and 
steady  adoption  will  be 
the 
implementation of the full set of measures. 

overachievement 

critical 

for 

Swift  action  on  decarbonising  buildings  and 
transport  appears  particularly  pressing  in 
Luxembourg.  Greenhouse  gas  emissions  from 
road  transport  and  buildings  account  together  for 
80%  of  total  national  emissions  in  the  effort 
sharing  sectors  (2023  data).  Between  2005  and 
2023,  greenhouse  gas  emissions  from  buildings 
decreased by 16% in Luxembourg, much less than 
by  the  33%  seen  in  the  EU  overall.  Speeding  up 
climate mitigation in this sector would help protect 
households  and  businesses  in  Luxembourg  from 
the impact of the forthcoming carbon price.  

Luxembourg’s  remarkable  efforts  on  GHG 
emissions reduction in road transport need to 
be  sustained.  The  country  has  achieved  a  43% 
reduction  of  GHG  emissions  in  road  transport  in 
2023 compared to 2005, the best performance in 
the  EU  in  this  sector.  Fleet  electrification,  actions 
to  promote  sustainable  mobility,  in  particular  the 
extension  of  the  tram  line  and  making  public 
transport free of charge since 2020, contributed to 
this.  With  59 %,  road  transport  still  remains  the 
major  source  of  effort  sharing  emissions  in  the 
country.  Luxembourg's  2025  budget  allocates 
substantial  funds  for  clean  mobility  projects (157). 
The 2035 National Mobility Plan proposes a global 
concept capable of managing 40% more journeys 
compared  to  2017,  implementing  the  approaches 
recommended  by  the  Modu  2.0  sustainable 

(156) The effort sharing emissions for 2023 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 final updated NECP. 

(157) Including €780 million for the Rail Fund (a 30% increase) 

and €390 million for bus transport. The budget also includes 
€82 million for transport services for individuals with special 
needs, and €53 million for school transport. Additionally, 
€395 million is designated for the Road Fund, set to reach 
€480 million by 2028. See Kurs op muer. Ee Muer fir 
Jiddereen" – Gilles Roth presents the State budget for 2025 - 
The Luxembourg Government. 

mobility  strategy (158).  Through  these  measures 
and  additional  actions  foreseen  in  the  national 
energy 
Luxembourg 
demonstrates  a  robust  commitment  to  enhancing 
sustainable  mobility  and  reducing  reliance  on 
fossil fuels in the transportation sector. 

climate 

plan, 

and 

prices 

compared 

international  carriers  or 
Fuel  sales  to 
individuals  have  a  significant 
transiting 
impact  on  greenhouse  gas  emissions  from 
road  transport.  Emissions  associated  to  fuel 
sales  made  to  international  carriers  or  private 
individuals  in  transit  or  residing  in  the  border 
regions  represents  2/3  of  total  fuel  sales,  due  to 
lower 
neighbouring 
countries (159),  but  with  a  tendency  to  converge 
more  and  more  with  neighbouring  regions  after 
the  introduction  of  the  CO2  tax.  Luxembourg  still 
needs to decide whether to temporarily opt-out of 
the  Emission  Trading  System  2 
(ETS2)  by 
maintaining  the  national  carbon  tax  system 
beyond  2026.  As  carbon  pricing  will  evolve,  the 
fuel price differential between Luxembourg and its 
neighbouring  nations  is  a  critical  factor  to  reach 
the 2030 climate target. 

to 

Graph A7.2: Greenhouse gas emissions from the 
effort sharing sectors, 2005 and 2023 

Source: European Environment Agency 

(158) Luxembourg Government, PNM 2035 - Plan national de 

mobilité 

(159) National Institute of Statistics and Economics Studies 

(STATEC), 2023, Simulation of the energy transition of the 
Luxembourg economy. 

60 

02468101220052023MtCO2eDomestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
 
       
 
Sustainable industry 

Circular economy transition  

Luxembourg  performs  well  in  the  circular 
economy sector, despite being more affected 
by international market variations. Its circular 
material use rate dropped in recent years, reaching 
10.2%  in  2023  (vs.  an  EU  average  of  11.8%). 
According to a study (160), this rate is higher (up to 
30%)  if  the  import  of  scrap  metal  for  the  steel 
industry  is  taken  into  account.  Luxembourg  is  the 
Member  State  with  the  second  highest  resource 
productivity  in  the  EU,  with  more  than  EUR  5.63 
per kg in 2023 (above an EU average of EUR 2.74). 
Luxembourg  adopted  a  national  circular  economy 
strategy in February 2021, to support the circular 
economy  transition  in  specific  sectors,  including 
industry. 

Luxembourg performs well in recycling rates 
but  generates  significantly  more  waste. 
Luxembourg is among the member states with the 
highest  waste  generation,  with  712  kg  per  capita 
in  2023,  above  the  EU  average  of  511  kg  per 
capita.  The  country  performs  well  in  terms  of 
treatment,  with  56.2%  of 
municipal  waste 
municipal  waste  recycled  in  2023.  The  recycling 
rate  for  packaging  waste  increased  to  40%  in 
2022,  slightly  below  the  EU  average  (41%).  The 
recycling  rate  for  construction  and  demolition 
waste  increased  to  94.4%  in  2022,  above  the  EU 
average (79.8%).  

is 

to 

room 

invest 

further 

in 
There 
Luxembourg’s  circular  economy.  Luxembourg 
is  estimated  (161)  to  need  a  total  additional 
investment  of  at  least  EUR  125  million  annually 
for  the  circular  economy  transition,  including 
waste  management.  Considering  the  country’s 
ambitions  to  further  develop  its  economy  and  its 
high  demographic  growth  (162)  in  the  past  years, 
Luxembourg  would  benefit  from  taking  action  to 
reduce waste generation and further invest in the 
is  still  potential  for 
circular  economy.  There 

(160) CIRCTER - Circular Economy and Territorial Consequences | 

instance  to  expand  the  pay-as-you-throw  system 
for  residual  waste,  to  improve  sorting  at  source 
and increase recycling, or to further shift reusable 
and  recyclable  waste  away  from  incineration, 
including using economic instruments. 

Zero -pollution industry  

Air  quality  in  Luxembourg  is  generally  good 
with  some  exceptions.  Industrial  processes  and 
related  activities 
transport,  energy 
(such  as 
production  and  waste  treatment)  are  one  of  the 
main sources of air pollution, which impacts health 
and  the  environment.  The  health  impacts  of  air 
pollution  have  decreased  in  Luxembourg  from 
2 077  years  of  life  lost  (163)  in  2016  to  833  in 
2022. It is estimated (164) that in Luxembourg each 
year  around  80  deaths  can  be  attributed  to  fine 
particulate  matter  (PM2.5);  30  to  nitrogen  dioxide 
(NO2) and 50 to ground-level ozone (O3). 

intensity 

emissions 

of 
However, 
the 
industrial  air  pollutants 
in  Luxembourg 
causes  more  damage  to  health  and  the 
environment  than on  average  in  the  EU,  with 
EUR  29.6  in  damage  per  thousand  EUR  of  gross 
value  added  (GVA)  (165)  in  2021  –  representing  a 
total  of  EUR  103.9  million,  compared  to  an  EU 
average  of  EUR  27.5  per  thousand  EUR  GVA.  To 
meet 
its  environmental  objectives  concerning 
pollution  prevention  and  control,  Luxembourg 
needs to provide an additional EUR 201 million per 
year (0.26% of GDP) (166). 

from 

industry 

Luxembourg  has  made  progress  in  tackling 
pollution  from  industrial  sources,  although 
some  areas  of  concerns  remain.  Air  emissions 
(167)  have  slightly 
intensities 
decreased  for  both  particulate  matters  (PM)  2.5 
and  10.  However,  while  intensities  are  now  below 
the  average  for  PM2.5  (from  0.05  g  per  Euro  vs. 
0.06 in the EU), they remain above the EU average 
for PM10 (from 0.09 g per Euro vs. 0.08 in the EU) 
in  2022.  Between  2010  and  2022,  pollutant 

(163) Eurostat, Dataset [hlth_cd_iap], 2025. 

(164) European Environment Agency, Harm to human health from 

air pollution in Europe: burden of disease 2024. 

ESPON, see CIRCTER SPINOFF - the case of Luxembourg.pdf 

(165) EEA, Industrial emission intensity indicators, 2021. 

(161) European Commission, DG Environment, Environmental 

(166) European Commission, DG Environment, Environmental 

investment needs & gaps assessment programme, 2025 
update. Expressed in 2022 prices. 

investment needs & gaps assessment programme, 2025 
update. Expressed in 2022 prices. 

(162) Eurostat, Dataset [demo_gind], 2025. 

(167) Eurostat, Dataset [sdg_09_70], 2024. 

61 

 
 
 
releases  into  air  (168)  have  decreased  by  65%  for 
carbon dioxide, 57% for nitrogen oxides, and 64% 
for sulphur oxide. However, they have increased by 
78%  for  cadmium  (Cd),  mercury  (Hg),  and  lead 
(Pb).  Over  the  same  period,  industrial  releases  of 
in 
pollutants  to  water 
Luxembourg  by  87%  for  Cd,  Hg  and  Pb,  77%  for 
nitrogen,  75%  for  total  organic  carbon  and  62% 
for phosphorus. The main industrial contributors to 
emissions  to  air  in  Luxembourg  (170),  as  regards 
dioxins,  are  the  metals  sector,  followed  by  the 
waste  and  energy  sector,  as  well  as  the  metals, 
energy and mineral sectors as regards mercury. 

(169)  have  decreased 

Luxembourg  is  one  of  the  member  states 
with  the  most  significant  drop  in  industrial 
releases of pollutants to water. Between 2010 
and  2022,  industrial  releases  have  decreased  by 
87% for heavy metal (Cd, Hg, Pb and nickel), 77% 
for  total  nitrogen,  75%  for  total  organic  carbon 
and  62%  total  phosphorus.  In  Luxembourg,  the 
ferrous-metals  processing  industry  is  the  main 
source  of  industrial  emissions  to  water  (171)  in 
Luxembourg. 

(168) European Environment Agency, Change of pollutant releases 
into air in EU-27 countries in the period 2010-2022, 2024. 

(169) EEA, Industrial releases of pollutants to water and economic 

activity in the EU-27, 2024. 

(170) European Environment Agency, LRTAP, Air pollutant 
emissions data viewer (Gothenburg Protocol, LRTAP 
Convention) 1990-2022, June 2024. 

(171) Industrial Reporting under the Industrial Emissions Directive 
2010/75/EU and European Pollutant Release and Transfer 
Register Regulation (EC) No 166/2006 - ver. 12.0 Sep. 2024 
(Tabular data). 

62 

 
 
Table A7.1:  Key clean industry and climate mitigation indicators: Luxembourg 

Source:  Net zero industry: European Commission: The net-zero manufacturing industry landscape across Member States: final 
report, 2025. Automotive industry transformation: Eurostat. Critical raw materials: Eurostat. Climate mitigation: See 
footnotes in the "climate mitigation" section; reduction of effort sharing emissions: EEA greenhouse gases data viewer; European 
Commission, Climate Action Progress Report, 2024. Sustainable industry: Years of life lost due to PM2.5: Eurostat and EEA, 
Harm to human health from air pollution in Europe: burden of disease status, 2024. Air pollution damage: EEA, EU large industry 
air pollution damage costs intensity, 2024. Emissions covered: As, benzene, Cd, Cr, Hg, NH3, Ni, NMVOC, NOX, Pb, dioxins, PM10, 
PAH, SOX. Water pollution intensity: EEA, EU large industry water pollution intensity, 2024. Releases into water covered from 
cadmium, lead, mercury, nickel. Other indicators: Eurostat. 

63 

Strategic autonomy and technology for the green transitionNet zero industryOperational manufacturing capacity 2023- Solar PV (c: cell, w: wafer, m: module), MW25-75 (m)- Electrolyzer, MW-- Wind (b: blade, t: turbine, n: nacelle), MW-- battery, MWh-Automotive industry transformation201720182019202020212022202320182021Motorisation rate (passenger cars per 1000 inhabitants), %670676681682682673675539561New zero-emission vehicles, electricity motor, %0.700.931.795.4710.4815.1822.481.038.96Critical raw materials201720182019202020212022202320182021Material import dependency, %91.291.090.489.690.088.724.222.6Climate mitigationTrendIndustry decarbonisation201720182019202020212022202320172022GHG emissions intensity of manufacturing production, kg/€0.50.520.460.440.420.38 0.340.27Share of energy-related emissions in industrial GHG emissions34.835.434.934.735.632.234.644.842.5Energy-related GHG emissions intensity of manufacturing191.7195.8181.0175.3180.2164.0-158.4132.9and construction, kg/€Share of electricity and renewables in final energy consumption44.044.442.444.244.051.652.443.344.2in manufacturing, %Energy intensity of manufacturing, GWh/€2.372.522.162.042.041.961.701.291.09Share of energy-intensive industries in manufacturing production7.37.3GHG emissions intensity of production in sector [...], kg/€- paper and paper products (NACE C-17)----- --0.730.68- chemicals and chemical products (NACE C20)0.120.090.110.050.070.040.04-1.251.26- other non-metallic mineral products (NACE C23)----- --2.532.24- basic metals (NACE C24)----- --2.793.49Reduction of effort sharing emissions20182019202020212022202320182023GHG emission reductions relative to base year, % -20.3-30.2-31.7- domestic road transport-16.7-14.5-36.0-31.8-41.6-43.21.45.2- buildings-1.5-1.8-3.1-1.0-14.6-16.421.432.92005202120222023TargetWEMWAMEffort sharing: GHG emissions, Mt; target, gap, %10.18.17.16.9-50.0-16.85.6Sustainable industryTrendCircular economy transition20182019202020212022202320182021Material footprint, tonnes per person28.327.127.427.631.732.114.715.0Circular material use rate, %10.8      9.1        9.4        8.5        12.3      10.2      11.611.1Resource productivity, €/kg4.3        4.4        4.4        4.6        5.2        5.6        2.12.3Zero pollution industryYears of life lost due to PM2.5, per 100,000 inhabitants280      171      125      135      197      -702571Air pollution damage cost intensity, per thousand € of GVA    29.6          27.5      Water pollution intensity, kg weighted by human factors per bn € GVA    0.2   0.9LuxembourgEU-27LuxembourgEU-27LuxembourgEU-27 
 
 
  
 
ANNEX 8: AFFORDABLE ENERGY TRANSITION 

This  annex  outlines  the  progress  made  and 
the  ongoing  challenges  faced  in  enhancing 
energy  competitiveness  and  affordability, 
while advancing the transition to net zero. It 
examines  the  measures  and  targets  proposed  in 
the  final  updates  to  the  national  energy  and 
climate plans (NECPs) for 2030. 

In  particular, 

Luxembourg has made very good progress in 
its  energy  transition. 
it  has 
substantially increased its installed solar capacity, 
and  its  wind  capacity  has  remained  constant. 
Efforts  have  also  been  made  with  regard  to 
permitting.  However,  additional  measures  would 
be  beneficial  regarding  building  renovation  and 
there  is  untapped  potential  in  energy  efficiency. 
Luxembourg’s heavy reliance on fossil fuels makes 
it 
to  continue 
diversifying  its  energy  sources  and  strengthening 
energy security. 

the  country 

important 

for 

Energy prices and costs 

Graph A8.1: Retail energy price components for 
household and non-household consumers, 2024 

the  electricity  and  gas  prices  for 
industrial 
consumers  (in  comparison  to  the  EU  averages  of 
15,4% and 11,6%), network costs and the share of 
the  energy  and  supply  component  of  electricity 
and  gas  retail  prices  for  industrial  consumers 
the  EU 
remained  substantially  higher 
average.  In  contrast,  retail  prices  for  household 
remained  below  the  EU  average,  despite  a  slight 
increase in household electricity prices.    

than 

of 

EU 

bidding 

average 

European  markets, 

Thanks  to  a  large  share  of  renewables  in 
Luxembourg’s  electricity  mix  (90.4%  %  in 
2024),  wholesale  electricity  prices  in  the 
German-Luxembourgish 
zone 
averaged 78.4 EUR/MWh in 2024 ( (172), below 
the 
84.7 EUR/MWh. 
Nevertheless,  along  with  the  broader  Central 
Western 
Luxembourg 
experienced  price  spikes  in  the  spring/summer 
which occurred amid rising natural gas costs, while 
stronger  increases  in  the  autumn/winter  were 
exacerbated  by  the  Dunkelflaute  in  the  region. 
Luxembourg  experienced  significantly  lower  wind 
power  generation  (-33%  in  Oct.-Dec.  vs  same 
period  in  2023).  This  decrease  in  renewable 
generation created a demand-supply gap that was 
covered  by  ramped  up  bioenergy  generation 
(+200%  in  Oct.-Dec.  vs  same  period  in  2023). 
Through  the  joint  German-Luxembourgish  bidding 
zone,  Luxembourg  was  directly  exposed  to  price 
dynamics  in  Germany,  including  those  driven  by 
increased  use  of  natural  gas  and  coal-fired 
generation units in Germany (+11% and +1.8% in 
Nov  2024  vs  same  period  in  2023),  particularly 
during  peak  demand  hours.  As  a  result,  prices 
spiked,  averaging  176  EUR/MWh  during  evening 
peak  demand  hours  in  November  and  December 
(173), 60% higher than in 2023(174). 

(i) For household consumers, consumption band is DC for 
electricity and D2 for gas. Taxes and levies are shown 
including VAT. 
(ii) For non-household consumers, consumption band is IC for 
electricity and I3 for gas. Taxes and levies are shown 
excluding VAT and recoverable charges, as these are typically 
recovered by businesses. 
Source: Eurostat 

In  2024,  Luxembourg’s  retail  energy  prices 
stayed  below  the  EU  average  for  household 
consumers,  while  non-household  consumer 
prices,  despite  a  year-on-year  decrease 
remained  above  the  EU  average.  While  low 
taxes and levies accounted for 0,9% and 7,1% of 

(172) Fraunhofer (ENTSO-E data) 
(173)  Fraunhofer (ENTSO-E data): Gas prices at peak demand 
hours from 17:00 to 18:00 on average in November and 
December 2024 compared to November and December 
2023 

(174) Yearly electricity data, Ember (consumption and generation 
data throughout the paragraph) 

64 

 
 
 
 
 
 
Graph A8.2: Monthly average day-ahead wholesale 
electricity prices and European benchmark 
natural gas prices (Dutch TTF) 

in any projects of common interest under the 
TEN-E Regulation (175). 

(i) the Title Transfer Facility (TTF) is a virtual trading point for 
natural gas in the Netherlands. It serves as the primary 
benchmark for European natural gas prices. 
(ii) CWE gives average prices in the central-western European 
market (Belgium, France, Germany, Luxembourg, the 
Netherlands and Austria). 
Source: S&P Platts and ENTSO-E 

Flexibility and electricity grids 

Luxembourg is highly interconnected in terms 
of  both  power  and  gas  but  is  also  highly 
dependent  on  its  neighbours  to  meet  its 
energy  needs.  Its  electricity  and  gas  grids  are 
sufficient  for  its  current  needs.  In  anticipation  of 
growing  renewable  energy  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  system  operator,  about  75%  of  the 
total  import  and  transmission  capacity  is  already 
used during peak import. The transmission system 
operator  sees  a  need  to  both  increase  and 
modernise 
import 
electrical 
transmission capacities. 

energy 

the 

in  regional  energy 
Despite  participating 
cooperation  and  having 
comprehensive 
legislation,  Luxembourg  does  not  participate 

Following 
reform  of 
the  constitutional 
January 2023, Luxembourg could continue its 
efforts  to  clarify  the  legal  and  institutional 
framework  pertinent  to  projects  of  common 
interest and projects of mutual interest, and 
permitting in particular. Luxembourg is working 
on  a  legal  framework  for  the  development  of 
grids, 
renewable 
that 
accentuates 
the  TEN-E 
Regulation,  which  also  contains  provisions  on 
streamlining the permitting process. 

including 
relevance  of 

hydrogen, 

the 

Renewable hydrogen (to be produced through 
in  the 
electrolysers)  can  play  a  role 
integration  of  energy  sectors  in  the  long 
term.  This  will  have  an  impact  on  infrastructure, 
the  electrical  grids  connecting 
including  on 
Luxembourg  with 
countries. 
Luxembourg is pursuing its hydrogen ambitions by 
means  of  regional  cooperation  including  via  the 
North  Seas  Energy  Cooperation  (NSEC)  and  the 
Pentalateral Energy Forum (PENTA) (176). 

neighbouring 

Luxembourg’s  regulatory  framework  still 
contains  barriers  to  the  development  of 
flexible  resources,  even  if  the  country  has 
taken  steps  to  support  non-fossil  flexibility. 
Luxembourg does not report on the installed non-
fossil  flexibility  capacity  in  the  updated  national 
energy  and  climate  plan.  Additionally,  demand 
response 
resources  cannot  access  wholesale 
markets nor ancillary services due to legal barriers. 
Luxembourg  has,  however,  committed  to  taking 
steps  to  develop  dynamic  electricity  prices  and  a 
legal  framework  for  aggregators.  Hydrogen  is 
envisaged  as  an  additional  pathway  to  increase 
flexibility 
in  the  electricity  grid  by  offering 
seasonal storage possibilities. 

With  a  99%  smart  meter  roll-out,  the 
infrastructure  for  informed  consumers  is  in 
place  but  has  not  yet  been  translated  into 
consumers 
the 
possibilities  offered  by  the  market.  There  is 
near-zero  switching  among  consumers,  and 

advantage 

taking 

of 

(175) See 2024 Country Report – Luxembourg SWD (2024) 616 

final, 19.6.2024 

(176) https://energy.ec.europa.eu/topics/infrastructure/high-level-

groups/north-seas-energy-cooperation_en 

65 

 
 
 
household  consumers  do  not  have  access  to 
regulations 
dynamic-price  contracts,  although 
require them (ACER CEER 2023). 

In  2023,  electricity  accounted  for  17.8%  of 
Luxembourg’s  final  energy  consumption, 
below  the  EU  average  of  22.9%,  and  this 
share  has  seen  a  slight  increase  in  the  last 
decade  (177).  When  it  comes  to  households, 
electricity  accounts  for  17.3%  of  final  energy 
consumption, while in industry it represents 51.2% 
(see  also  Annex  7).  For  the  transport  sector,  this 
share  remains  negligible  at  1.3%.  Accelerating 
electrification  across  sectors  would  support  cost-
effective  decarbonisation  and  make  affordable 
renewable energy more accessible to consumers. 

Renewables and long-term contracts 

Graph A8.3: Luxembourg's installed renewable 
capacity (left) and electricity generation mix 
(right) 

“Other” includes renewable municipal waste, solid biofuels, 
liquid biofuels, and biogas. 
Source: IRENA, Ember 

2024 saw an impressive increase of installed 
solar  capacity,  which  rose  to  540 MW 
compared to 420 MW in 2023. Installed wind 
capacity remained constant at 210 MW. Total 
renewable  electricity  generation,  including  from 
sources  other  than  wind  and  solar,  increased  by 
16%  to  a  total  of  1.18  TWh.  In  2024,  renewable 
energy  sources  (RES)  accounted  for  90%  (178)  of 
the  electricity  mix  (vs  EU  overall  RES  share  of 
47%). 

(177) CAGR (compound annual growth rate) of 2.3% between 
2013 and 2023 and minimum/maximum share of 14.2% and 
17.8%, respectively. 
(178) Yearly electricity data, Ember. 

66 

Efforts  are  being  made  to  improve  permit-
granting  procedures  for  renewables  projects 
below  a  certain  threshold.  Shorter  procedures 
have  been  adopted, 
including  procedures  for 
small-scale  installations  in  residential  buildings. 
However, 
coordination 
between public authorities is limited. Furthermore, 
there 
is  currently  no  competent  authority 
responsible  or  mandated  to  mediate  between 
project  developers  and  other  relevant  authorities 
thereby  ensuring  uniform 
interpretations  of 
permit-granting rules. 

communication 

and 

Luxembourg is  currently  working  to  increase 
wind  capacity  by  facilitating  permitting 
procedures,  establishing  a  catalogue  of 
procedures  and  creating  a  wind  register. 
These measures have yet to be implemented. 

renewable  energy 

Luxembourg  has  a  sliding  premium  with  an 
upper ceiling support mechanism in place for 
several 
technologies. 
Furthermore,  the  Solidaritéits  Pak  2.0  (tripartite 
agreements  in  response  to  the  energy  crisis), 
signed in September 2022, encourages companies 
to  source  energy  directly  from  renewable  energy 
suppliers through power purchase agreements. 

Energy efficiency 

but 

significant 

(PEC)  decreased  by  3.5% 

Energy  efficiency  gains  have  accelerated  in 
Luxembourg, 
untapped 
potential  remains.  In  2023,  primary  energy 
to 
consumption 
3.65 Mtoe.  Final  energy 
(FEC) 
decreased by 4.3% to 3.5 Mtoe compared to 2022. 
FEC decreased in all main sectors: in transport by 
4.3%,  in  industrial  by  10.4%  and  in  services  by 
1.7%.  Under  Annex 
I  to  the  recast  Energy 
Efficiency  Directive  (Directive  (EU)  2023/1791), 
Luxembourg should be able to reach a PEC of 2.84 
Mtoe and a FEC of 2.80 Mtoe by 2030. 

consumption 

identifying 

Luxembourg has not notified the Commission 
of  its  comprehensive  heating  and  cooling 
assessment 
the 
application  of  high-efficiency  cogeneration  and 
efficient  district  heating  and  cooling  in  line  with 
Article 25(1)  of  the  Energy  Efficiency  Directive. 
There is no timeline for this notification. 

potential 

for 

 
 
 
 
Luxembourg’s  efforts 
in  the  residential 
sector  to  achieve  a  meaningful  contribution 
to  its  2030  reduction  target  for  energy 
consumption  by  buildings  are  on  the  right 
track (residential final energy consumption fell by 
around 9% in 2022 compared to 2018). However, 
additional  efforts  would  be  beneficial 
in 
implementing  the  national  long-term  renovation 
strategy, i.e. achieve a reduction of 34% by 2030. 
For 2022-2023, the reduction is between 11% and 
15%. 

In  2022,  heating  and  cooling  represented 
88% of the country’s residential final energy 
consumption. Approximately 140 000 households 
are using gas to heat their homes, while the heat 
pump market remains limited. Building regulations 
have made it practically impossible to install a gas 
or oil boiler in a new building since 2023. 

Fossil fuel subsidies 

In  2023,  environmentally  harmful(180)  fossil 
fuel  subsidies  without  a  planned  phase-out 
before  2030  represented  0.12%(181)  of 
Luxembourg’s  GDP(182),  below 
the  EU 
weighted  average  of  0.49%.  Tax  measures 
accounted  for  97%  of  this  volume,  while  the 
income/price  support 
remaining  share  were 
measures.  Additionally, 
Luxembourg’s  2023 
Effective  Carbon  Rate(183)    averaged  EUR  112.92 
per tonne of CO₂, above the EU weighted mean of 
EUR 84.80 (184). 

Luxembourg  deploys  a  supportive  national 
financing 
framework  mobilising  energy 
efficiency  investments  composed  mainly  of 
financial 
rebates 
grants, 
instruments.  Luxembourg  also  implements  the 
energy efficiency obligation scheme. 

and 

tax 

Security of supply and diversification 

national 

introduced 

Luxembourg 
load 
shedding  to  improve  security  of  supply  and 
significantly 
in 
situations threatening the integrity of the networks 
or the physical safety of individuals. 

reduce  energy 

consumption 

in 

progress 

Despite 
renewables, 
Luxembourg’s  overall  energy  mix  in  2023 
remained  heavily  reliant  on  fossil  fuels,  with 
oil  accounting  for  61.1%  and  natural  gas  for 
13.4%  of  gross 
inland  consumption,  while 
renewables (together with biofuels)  accounted  for 
11.9%(179). 
the 
reliance 
importance  of  Luxembourg’s  ongoing  efforts  to 
diversify its energy sources and strengthen energy 
security. 

underscores 

This 

(179) Gross inland consumption 2023 (Eurostat). 

67 

(180) Direct fossil fuel subsidies that incentivise maintaining or 
increasing in the availability of fossil fuels and/or use of 
fossil fuels. 

(181) Numerator is based on volumes cross-checked with the 

Luxembourgish authorities. For all Member States, it includes 
public R&D expenditures for fossil fuels as reported by the 
IEA (Energy Technology RD&D Budgets) and excludes, for 
methodological consistency, excise tax exemption on 
kerosene consumed in intra-EU27 air traffic. 

(182) 2023 Gross Domestic Product at market prices, Eurostat. 

(183) The Effective Carbon Rate is the sum of carbon taxes, ETS 
permit prices and fuel excise taxes, representing the 
aggregate effective carbon rate paid on emissions. 

(184) OECD (2024), Pricing Greenhouse Gas Emissions 2024 

 
 
 
Table A8.1:  Key Energy Indicators 

Source: Eurostat, ENTSO-E, S&P Platts 

68 

20212022202320242021202220232024Household consumer - Electricity retail price (EUR/KWh)0.1988          0.2029             0.2013             0.2027          0.2314             0.2649          0.2877          0.2879          Energy & supply [%]34.3%44.4%85.1%94.0%36.6%54.3%55.6%47.8%Network costs39.5%38.6%61.1%55.1%26.7%25.3%24.8%27.2%Taxes and levies including VAT26.2%17.0%-46.2%-49.1%36.7%20.3%19.6%25.0%VAT7.4%7.4%6.6%7.4%14.5%13.4%13.8%14.6%Household consumer - Gas retail price0.0526          0.0872             0.0866             0.0824          0.0684             0.0948          0.1121          0.1128          Energy & supply54.9%97.5%128.5%83.1%43.7%61.0%64.5%53.9%Network costs27.9%17.7%20.8%27.1%22.5%17.3%17.1%18.3%Taxes and levies including VAT17.1%-15.1%-49.3%-10.2%33.8%21.7%18.4%27.8%VAT7.6%7.5%6.6%7.4%15.5%11.6%10.2%13.6%Non-household consumer - Electricity retail price0.0969          0.1407             0.2418             0.2049          0.1242             0.1895          0.1971          0.1661          Energy & supply51.2%67.8%67.3%67.4%43.0%66.5%63.0%55.8%Network costs29.5%20.0%25.6%24.3%15.8%10.7%11.9%15.5%Taxes and levies excluding VAT12.7%5.1%0.6%0.9%30.4%9.9%11.2%15.4%Non-household consumer - Gas retail price0.0393          0.0918             0.1066             0.0716          0.0328             0.0722          0.0672          0.0517          Energy & supply64.6%80.4%80.5%71.9%66.2%77.3%77.3%68.7%Network costs18.6%8.6%9.9%14.1%7.7%3.8%5.3%7.1%Taxes and levies excluding VAT10.2%3.9%3.3%7.1%12.5%6.1%7.3%11.6%Wholesale electrity price (EUR/MWh)96.6234.595.578.6111.0233.299.184.7Dutch TTF (EUR/MWh)n/an/an/an/a46.9123.140.534.420172018201920202021202220232024Gross Electricity Production (GWh) (2)2,235            2,200                1,908                2,234            2,211               2,258            2,532            -Combustible Fuels470            490                547                628            632                546            507            -Nuclear-             -                 -                 -             -                -             -             -Hydro1,422         1,337             949                1,094         1,085            1,124         1,236         -Wind235            255                281                351            314                312            495            -Solar108            119                130                161            180                276            294            -Geothermal-             -                 -                 -             -                -             -             -Other Sources-             -                 -                 -             -                -             -             Gross Electricity Production [%]Combustible Fuels21.0%22.3%28.7%28.1%28.6%24.2%20.0%-Nuclear0.0%0.0%0.0%0.0%0.0%0.0%0.0%-Hydro63.6%60.8%49.7%49.0%49.1%49.8%48.8%-Wind10.5%11.6%14.7%15.7%14.2%13.8%19.6%-Solar4.9%5.4%6.8%7.2%8.1%12.2%11.6%-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)6,1786,1615,8795,4655,7215,5075,202-As a % of electricity available for final consumption 96.6%95.4%91.9%89.3%89.5%89.5%86.1%-Electricity Interconnection [%]-58.4%58.2%55.2%168.4%163.5%166.3%163.8%Share of renewable energy consumption - by sector [%]Electricity8.1%9.1%10.9%13.9%14.2%16.2%18.0%-Heating and cooling7.5%8.4%8.7%12.6%12.9%15.0%15.5%-Transport6.5%6.6%7.7%12.6%8.0%8.7%9.2%-Overall6.2%8.9%7.0%11.7%11.7%14.3%14.4%-20202021202220232020202120222023Import Dependency [%] 92.3%92.5%91.5%90.6%57.5%55.5%62.5%58.3%of Solid fossil fuels 112.3%97.4%101.5%99.6%35.8%37.2%45.9%40.8%of Oil and petroleum products 99.9%99.9%99.7%99.5%96.8%91.7%97.8%94.5%of Natural Gas 100.0%100.0%100.0%100.0%83.6%83.6%97.6%90.0%Dependency from Russian Fossil Fuels [%]of Natural Gas 23.3%18.7%0.0%0.3%41.0%40.9%20.7%9.3%of Crude Oil0.0%0.0%0.0%0.0%25.7%25.2%18.4%3.0%of Hard Coal7.1%7.0%4.4%0.7%49.1%47.4%21.5%1.0%2017201820192020202120222023Gas Consumption (in bcm)0.8                 0.8                    0.8                    0.7                 0.8                    0.6                 0.6                 Gas Consumption year-on-year change [%]-2.3%-0.8%-0.2%-9.4%7.3%-22.1%-6.3%Gas Imports - by type (in bcm)0.8                 0.8                    0.8                    0.7                 0.8                    0.6                 0.6                 Gas imports - pipeline0.8                 0.8                    0.8                    0.7                 0.8                    0.6                 0.6                 Gas imports - LNG0.00.00.00.00.00.00.0Gas Imports - by main source supplier [%] (1)Netherlands11.5%9.9%6.4%14.8%10.9%0.0%53.5%Norway22.0%17.8%11.2%21.5%42.8%35.4%27.5%United Kingdom29.9%11.5%18.5%12.9%5.8%25.1%8.5%Russia18.2%25.6%11.7%23.3%18.7%0.0%0.3%LuxembourgEU 
 
  
 
ANNEX 9: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT 

Luxembourg  faces  increasing  environmental 
challenges caused by climate change and the 
intensification  of  human  activities.  Climate 
risks  are  increasing  in  Luxembourg,  with  serious 
consequences  on  its  population,  environment  and 
economy.  Luxembourg  and 
its  economy  are 
dependent  on  natural  resources,  especially  on 
water  and  ecosystem  services.  More  action  and 
investments  are  needed  to  tackle  pollution  and 
nature  degradation.  Luxembourg’s  water  bodies 
are  among  the  most  affected  by  pollution  in  the 
EU,  in  particular  nitrates  and  pesticide  pollution. 
in  water 
is  declining,  particularly 
Biodiversity 
ecosystems,  and  forests  and  grasslands  habitats. 
This  has  negative  impacts  on  the  species  and 
economic  activities 
these 
ecosystems. Luxembourg has taken some steps to 
implement  sustainable  agricultural  practices,  but 
more  efforts  are  needed  to  reduce  the  agri-food 
sector’s environmental footprint. 

that  depend  on 

Climate adaptation and preparedness 

is 

2021, 

disrupting 

communities 

Luxembourg 
increasingly  affected  by 
floods,  heatwaves  and  droughts,  reflecting 
the broader effects of climate change. Recent 
years have seen significant flooding in 2016, 2018 
and 
and 
infrastructure. Heatwaves have also become more 
frequent,  posing  health  risks  and  straining  water 
resources.  Heat-related  mortality  reached  53 
deaths  per  100 000  inhabitants  between  2013 
and 2022, a 60% increase on the previous period. 
Droughts  have  multiplied,  with  2022  being 
particularly  severe:  with  71%  of  the  country 
affected.  While  this  was  the  highest  share  in  the 
EU  that  year,  Luxembourg’s  size  should  be  noted 
2024  was  one  of  the  10  hottest  years  ever 
recorded in Luxembourg. It was also a record year 
in  terms  of  rainfall  since measurements  began in 
1854 in the Grand Duchy, with a 42.6% increase in 
rainfall (185).  The  2021  floods  caused  EUR 184 
million  in  damages,  disrupting  infrastructure  and 
essential  services.  Heatwaves  have  become  more 
frequent,  with  temperatures  having  risen  by 
approximately 1.5 °C since the early 20th century, 

which impacts public  health  and increases  energy 
demand for cooling. 

in  recent  years  and 
Drought  conditions 
excess  precipitations 
in  2024  affected 
agriculture and forestry, leading to concerns 
about crop yields and forest health. For some 
crops,  yield  reductions  were  almost  30% 
in 
2024 (186).  In  recent  years,  droughts,  heatwaves 
and  the  spread  of  bark  beetle,  exacerbated  by 
climate change, have damaged or destroyed about 
two  thirds  of  Luxembourg’s  forests,  according  to 
the 2023 phytosanitary inventory. 

Luxembourg  has  taken  some  measures  to 
adapt  to  climate  change  and  boost  its 
preparedness, but further action is needed to 
update  its  strategy.  The  national  adaptation 
strategy,  which  covered  2018-2023  and 
is 
currently  under  revision,  focused  on  mitigating 
climate  risks  across  various  sectors,  including 
agriculture,  water  management  and  public  health. 
Key  initiatives  included  improving  infrastructure 
resilience,  promoting  sustainable  land  use  and 
enhancing  emergency  response  systems.  The 
government  works  with  local  municipalities  and 
stakeholders 
in 
adaptation  planning.  Additionally,  Luxembourg  is 
updating  its  climate  action  plans  in  line  with  its 
climate law, aiming to integrate binding adaptation 
measures  and  promote  a  proactive  approach  to 
climate  resilience  and  sustainability.  In  particular, 
Luxembourg  should  tackle  the  impact  of  extreme 
events on infrastructure, agriculture and forests. 

the  community 

involve 

to 

Luxembourg  has  a  robust  institutional  setup 
for  climate  adaptation,  involving  a  range  of 
stakeholders at national and local levels. The 
Ministry  of 
the  Environment,  Climate  and 
Biodiversity leads the national adaptation strategy, 
which  focuses  on  integrating  climate  risks  into 
policymaking.  Local  municipalities  play  a  crucial 
role 
implementing  adaptation  measures, 
supported  by the  climate pact  2.0  and the  nature 
pact. Luxembourg’s climate law mandates regular 
updates  to  adaptation  plans,  ensuring  a  proactive 
approach  to  climate  resilience  and  sustainability. 
The  aim  of  this  comprehensive  framework  is  to 
effectively tackle the challenges posed by climate 
change. 

in 

(185) Le gouvernement luxembourgeois, 2025, Bilan AgriMeteo: 
les cultures agricoles au Luxembourg impactées par le 
record de pluie (+42,6%) en 2024. 

(186) Le gouvernement luxembourgeois, 2024, Une récolte 

céréalière 2024 qui n’est pas à la hauteur des attentes. 

69 

 
 
 
 
 
 
Water resilience 

is 

economy 

is  being  abstracted 

Luxembourg’s 
increasingly 
dependent  on  its  freshwater  resources.  The 
Water  Exploitation  Index  Plus  (WEI+),  increased 
from  0.36%  in  2016  to  0.67%  in  2022,  showing 
that  a  greater  share  of the  renewable  freshwater 
in 
resources  available 
Luxembourg.  The  main  demand  for  water  is  for 
the public water supply, accounting for 90% of net 
water consumption in 2022 (e.g. 8.7 million m³ of 
a  total  9.7  million  m³)  (187).  Agriculture  and 
manufacturing  only  accounted  for  5%  and  4%  of 
water  consumption  in  2022.  However,  net  water 
consumption increased significantly between 2010 
and  2022:  by  133%  for  agriculture  and  by  52% 
for manufacturing. 

Luxembourg  is  the  Member  State  that  faces 
the most significant water quality challenges 
for  both  surface  and  groundwater  bodies. 
According to its third river basin management plan 
(RBMP)  (188),  none  of  the  surface  water  bodies  in 
Luxembourg  are  classified  as  having  good 
ecological  status/potential,  far  below  the  EU 
average 
(37.3%).  Their  chemical  status  has 
worsened  since the  second  RBMP,  and  no  surface 
water  bodies  are  classified  as  having  a  good 
chemical  status  either  (189).  This  is  mostly  due  to 
diffuse  and  point-source  pollution,  producing  high 
the 
volumes 
eutrophication  of  all  water  bodies in Luxembourg. 
Eight water bodies are considered heavily modified 
water  bodies  due  to  dams,  shipping,  construction 
and urban development. Urban developments and 
constructions  are  the  more  frequent  cause  of 
modifications rather than hydropower. For 14% of 
surface  water  bodies,  there  is  not  enough  flow  in 
the  river  to  promote  healthy  water  life  or  options 

nutrients 

causing 

and 

of 

(187) Based on data provided by the European Environment 

Agency (EEA) between 2010 and 2022. 

(188) European Commission, Staff working document 

accompanying the report from the commission to the council 
and the European parliament on the implementation of the 
Water Framework Directive and the Floods Directive - 
Member State: Luxembourg, February 2025. 

(189) Failure to achieve good chemical status is mainly due to a 

small number of persistent, bioaccumulative and toxic (PBT) 
substances (polybrominated diphenyl ethers, mercury, 
polyaromatic hydrocarbons, perfluorooctane sulfonic acid 
and its derivatives and heptachlor and heptachlor epoxide) 
and non-PBT substances ((arsenic, but also cadmium, lead 
and nickel, along with the hydrocarbon fluoranthene). 

for human use of the water downstream. While all 
groundwater  bodies  remain  in  good  quantitative 
status, there are risks that the quantitative status 
will  deteriorate  by  2027.  Moreover,  50%  of 
groundwater  bodies  are  in  poor  chemical  status 
due to the presence of nitrates and pesticides. 

in 

Directive 

(UWWTD). 

load 
of 

Luxembourg is one of the best performers in 
the  EU  regarding  wastewater  treatment.  In 
(190)  of  agglomerations  and 
2020,  100% 
generated 
the 
Luxembourg  met 
the  Urban  Waste-Water 
requirements 
However, 
Treatment 
wastewater  point-source  discharges  are  reported 
for  surface  and  groundwaters.  In  2022,  it  was 
estimated  that  discharges  of  urban  waste-water 
significantly impaired the water quality of 76.92% 
of river water bodies, 50% of lakes and 31.5% of 
groundwaters  in  Luxembourg  (191).  Moreover,  the 
revised  UWWTD  (to  be  transposed  by  31 July 
2027)  introduced  stricter  requirements  (192),  so 
efforts  will  be  needed  to  ensure  compliance  with 
the new standards. 

Additional  investment  is  required  to  meet 
Luxembourg’s  financial  needs  in  the  water 
sector.  It  is  estimated  that  a  total  of  EUR 339 
million  per  year  are  dedicated  in  Luxembourg  to 
(EUR 234 
support  wastewater  management 
million),  drinking  water  (EUR 105  million),  and 
water management and protection (EUR 1 million), 
mainly  from  national  sources  (99.4%).  However, 
the investment needs reveal a substantial gap for 
water 
protection  and  water  management 
(EUR 125  million  per  year  by  2027).  Of  this, 
EUR 13  million  per  year  is  needed  to  meet 
financing  for  wastewater  management,  EUR 18 
million  per  year  for  drinking  water  and  around 
EUR 94  million  per  year  for  other  aspects  of  the 
(WFD).  Water 
Water 
management  and  protection 
is  therefore  the 
environmental  sector  with  the  biggest  investment 
gap 
Luxembourg’s 
challenges  related  to  water  quality  or  flood 
protection, and the dependency of its economy on 
ecosystems,  the  country  would  benefit  from 
investing  more  in  other  aspects  of  the  WFD. 
investment  will  also  be 
Sufficient 

Framework  Directive 

Luxembourg.  Given 

levels  of 

in 

(190) European Commission, Implementation Reports - European 

Commission. 

(191) WISE-Freshwater, Luxembourg | WISE Freshwater. 

(192) Directive 2024/3019, of 27 November 2024. The deadline 

for transposition is 31 July 2027. 

70 

 
 
 
important to meet the requirements of the revised 
increasing 
UWWTD  and  meet  the  potentially 
demand 
for  water  supply  and  wastewater 
treatment  infrastructure  related  to  the  growing 
number of inhabitants and new companies setting 
up  in  Luxembourg.  Luxembourg  has  the  lowest 
level  of  environmental  taxation  per  GDP  among 
member  states  (193),  especially  for  taxation  on 
pollution.  There  is  potential  to  better  apply  the 
“polluter  pays”  principle  and  use  economic 
incentives  to  ensure  sufficient  funding  for  water 
protection and management. 

Biodiversity and ecosystems 

(199),  partly  due 

forest  habitats  (198)  have  a  bad  conservation 
status. Overall, Luxembourg’s forest conditions are 
more degraded than the EU average with a forest 
health  indicator  of  0.56  in  2018  (v  0.62  in  EU 
average). Only 14.5% of Luxembourg’s trees were 
in good health, while 12.3% were dying or dead in 
2023 
to  pollution  and 
eutrophication, and the situation is worsening. This 
has 
for  Luxembourg’s 
environmental  and  climate  resilience,  as  the  loss 
of  biodiversity  impairs  ecosystems’  ability  to 
provide  services  that  help  mitigate  the  effects  of 
climate  change  (such  as  regulating  water  cycles, 
maintaining  soil  health  and  sequestering  carbon) 
and climate-related events such as floods, fires or 
droughts. 

implications 

serious 

Luxembourg’s  biodiversity  and  nature  are 
declining, and urgent measures are needed to 
protect  and  restore  habitats  and  species. 
According to the latest available data  (194), 32.1% 
of  Luxembourg’s  habitats  are  in  good  status 
(above  the  EU  average).  However,  50%  of  the 
country’s habitats have a bad conservation status, 
a  higher  share  than  during  the  last  reporting 
period (195) and above the EU average of 35.82%. 
Similarly,  the  conservation  status  of  species  is 
concerning,  with  only  15%  reported  as  having  a 
good status, far below the EU average (30%), and 
more  than  45%  in  bad  conservation  status,  far 
above  the  EU  average  (21%).  Since  the  last 
reporting  period  (196),  the  status  of  species  has 
declined 
particularly 
concerning as Luxembourg has decreased its share 
of protected areas from 55.8% (in 2021) to 37.8% 
in  2022.  The  common  farmland  bird  index  has 
been  on  a  negative  trend  for  years  (falling  from 
115  in  2011  to  80  in  2019),  despite  a  slight 
increase since 2018 (197), illustrating the decline in 
the  bird  population  highly  dependent  on  the  good 
ecological status of cultivated areas. Over 50% of 

significantly. 

This 

is 

(193) Eurostat, Environmental taxes revenues [env_ac_tax], 

January 2025. 

(194) EEA, Conservation status of habitats under the EU Habitats 

Directive, November 2021. 

of 

degree 

dependency 

Nature  degradation  creates  significant  risks 
to  the  competitiveness  of  Luxembourg’s 
economy  as  several  sectors  are  directly 
dependent  on  ecosystem  services.  Overall, 
Luxembourg’s 
on 
ecosystem  services  is  close  to  the  EU  average  at 
44%  of  gross  value  added,  a  high  degree  of 
dependency.  Several  sectors  such  as  agriculture, 
forestry, fisheries, construction, water utilities and 
health  services  (see  Graph  A9.1)  are  particularly 
dependent  on  ecosystem  services.  100%  of  the 
gross  value  added  generated  by  these  sectors  is 
directly  dependent  on  ecosystem  services.  This 
means  that  failure  to  maintain  the  capacity  of 
to  deliver  services  could  entail 
ecosystems 
significant  costs  or  even  stop  production  in  these 
sectors.  Protecting  and  restoring  key  ecosystems 
would 
long-term 
maintain 
competitiveness of these sectors, among others. 

help 

the 

Targeted  action  is  needed  in  Luxembourg  to 
improve  nature  conservation  and  ecosystem 
restoration. In 2022, 27.1% of Luxembourg was 
in the Natura 2000 network, above the EU average 
(18.6%). Therefore, the country is on track to meet 
its  commitment  to  reach  30%  of  Natura  2000 
its  national 
sites  by  2030,  as  outlined 
biodiversity strategy for 2030 (200). However, there 
is  scope  for  Luxembourg  to  boost  action  on 

in 

(198) Assessments done for the forest habitats listed under 

(195) Assessments on conservation status for habitats for the 

Article 17 of the Habitats Directive. 

2007-2012 reporting period. 

(196) Assessments on conservation status for species for the 

2007-2012 reporting period. 

(199) Administration de la Nature et des forêts, ministère de 

l’Environnement du Luxembourg, Résultats de l’inventaire 
photosanytaire des forêts du Luxembourg, 2023. 

(197) Eurostat, Common farmland bird index [env_bio2], February 

(200) National Biodiversity Strategy for 2030, adopted in January 

2025. 

2023. 

71 

 
 
 
Graph A9.1: Direct dependency(1) on ecosystem 
services(2) of the gross value added generated by 
economic sector in 2022 

climate adaptation and tackle nature degradation: 
by  improving  the  protection  of  existing  protected 
zones  and  implementing  measures  to  restore 
degraded  ecosystems.  One  area  of  action  is  to 
tackle  the  loss  of  ecosystems  that  naturally  help 
mitigate climate risks. For instance, between 2006 
and 2012, the extent of soil areas providing flood 
control  ecosystem 
in  Luxembourg 
decreased  by  50%  due  to  soil  sealing  (201),  far 
above  the  EU  average  (29%).  Another  area  of 
action  for  Luxembourg  is  to  restore  164  km2  of 
habitats listed in Annex I to the Habitats Directive, 
corresponding to up to 6.3% of its territory (202). 

services 

Sustainable agriculture and land use 

large 

increase 

Luxembourg’s  carbon  removals  are  in  line 
with the level of ambition needed to meet its 
2030  target  for  land  use,  land-use  change 
and forestry (LULUCF). Luxembourg has seen a 
comparatively 
in  net  LULUCF 
removals  since  2018.  To  meet  its  2030  LULUCF 
target,  additional  carbon  removals  of  -0.027 
megatonnes  of  CO2  equivalent 
(CO2eq)  are 
needed (203).  The  latest  available projections  show 
a  surplus  over  the  target  of  -0.040  kilotonnes  of 
CO2eq for 2030 (204). Therefore, Luxembourg is on 
track to meet its 2030 target. 

(1) Dependency based on the sector’s own operations, 
excluding value chain operations within countries and across 
international value chains. A high dependency indicates a high 
potential exposure to nature-related shocks or deteriorating 
trends, which means that the disruption of an ecosystem  
service could cause production failure and severe financial 
loss. 
(2) Ecosystem services are the contributions of ecosystems to 
the benefits that are used in economic and other human 
activity, including provisioning services (e.g. biomass 
provisioning or water supply), regulating and maintenance 
services (e.g. soil quality regulation or pollination), and cultural 
services (e.g. recreational activities). 
Source: Hirschbuehl et al., 2025, The EU economy's 
dependency on nature, Link. 

impacts  on 
Agriculture  has  significant 
Luxembourg’s  environment.  Much  of 
the 
country  is  used  for  agriculture  (205).  Luxembourg’s 
soils  are  heavily  impacted  by  excess  nitrogen 
levels  and  erosion  and  overall,  41%  of 
Luxembourg’s  soils  are  considered  unhealthy.  In 
particular, 31% of soils and 86% of all agricultural 
land is unhealthy due to nitrogen excess (206). 12% 
of  the  country  is  subject  to  unsustainable  soil 
erosion  by  water,  wind,  tillage  and  harvest, 

(201) European Commission, EEA, Accounting for ecosystems and 

their services in the European Union, 2021. 

(202) European Commission, Impact assessment accompanying 
the proposal for a Regulation on nature restoration, 2023. 

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

Regulation (EU) 2023/839. 

(204) Climate Action Progress Report 2024, COM/2024/498. 

(205) The utilised agricultural area in Luxembourg was 132 980 
hectares in 2023. Eurostat, Utilised agricultural area by 
categories [tag00025], March 2025. These figures partially 
include land used by Luxembourg’s farmers in neighbouring 
countries. 

(206) European Commission (2023), Impact assessment 

accompanying the proposal for the Soil monitoring Law. 

72 

0%20%40%60%80%100%AgricultureForestryFishery and acquacultureMining and metalsConstructionWater utilitiesHealthcare deliveryAviation travel and tourismFood beverages and tobaccoSupply chain and transportPublic services and othersElectricityChemical and materials industryElectronicsOil and gasReal estateHeat utilitiesAutomotiveRetail consumer goods and…Information technologyBanking and capital marketsInsurance and asset…Digital communicationsHighMediumLow 
 
     
 
pesticides  on  their  farms  will  receive  financial 
support. The plan also encourages dairy and cattle 
farmers  to  limit  and  reduce  the  cattle  population. 
However,  currently,  organic  farming  makes  up 
6.2% of Luxembourg’s agricultural land, below the 
2022 EU average of 10.52%. In 2022, only 4% of 
agricultural  land  had  landscape  features  such  as 
woods  and  non-productive  grasslands,  below  the 
EU average of 5.6%. 

in 

recorded 

Luxembourg 

affecting  87%  of  cropland  areas.  The  analysis  of 
the 3rd RBMP for Luxembourg identified nutrients 
from  agriculture  as  a  significant  source  of 
pressure  on  groundwater  and  surface  water, 
affecting  the  water  status.  Excess  nutrients  are 
one  of  the  main  factors  for  failure  to  meet  the 
WFD  objectives.  According  to  data  from  the 
Nitrates Directive, 20% of groundwater monitoring 
stations 
nitrate 
concentrations  above  50  mg/l  between  2016  and 
2019, exceeding the healthy threshold for human 
consumption (207).  The livestock density index  was 
1.24  in  2020,  far  above  the  EU  average  of 
0.75 (208).  The  share  of  ammonia  emissions  from 
agriculture has reached  93.2% of all emissions in 
2022,  above  the  EU  average  (89.8%).  However, 
after  an  increasing  trend  until  2018,  the  overall 
ammonia  emission  in  Luxembourg  has  decreased 
by  6.59%  in  2022  compared  to  1990  levels. 
Luxembourg  only monitored  the  level  of  pesticide 
pollution  in  two  monitoring  stations  (and  only  for 
rivers) (209). In 2021, 50% of surface water bodies 
reported  pesticide  levels  that  exceed  the  set 
thresholds. 

Luxembourg  should  take  further  action  to 
reduce  the  environmental  footprint  of  the 
agri-food  sector.  The  bioeconomy  includes  all 
sectors  and  systems  that  rely  on  biological 
resources  (animals,  plants,  micro-organisms  and 
derived  biomass,  including  organic  waste),  their 
functions  and  principles,  which  encompasses  the 
production  and  processing  of  agriculture  products 
and  food.  In  2021,  it  contributed  to  EUR 489 
million of added value of the Luxembourg’s gross 
domestic  product  in  2021.  Agriculture  generated 
around  EUR 138  million,  on  an  upward  trend,  the 
beverage  industry  EUR 40  million,  and  the  food 
industry  contributed  around  EUR 227  million. 
plan 
Luxembourg’s 
implementing the common agricultural policy aims 
to  bring  environmental  benefits  and  to  protect 
natural  resources.  It  allocates  EUR 86.5  million  to 
environmental  and  climate  objectives.  It  aims  to 
extend  organic  farming  practices,  reduce  the  use 
of  pesticides,  greenhouse  gas  and  ammonia 
emissions,  and promote  carbon  sequestration.  For 
example,  farmers  who  abandon  the  use  of 

strategic 

national 

(207) EEA,  Nitrate in groundwater in Europe | European 

Environment Agency's home page, December 2024. 

(208) Eurostat, Livestock density index [tai09], February 2025. 

(209) EEA, Pesticides in rivers, lakes and groundwater in Europe, 

December 2024. 

73 

 
 
Table A9.1:  Key indicators tracking progress on climate adaptation, resilience and environment 

(1) The data show the average for the timespan 2006-2023 based on EFFIS - European Forest Fire Information System. 
(2) Scale: 0 (no protection gap) – 4 (very high gap). EIOPA, 2024, Dashboard on insurance protection gap for natural catastrophes. 
(3) van Daalen, K. R. et al., 2024, The 2024 Europe report of the Lancet Countdown on health and climate change: unprecedented 
warming demands unprecedented action, The Lancet Public Health. 
(4) This indicator measures total water consumption as a percentage of the renewable freshwater resources available for a given 
territory and period. Values above 20% are generally considered to be a sign of water scarcity, while values equal or greater than 
40% indicate situations of severe water scarcity. 
(5) European Commission, 2024, 7th Implementation Report from the Commission to the Council and the European Parliament on 
the implementation of the Water Framework Directive (2000/60/EC) and the Floods Directive (2007/60/EC) (Third River Basin 
Management Plans and Second Flood Risk Management Plans). 
(6) For this indicator, the EU average includes figures for the UK under the previous configuration, EU-28. 
(7) European Commission, 2023, EU Bioeconomy Monitoring System dashboards. 
(8) Nitrates can persist in groundwater for a long time and accumulate at a high level through inputs from anthropogenic sources 
(mainly agriculture). The EU drinking water standard sets a limit of 50 mg NO3/L to avoid threats to human health. 
(9) 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. 
Source: Eurostat, EEA. 

74 

Climate adaptation and preparedness:20182019202020212022202320182021Drought impact on ecosystems12.8517.0569.83070.540.126.772.76[area impacted by drought as % of total]Forest-fire burnt area (1)------[ha, annual average 2006-2023]Economic losses from extreme events-           157          20            184          -           -           24 142       62 981       [EUR million at constant 2022 prices]Insurance protection gap (2)----0.75         0.75         [composite score between 0 and 4]Heat-related mortality (3)53            53            53            53            53            [number of deaths per 100 000 inhabitants in 2013-2022]Sub-national climate adaptation action4              7              7              7              4              4              4144[% of population covered by the EU Covenant of Mayors for Climate & Energy]Water resilience:20182019202020212022202320182021Water Exploitation Index Plus, WEI+ (4)0.60.80.60.50.7-4.54.5[total water consumption as % of renewable freshwater resources]Water consumption11            11            10            10            10            -           [million m3]Ecological/quantitative status of water bodies (5)[% of water bodies failing to achieve good status]Surface water bodies---100%---59%Groundwater bodies---0%---93%Biodiversity and ecosystems:20182019202020212022202320182021Conservation status of habitats (6)32.1-----14.7-[% of habitats having a good conservation status]Common farmland bird index77.280.2-94.3--72.274.42000=100Protected areas---5638--26[% of protected land areas]Sustainable agriculture and land use:20182019202020212022202320182021Bioeconomy's added value (7)494          491          495          489          634 378     716 124     [EUR million]Landscape features----4              -[% of agricultural land covered with landscape features]Food waste--147127122-[kg per capita]Area under organic farming4.44.44.65.26.27.99-[% of total UAA]Nitrogen balance------[kg of nitrogen per ha of UAA]Nitrates in groundwater (8)------[mgNO3/l]Net greenhouse gas removals from LULUCF (9)241-          364-          448-          605-          648-          -           256 077-     240 984-     [Kt CO2-eq]LuxembourgEU-27LuxembourgEU-27LuxembourgEU-27LuxembourgEU-27 
 
  
 
FAIRNESS 
ANNEX 10: LABOUR MARKET 

Although  it  has  proved  resilient  to  external 
shocks  such  as  the  COVID-19  pandemic, 
Luxembourg’s 
employment  growth  has 
significantly  slowed  down  since  2022.  This 
can  be  attributed  to  several  factors  such  as  slow 
economic  growth,  labour  shortages  and  skills 
mismatches,  which  are  impacting  the  country’s 
competitiveness.  Targeted  upskilling  and  reskilling 
will  help  to  futureproof  the 
labour  market, 
especially  in  terms  of  digital  and  green  jobs. 
Certain  demographic  groups  –  such  as  older 
workers, young people and vulnerable groups such 
as  persons  with  disabilities,  the  low-skilled  and 
those not born in the EU – are particularly prone to 
unemployment.  Luxembourg’s  2030  national 
employment target is within reach. 

Graph A10.1: Key labour market indicators 

Source: Eurostat, LFS [lfsi_emp_a, une_rt_a, edat_lfse_20, 
une_ltu_a] 

Labour  market  activity  has  weakened  amid 
slow  economic  growth.  The  employment  rate 
declined to 74.2% in 2024 and the gap between it 
and  the  EU  average 
(75.8%)  has  widened. 
Although  they  are  not  reflected  in  Luxembourg’s 
employment rate, cross-border workers accounted 
for  43%  in  2024  (210).  The  activity  rate  was  also 
below the EU average in 2024 (78.8% vs 80.4%), 
despite being on an upward trend.  

time, 

the  same 

Against  a  backdrop  of  economic  slowdown, 
with  modest  real  GDP  growth  of  1.0%  in 
2024, employment growth is projected to fall 
the 
back  to  0.7%.  At 
unemployment  rate  increased  to  6.4%  in  2024 
from  5.2%  in  2023,  surpassing  the  EU  average 
(5.9%)  for  the  first  time  since  2009.  Long-term 
unemployment  declined  by  0.1  percentage  points 
(pps)  to  1.6%  in  2024,  but  still  remains  slightly 
above  its  low  pre-pandemic  level.  Looking  ahead, 
the  country’s  2030  employment  target  of  77.6% 
remains within reach, contingent on i) a rebound in 
real GDP from 2025 onwards and ii) measures to 
address  labour-market  imbalances.  Based  on  the 
Commission’s  2024  Autumn  Forecast,  real  GDP 
growth  is  expected  to  rise  to  2.3%  in  2025  and 
2.2%  in  2026,  with  employment  growth  rising  to 
1.6%  and  1.7%,  respectively.  Unemployment  is 
projected  to  fall  slightly  to  5.8%  in  2026  (from 
6.0% 
labour  market  conditions 
improve. 

in  2025)  as 

Labour  shortages  persist  in  certain  sectors. 
The  job-vacancy  rate  is  low  (1.4%  in  Q4-2024) 
and  below  the  EU  average.  The  proportion  of 
employers expecting labour shortages to limit their 
production increased above the EU average both in 
industry  (18.5%)  and  construction  (36%)  as  of 
October  2024  (211).  Specifically,  shortages  are 
reported in the tourism, business services and ICT 
sectors. At the same time, labour market slack (212) 
increased  from  10.9%  in  Q4-2023  (then  slightly 
below  the  EU  average  of  11.2%)  to  12%  in  Q4-
2024  (well  above  the  EU  average  of  10.8%), 
further confirming imbalances between supply and 
demand.  Skills  mismatches  continue  to  pose 
difficulties,  as  macroeconomic  skills  mismatches 
(213)  increased  from  23.0%  to  26.8%  in  2024, 
significantly  above  the  EU  average 
(19.2%). 
Moreover,  80%  of  small  and  medium-sized 
enterprises  find  it  difficult  to  recruit  workers  with 
the right skills (214).  

(211) ECFIN European Business and Consumer Surveys 

(212) Labour market slack refers to all unmet needs for 

employment, namely it represents the extent to which labour 
supply exceeds labour demand in the short run.  

(213) The macroeconomic skills mismatch indicator measures the 
dispersion of employment rates across skill groups (represented 
by qualification levels, with ISCED 0-2 low; 3-4 medium and 
5-7 high). 

(210) Eurostat, Luxembourg National Accounts 

(214) Education and Training Monitor 2024 

75 

64666870727476788005101520252009201020112012201320142015201620172018201920202021202220232024%%LUActivity rate 20-64 (rhs)Employment rate 20-64 (rhs)Unemployment rate 15-74 (lhs)Long-term unemployment rate 15-74 (lhs)Youth unemployment rate 15-24 (lhs)NEET rate 15-29 (lhs) 
 
 
  
 
 
 
 
Graph A10.2: Employment rate by age group 
(annual) 

to 

keep  older  workers 

and  reducing  financial  incentives  to  leave  the 
labour  market  early,  health  and  lifelong  learning, 
and  designed 
in 
employment.  If  the  current  situation  persists, 
whereby  limited  policy  action  has  been  taken  to 
help  older  workers  become  more  employable  and 
to limit early retirement (216), Luxembourg will face 
the EU’s sharpest increase in pensions expenditure 
by  2070,  which 
reach 
approximately 17% of GDP by 2070 − potentially 
the  highest  proportion  in  the  EU  (217).  More 
substantial  change  can  be  achieved  through 
pension reform. Consultations on this subject with 
all  relevant  stakeholders  have  been  taking  place 
since  October  2024.  A  report  summarising  key 
findings  was  published  in  January  2025,  and  a 
closing event is scheduled for 2025.  

projected 

to 

is 

Source: Eurostat, LFS [lfsi_emp_a] 

Graph A10.3: Labour market outcomes of young 
people (15-24) 

Low labour market participation among older 
workers  remains  a  pressing  challenge,  while 
the  projected  increase  in  pension  spending 
poses  risks  to  the  sustainability  of  public 
finances  in  the  medium  term.  At  49.4%  in 
2024, the employment rate for older workers (55-
64) is among the lowest in the EU, 15.8 pps below 
the  EU  average 
(65.2%).  Almost  half  of 
Luxembourg’s unemployed people aged 55-64 are 
long-term unemployed, compared with 30% for all 
unemployed  people.  The  participation  of  older 
workers  in  adult  learning  is  also  lagging  behind, 
with a rate of 29.0% over the previous 12 months 
in  2022  (vs  an  EU  average  of  29.9%  for  older 
workers,  and  an  overall  rate  of  45.2% 
in 
Luxembourg)  (215).  Participation  is  expected  to 
increase  as  a  result  of  the  different  programmes 
national 
implemented 
employment  agency  and 
“Future  skills” 
initiative  (pilot  programmes  to  integrate  people 
over  45  years  into  the  labour  force)  under 
Luxembourg’s recovery and resilience plan. Helping 
older  workers  into  employment  would  not  only 
help Luxembourg to achieve its 2030 employment 
improve  the  financial 
target  but  would  also 
sustainability  of  the  pension  system  and  reduce 
government  debt.  This,  however,  is  dependent  on 
more systematic active-ageing policies, focusing in 
particular on phasing out early retirement schemes 

Luxembourg’s 
the 

by 

Source: Eurostat, LFS [edat_lfse_18, lfsi_emp_a, une_rt_a, 
lfsi_act_a, edat_lfse_20] 

Youth  unemployment,  particularly  among 
men,  amid  low  job  vacancies,  is  a  concern. 
The  youth  unemployment  rate  (15-24)  stood  at 
21.6%  (218)  in  2024,  6.7  pps  higher  than  the  EU 
average  (14.9%).  In  addition,  monthly  data  from 
March 2025 indicate that Luxembourg had one of 

(216) N.B. The effective retirement age was 61.6 in 2022, well 

below the statutory retirement age of 65. 

(217) Cf. 2024 Ageing Report. Economic and Budgetary Projections 
for  the  EU  Member  States  (2022-2070),  country  fiche 
Luxembourg.  

(215) Education and Training Monitor 2024 

(218) Data with low reliability in 2024.  

76 

01020304050607080901002009201020112012201320142015201620172018201920202021202220232024% populationLU15-2425-5455-6401020304050607080900510152025200720082009201020112012201320142015201620172018201920202021202220232024%%LUUnemployment rate (lhs)Unemployment ratio (lhs)NEET (lhs)In education, training (rhs)Employment rate (rhs) 
  
 
  
 
This 

for  women). 

the  highest  youth  unemployment  rates  among  all 
EU  countries  (21.4%  vs  EU:  14.5%),  with  the  rate 
for  men  among  the  highest  in  the  EU  (24.7%  vs 
17.4% 
contrasts  with 
Luxembourg’s  overall  unemployment  rate (15-74) 
which is only slightly above the EU average (6.4% 
vs 5.9%). The low activity rate of young people is 
partly due to a high rate of enrolment in education 
and training among those aged 15 to 24 (school is 
compulsory until the age of 18). The rate of young 
people aged 15 to 24 neither in employment, nor 
in education and training (NEETs)  rose from 8.8% 
in 2023 to 9.5% in 2024, above the EU average of 
9.1%.  In  2023  the  total  number  of  job  vacancies 
fell  by  40%  according  to  the  public  employment 
service  (219),  following  a  slowdown  in  activity, 
IT, 
the  business 
especially 
transportation  and 
logistics  and  construction 
sectors.  The  largest  increases  in  unemployment 
were 
the  highest  qualified 
(university graduates) and young people under 30. 
In  addition,  only  19.7%  of  15-29-year-olds  in 
Luxembourg  combined  study  and  work  in  2023 
(below  the  EU  average  of  25.7%),  which  may 
affect  their  transition  into  work  (220).  To  address 
youth 
has 
implemented  the  reinforced  Youth  Guarantee  (via 
the  ESF+  and  REACT-EU)  -  which  involves  the 
National  Employment  Agency  (ADEM),  the  Local 
Youth Action (ALJ) and the National Youth Service 
(SNJ).  It  provides,  for  example,  coaching  and 
financial incentives to companies hiring or training 
young jobseekers.  

recorded  among 

unemployment, 

Luxembourg 

consulting, 

in 

Vulnerable  groups,  including  persons  with 
disabilities,  women  with  children,  low-skilled 
adults and the non-EU-born, continue to face 
obstacles  to  labour  market  integration.  The 
disability  employment  gap  narrowed  from  23.7 
pps  in  2023  to  19.1  pps  in  2024,  below  the  EU 
average  (24  pps).  Barriers  include  a  lack  of 
adapted  workplaces,  private-sector  employers 

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

11.html  N.B.  This  decrease  slowed  down  to  16.3% over  the 
course of 2024. The decline mainly affected the IT, banking 
and  building  finishing  work  sectors  (cf.  18 625  jobseekers 
and  an  unemployment  rate  rising  to  5.9%  -  Latest  news  - 
ADEM - FACILITONS L'EMPLOI - Luxembourg (public.lu)). The 
year-on-year  decrease  is  16.3%.  This  decline  (in  newly 
advertised  posts  and  the  stock  at  the  end  of  the  month) 
primarily  affects  professions  in  IT  (ROME  category  M18), 
banking (category C12), and building finishing work (F16). 

(220) Cf. https://ec.europa.eu/eurostat/statistics-

explained/index.php?title=Participation_of_young_people_in_
education_and_the_labour_market  

77 

and 

leading 

mentoring 

failing  to  comply  with  legal  hiring  quotas  (only 
12% of companies meet this obligation) and weak 
enforcement  mechanisms.  Fear  of  stigmatisation 
may discourage people from disclosing disabilities, 
which  are  not  always  visible, 
to 
underreporting.  Measures  to  help  narrow  the 
disability employment gap could include continued 
awareness-raising, 
de-
stigmatisation campaigns, additional incentives for 
companies  who  meet  disability  quotas,  offer 
training  or  adapt  workplaces  (and/or  penalties  for 
those  who  do  not),  and  the  setting  of  nationwide 
employment  targets.  Women  with  children  also 
face  significant  labour  market  constraints,  with 
35.4%  of  employed  women  with  children  working 
part-time,  much  higher  than  for  women  without 
children  (19.8%),  a  figure  that  exceeds  the  EU 
average  for  mothers  in  part-time  work  (31.8%). 
Language barriers further hinder the non-EU-born 
and low-skilled workers, limiting access to higher-
quality jobs. The employment gap between people 
born  in  and  outside  the  EU  reached  10  pps  in 
2024,  and  the  unemployment  rate  differential 
between  those  two  categories  is  still  significant. 
to 
Several  negative 
exacerbate the situation: for example, the high tax 
rate on low-wage earners leads to one of the most 
severe  unemployment  traps 
in  the  EU: 
Luxembourg has one of the highest rates in 2024, 
well above the EU average (91.4% vs 74.4%). 

factors  often  combine 

(221) 

Wage  growth 
in  Luxembourg  has  been 
slightly below the EU average, while in-work 
poverty remains among the highest in the EU. 
Nominal wage growth is expected to reach 3.4% in 
2025, after 5.8% in 2022, 7.3% in 2023 and 3.0% 
in 2024 (222). Real wages, in turn, grew by 0.7% in 
2024,  well  below  the  EU  average,  and  are 
expected  to  rise  by  0.9%  in  2025,  following  a 
significant  decline  in  2022  (2.1%)  and  a  strong 
rebound  in  2023  (4.2%).  This  recovery  reflects 
both sustained nominal  wage growth and a slight 
fall  in  inflation,  which  went  down  from  3.8%  in 
2023  to  2.6%  in  2024.  The  statutory  minimum 

(221) The unemployment trap measures the percentage of gross 
earnings lost to taxes when a person becomes employed. 

(222) For nominal wage growth, pay per employee is considered. It 
includes: i) Wages and salaries payable in cash or in kind; 
and ii) Social contributions payable by employers. For real 
gross wages, the deflator used is HICP. Real wages using this 
deflator then can differ from real wages shown in AMECO 
(that uses private consumption as deflator). Data for 2024 
and 2025 are based on the European Commission Autumn 
2024 economic forecast. 

 
 
 
wage  increased  by  almost  17%  between  January 
2022 and January 2025, a real increase of around 
5%. In-work poverty  remained  among the highest 
in the EU in 2024, at 13.4% (see Annex 11). 

The  workforce  is  adapting  to  the  green  and 
digital  transitions,  and  there  is  a  growing 
need for skilled workers in emerging sectors. 
In  2022,  employment  in  the  country’s  energy-
intensive  industries  accounted  for  0.9%  of  total 
employment,  while  jobs  in  the  green  economy 
have  expanded  rapidly.  Between  2016  and  2022, 
employment  in  the  environmental  goods  and 
services sector grew by 120.3%, reaching 9.2% of 
total employment (EU: 3.3%). The job-vacancy rate 
in  construction,  a  key  sector  for  the  green 
transition, is below the EU average (1.0% vs 3.1% 
in  2024).  The  greenhouse  gas  emission  intensity 
of  Luxembourg’s  workforce  has 
improved, 
decreasing from 21 tonnes per worker in 2015 to 
13.7 in 2023 (EU: 12.3), reflecting progress in the 
green  transition.  The  ICT  sector  continues  to 
develop, with ICT specialists accounting for 8% of 
total employment in 2024, compared to 5% in the 
EU.  Although  above  the  EU  average  of  19.4%, 
women  are  particularly  underrepresented,  with 
only  22.5%  of  women  ICT  specialists.  66.8%  of 
workers  (25-64)  have  at  least  basic  digital  skills, 
which  is  above  the  EU  average  of  64.7%.  Only 
60.1% of the general  public met this threshold in 
2023 (vs 55.6% in the EU): this underlines the fact 
that  further  strengthening  of  upskilling  and 
reskilling would be beneficial (see Annex 12). 

78 

 
 
 
to  the  fight  against  poverty  and  social  exclusion 
(EUR 3.8 million). 

Poverty  risks  are  especially  high  among 
children.  The  AROPE  rate  for  children  has  also 
increased overall since 2015 and impacts over 1 in 
4  children,  particularly  affecting  single-parent 
households.  In  2023  it  fell  slightly  by  0.5 pps  to 
25.6% (vs an EU average of 24.2%), as compared 
to  26.1%  in  2023  and  23.3%  in  2015.  Like  for 
adults,  this  rising  AROPE  rate  is  linked  to  the 
increasing AROP rate, which has been rising overall 
since  2015  (when  it  affected  21.5%  of  the 
population  aged  less  than  18),  reaching  24.1%  in 
2024. This is well above the EU  average (19.3%), 
and one of the highest rates in the EU. In addition, 
in  single-parent 
43.7%  of 
households were at risk of poverty in 2023. While 
Luxembourg’s  2030  target 
is  to  reduce  the 
number  of  children  at  risk  of  poverty  or  social 
exclusion by 1 000 compared to the 2019 level of 
28 000,  it  has  drifted  further  from  that  number, 
with 4 33 000 children affected in 2024. In order 
to  reduce  the  impact  of  poverty  on  children, 
Luxembourg  is  implementing  the  European  Child 
Guarantee  (ECG)  as  part  of  its  2022  action  plan. 
The implementation of the ECG is supported by the 
ESF+  and  focuses  on  various  areas  including,  for 
instance,  targeted  measures  to  combat  child 
poverty and to promote inclusion. 

individuals 

living 

Graph A11.1: At-risk-of-poverty or social exclusion 
rate (AROPE) by age group 

ANNEX 11: SOCIAL POLICIES 

faces 

Luxembourg 

Despite  its  comprehensive  social  welfare 
increasing 
system, 
challenges linked to people at risk of poverty 
and  has  seen  very  high  levels  of  in-work 
poverty  over  the  past  few  years.  Vulnerable 
groups,  such  as  the  non-EU-born,  the  low  skilled 
and  single-parent  households,  are  particularly 
affected. A number of structural factors contribute 
the  particular 
to 
composition  of  Luxembourg’s  job  market,  rising 
income equalities, the decreasing impact of social 
transfers  in  the  reduction  of  monetary  poverty, 
issues  of  tax  fairness  and  high  housing  costs. 
Addressing these issues as a matter of priority will 
help  Luxembourg  on  its  path  to  inclusive  growth 
and competitiveness. 

situation, 

including 

this 

rate 

(AROPE) 

Driven  mainly  by  income  disparities,  poverty 
risks  are  on  the  rise,  making  Luxembourg’s 
2030  poverty  reduction  target  increasingly 
difficult to meet. The at-risk-of-poverty or social 
exclusion 
in  Luxembourg  has 
increased by 1.6 percentage points (pps) compared 
to 2015 (223). In 2024, 1 in 5 people were at risk of 
poverty  or  social  exclusion  (20.0%  vs  18.4%  in 
2015),  slightly  below  the  EU  average  (21.0%). 
Conversely, the average AROPE rate in the EU has 
been  falling  overall  since  2015  (from  a  high  of 
24.0%).  Luxembourg's  rising  AROPE  rate  is,  in 
terms  of  its  components,  driven  primarily  by 
steadily  increasing  at-risk-of-poverty  (AROP  or 
relative  monetary  poverty)  rates.  The  AROP  rate 
has  been  increasing  overall  since  2015  (when 
15.3%  of  the  population  were  affected),  to  reach 
18.1%  in  2024.  This  is  above  the  EU  average  of 
16.2%,  which  has  been  trending  downward. 
Between  2019  (reference  year  for  the  2030 
target) and 2024, the number of people at risk of 
poverty  or  social  exclusion 
in  Luxembourg 
increased  by  13 000  to  132 000.  This  makes 
reaching  Luxembourg’s  2030  target  of  4 000 
fewer people at risk of poverty or social exclusion 
compared 
(i.e.  115 000) 
increasingly challenging, especially since structural 
issues  –  such  as  wage  disparities,  the  decreasing 
inequality-reducing  effect  of  social  transfers  and 
high housing costs – remain prominent despite an 
overall  decrease 
since  2022. 
Luxembourg has dedicated 25% of its total 2021-
2027 European Social Fund Plus (ESF+) allocation 

to  2019 

inflation 

levels 

in 

(223) There are breaks in series for 2016, 2020, 2021 and 2022 

data. 

Source: Eurostat, EU-SILC [ilc_peps01n] 

Significant levels of in-work poverty are due 
income 
to  structural  factors  such  as 

79 

051015202530352015201620172018201920202021202220232024% of populationLUChildren (<18y)Working age (18-64)Elderly (65+) 
 
 
  
 
 
inequality. In 2024, the share of the Luxembourg 
population  which  was  employed  but  at  risk  of 
poverty was 13.4% (well above the EU average of 
8.2%)  and  constitutes  the  highest  rate  in  the  EU. 
This  phenomenon  is  not  new,  since  the  share  of 
the  Luxembourg  population  affected  by  in-work 
poverty  has  been  consistently  higher  than  the  EU 
average  since  at  least  2010.  It  has  also  been  on 
an overall upward trajectory over the last 20 or so 
years  (with  a low  of  9.3%  in  2007),  while  the  EU 
average  has  remained  relatively  stable  overall 
(8.5% in 2010 vs 8.3% in 2023). Nevertheless, the 
in  7 
current 
employees constitutes an increase of almost 45% 
since 2007. Income inequality, as measured by the 
income  quintile  share  ratio  S80/S20,  fell  slightly 
from  4.8  in  2023  to  4.7  in  2024,  but  has  risen 
overall since 2005 (when it was 3.9). The share of 
income  of  the  poorest  40%  of  households  (S40) 
was 21.1%, below the EU average of 21.8%. 

representing  almost  1 

level, 

Graph A11.2: In-work poverty rate (by group) 

Source: Eurostat, EU-SILC [ilc_iw01, _iw05, _iw07, _iw02] 

factors 

contribute 

in-work 
Several 
to 
income 
poverty,  monetary  poverty  and 
inequality, 
the 
including 
composition  of  the  job  market  and  the  level 
of  minimum  wages.  Average  annual  gross 
salaries  in  Luxembourg’s  financial  and  insurance 
sector  –  which  plays  a  pivotal  role 
its 
economy(224)  –  are  almost  50%  higher  than  the 

for  example 

in 

(224)In  2021  (according  to  the  latest  available  Eurostat  data), 
financial and insurance activities represented almost 35% 
of value  added  in  Luxembourg’s  business  economy  total, 

80 

average  for  the  entire  economy,  and  salaries 
earned in this sector are, for instance, on average 
2.8  times  higher  than  those  in  the  hospitality 
sector (HORECA) (225). Concerning minimum wages, 
Luxembourg  has  the  highest  nominal  minimum 
wage  in  Europe  (the  minimum  wage  for  unskilled 
workers  is  set  at  EUR 2,703.73,  and  EUR 3244.48 
for  qualified  workers:  these  increased  on  1 May 
2025  and  wages  are  indexed).  However,  workers 
that  earn  a  minimum  wage  remain  at  or  near 
poverty  level  when  compared  to  the  median 
income.  The  inequality-reducing  effect  of  taxes 
and  transfers  is  also  low  in  Luxembourg  (see 
Annex  2)(226).  The  government  is  working  on 
improving the adequacy of minimum wages, in line 
with  Directive  2022/2041  on  adequate  minimum 
wages in the European Union. 

The  groups  most  vulnerable  to  poverty  risks 
include  the  non-EU-born,  the  low  skilled  and 
single-parent  households,  especially  those 
with  dependent  children.  In  2024,  the  AROPE 
rate  of  non-EU-born  people  in  Luxembourg  was 
30.3%  with  a  gap  of  18.7 pps  with  native-born 
people  (the  EU  gap  being  10.2  pps).  In-work 
poverty  was  23.1%  among  non-EU-born  people, 
while  in-work  poverty  for  native-born  people  was 
only 4.3%, with a gap  of 18.8 pps, vs an average 
EU  gap  of  12.5  pps.  Workers  whose  education 
levels  are  classed  as  low  (International  Standard 
Classification of Education 0-2) or medium (ISCED 
3-4)  face  much  higher  in-work  poverty  rates  in 
Luxembourg  compared  to  the  EU  average:  35.5% 
versus  17.4%  for  workers  with  a  low  level  of 
education,  and  18.8%  versus  8.6%  for  those  with 
a medium level. Workers living in households with 
children  face  a  much  higher  in-work  poverty  risk 
than those without children (17.9% vs 8.8%). This 
risk  is  especially  pronounced  for  single  parents, 
rate  of  26.6%.  These  factors  are 
with  a 
exacerbated  when  the  worker  has  a temporary  or 
part-time  contract (227),  and  many  or  even  all  of 

taking  the  number  one  position  in  the  EU,  ahead  of  the 
Netherlands, and reaching around 3 times the EU average. 
Luxembourg  also  dominated  the  EU’s  financial  and 
insurance  activities  sector 
in  employment  share, 
accounting  for  over  12%  of  its  business  economy 
workforce (also around 3 times the EU average). 

(225)STATEC, Work and Social Cohesion Report (2024), p64. 

(226) European Commission (2024), Economic inequalities in the 

EU. 

(227)Panorama 

social  2024,  Luxembourg  Chamber  of 

Employees, CSL, p109. 

051015202530354045200720082009201020112012201320142015201620172018201920202021202220232024% of employedLUTotalTemporaryPart-timeSingle parents 
  
 
 
 
these  factors  can  occur  simultaneously.  Linguistic 
barriers  are  a  key  challenge  for  non-EU-born 
workers.  Another  aggravating  factor (228)  is  that 
foreign  diplomas  and  experience  are  not  always 
recognised (229),  thus  further  exposing  them  to  in-
work  poverty.  In  addition,  Luxembourg’s  current 
collective  bargaining  agreement  coverage  rate  – 
around  59%  –  is  below  the  80%  target  set  by 
Directive  2022/2041  on  adequate  minimum 
wages in the European Union. 

than 
from 
households. 

capital, 

favouring 

high-income 

Graph A11.3: Impact of social transfers (other 
than pensions) on poverty reduction 

for, 

indexation  mechanism  as 

Social  transfers  are  not  fully  effective  in 
reducing  poverty  and  income  inequality.  At 
27.0%,  the  impact  of  social  transfers  (excluding 
pensions)  in  reducing  monetary  poverty  was  well 
below  the  EU  average  of  34.4%  in  2024.  One 
explanation  could  be  the  suspension  of  the 
automatic 
regards 
family benefits from 2006 to 2014, which was not 
compensated 
gradual 
reintroduction of automatic indexation after 2014 
(and in 2021 for child benefits).  The inefficacy  of 
social  transfers  (Eurofound,  2024),  despite  their 
availability, is also partly explained by low take-up 
rates –   a result of low awareness about support 
measures 
complex  administrative 
procedures  and  psychological  costs (230).  The 
government is to set up a guichet social unique – a 
issues  relating  to  social 
‘one-stop  shop’  for 
welfare – to make it easier for people to find out 
about and access social benefits. 

eligibility, 

despite 

the 

The  inequality-reducing  effect  of  taxes  and 
transfers  is  low.  This  indicator  was  also  well 
below  the  EU  average  in  2024  (39%  vs  an  EU 
average  of  48%).  The  Commission’s  2024  report 
on  taxation (231)  shows  that  Luxembourg’s  tax-
benefit  system  does  not  reduce  inequality  as 
effectively  as  in  other  Member  States  (see  Annex 
2).  A  2021  OECD  study (232)  comparing  37 
countries (of which 21 from the EU) showed that, 
in Luxembourg, average incomes were taxed seven 
times  more  when  they  came  from  work  rather 

(228)STATEC, Work and Social Cohesion Report (2024), p60. 

(229)STATEC, 2023. 

(230) Franziskus, A., & Guio, A.-C. (2024),  Précarité et (non-

)recours aux aides financières au Luxembourg: une étude 
qualitative (a LISER study commissioned by the 
Luxembourg Chamber of Employees, CSL, on Precarity and 
the (non) take-up of financial assistance in Luxembourg).   

(231)European Commission (2024), p83 and p98. 

(232)Statistiques  des  recettes  publiques  1965-2020  (OECD, 

2021) - Revenue statistics 

Source: Eurostat, EU-SILC [ilc_li02, ilc_li10] 

House  prices  have  increased  significantly  in 
the 
last  decade  and  exhibit  signs  of 
overvaluation.  House  prices  have  increased  by 
70% 
in  nominal  terms  since  2015.  Supply 
constraints  continue  to  keep  house  prices  high 
owing  to  a  structural  lack  of  housing  supply  and 
low  or  negative  residential  housing  investment 
growth.  House  prices  increased  by  13.9%  and 
9.6%  in  2021  and  2022  respectively.  That  said, 
after  years  of  strong  growth,  they  experienced  a 
sharp  9.1%  drop  in  2023.  In  2024,  the  correction 
continued with house prices decreasing by 8.3% in 
Q2-2024, year-on-year (and by 1.7% in Q3-2024). 
The ongoing correction is driven by the adjustment 
to the current environment of higher interest rates, 
which  increased  from  1.3%  in  2021  to  4.1%  in 
2023. House prices are unlikely to continue to fall 
as  high  population  growth,  the  large  number  of 
cross-border  workers  and  tax  measures  support 
demand  while  housing  supply  remains  low.  The 
number  of  housing  transactions  fell  by  43.3%  in 
2023,  after  decreasing  by  15.1%  in  2022.  The 
number of building permits issued fell by 7.5% in 
2023  after  falling  by  22.9%  in  2022.  In  terms  of 
financial  stability,  in  February  2024  the  European 
Systemic Risk Board concluded that the residential 
housing market in Luxembourg was subject to high 
risks and the macroprudential policy mix was only 
partially  appropriate  and  partially  sufficient  to 
mitigate the situation. 

81 

2527293133353739414320172018201920202021202220232024LUEU 
 
  
Overall  housing  affordability  has  strongly 
deteriorated  in  the  last  decade  reflecting 
limited housing supply amid growing demand, 
and  household  debt  is high.  House  prices  have 
grown  faster  than  household  incomes  over  the 
past  decade.  The  standardised  house  price-to-
income  ratio  has  increased  by  nearly  30%  since 
2015,  and  more  than  60%  above  the  long-term 
average.  While  it  has  improved,  with  household 
incomes, since 2022, it stills stands 23% above its 
long-term average. Long-term price pressures also 
reflect accessible housing supply not keeping pace 
with  the  strong  population  increase  by  50%  since 
2003. As a consequence, the number of dwellings 
per capita continues to decrease at a strong pace. 
Over  recent  years,  both  dwelling  and  residential 
building permits per capita has been decreasing to 
below  pre-pandemic  levels,  which  could  indicate 
limited  new  housing  supply  looking  ahead.  House 
price  levels  compared  to  incomes  remain  among 
the  highest  in  the  EU,  posing  potential  structural 
risks to the domestic economy. Taking into account 
the  cost  of  mortgage  funding,  the  borrowing 
capacity  of  households  remained  broadly  stable 
over  the  past  decade.  However,  Luxembourg’s 
household  debt-to-GDP  ratio  stood  above  pre-
pandemic  levels  in  2023  (at  68%  of  GDP). 
Household debt is even higher when expressed as 
a  ratio  of  household  gross  disposable  income, 
coming  in  at  around  140%.  Net  credit  flows 
contracted  strongly  in  2023  on  the  back  of  rising 
borrowing  costs,  after  having  expanded  in  2022. 
Risk  factors  include:  (i)  variable  rate  mortgages, 
which  continue  to  account  for  a  significant  share 
of new mortgages; (ii) a high median debt service-
to-income  ratio  (16%),  reaching  35%  for  debt 
holders  in  the  bottom  quintile  of  the  income 
distribution, which make up 9% of all households; 
and (iii)  a high price-to-income ratio. At the same 
time, the gross saving rate is high. 

The  overall  cost  of  living  is  exacerbated 
significantly  by  Luxembourg’s  high  housing 
costs.    People  in  Luxembourg  spent  19.1%  on 
their  homes  in  2024.  While  the  housing  cost 
overburden has been flagged as a critical issue for 
Luxembourg for several years, in 2023 it fell from 
11.5% of the population (above the EU average of 
8.8%)  to  8.0% in  2024  (below  the  EU  average  of 
8.2%).    Still,  it  has  been  rising  overall  since  2012 
(from  a  low  of  4.9%,  vs  the  then  EU  average  of 
11.5%)  while,  conversely,  the  EU  average  has 
followed  a  downwards  trajectory.  In  2021,  a  law 
was  adopted  establishing  the  ‘Housing  Pact  2.0’, 
which was included in Luxembourg’s recovery and 

resilience  plan.  It  aimed  to  support  municipalities, 
in  cooperation  with  the  State,  in  promoting  the 
development  of  affordable  and  sustainable 
housing,  mobilising  existing  land  and  residential 
potential,  and 
residential  quality. 
Nevertheless,  given  that  housing  costs  have 
continued  to  rise,  the  government  introduced  a 
new  package  of  measures  in  2024,  including 
financial  aid  for  households,  tax  breaks  and 
support for the construction sector. 

improving 

prices 

energy 

from 
Some  households  have  suffered 
costs 
and 
fluctuating 
stemming  from  a  lack  of  building  energy 
efficiency, while many have encountered high 
costs  linked  to  personal  transport  fuels.  In 
terms  of  energy  poverty,  the  number  of  cases  of 
gas  and  electricity  disconnections  referred  to  the 
Social  Welfare  Office  (Office  social)  more  than 
doubled  for  gas  between  2020  and  2023,  and 
increased  by  50%  for  electricity,  while  there  was 
an  average  increase  in  energy  expenses  of  35% 
between  2019  and  2023  due  to  inflation (233). 
More  broadly,  4.2%  of  the  population  faced 
arrears  on  utility  bills  in  2024,  increasing  from 
3.6% in 2021 even though this was still below the 
EU  average  of  6.9%.  Structural  issues  such  as 
leaks,  damp  or  rot  affected  18%  of  dwellings  in 
2023,  an  increase  of  2.6 pps  since  2021,  and 
above  the  EU  average  of  15.5%.  In  response, 
Luxembourg  is  advancing  a  national  strategy  to 
address energy poverty, with a focus on improving 
building energy efficiency through renovations and 
energy  performance  certifications.  Luxembourg’s 
national  energy  and  climate  plan  also  includes  a 
range  of  measures  to  mitigate  energy  poverty, 
including  social  subsidies  and  energy  efficiency 
programmes  for  vulnerable  households.  As  for 
transport  poverty,  while  individuals  do  not  face 
major obstacles to car ownership, Luxembourg has 
a  higher  than  EU  average  share  of  individuals  at 
risk  of  poverty  with  very  high  expenditure  on 
personal  transport  fuels  (defined  as  twice  the 
national  median),  which  stands  at  19.5% 
compared  to  the  EU  average  of  18.3%.  The 
continued  dominance  of  private  cars  and  the 
stagnation in public transport use – despite public 
transport  being  free  of  charge  –  highlight 
challenges  in  promoting  sustainable  and  inclusive 
transportation systems. 

(233) Institut Luxembourgeois de Regulation (ILR). 

82 

 
 
ANNEX 12: EDUCATION AND SKILLS 

basic 

skills, 

especially 

competitiveness.  Weaknesses 

Low 
among 
disadvantaged  students,  as  well  as  adults’ 
level  of  digital  skills,  limit  Luxembourg’s 
overall 
in 
language skills adversely impact the development 
of  pupils’  basic  skills  at  school.  In  early  childhood 
education  and  care  (ECEC),  children  are  not 
familiarised  with  German,  although  it  is  the 
language of tuition and literacy in primary school. 
This leads to the early emergence of performance 
gaps  between  pupils  of  various  linguistic  and 
socio-economic  backgrounds.  The 
share  of 
underachievers  among  15-year-olds  was  well 
above the EU average in PISA, while the relatively 
low  share  of  STEM  graduates  may  exacerbate 
skills  shortages.  VET  participation  is  strong  and 
generally  leads  to  solid  employment  prospects, 
although 
low  female  enrolment  rates  are  a 
concern.  Adult  participation  in  training  needs  to 
increase significantly, particularly for older workers 
and  the  low-skilled  -  especially  as  regards  digital 
skills  -  to  address  skills  mismatches  and  to 
maintain a competitive workforce and economy. 

for 

skills 

Language  development  from  an  early  age  in 
the instruction languages at school would be 
crucial 
development.  While 
participation in ECEC is high for children below the 
age  of  three  (60.0%  in  2023  vs  EU  average  of 
37.4%) (234), it is below the EU average for children 
from  age  three  onwards  (90.5%  vs  EU  93.3%). 
Participation  in  ECEC  has  only  a  moderately 
positive  impact  on  language  skills (235),  partly 
because in ECEC children are not familiarised with 
German,  the  language  of  tuition  and  literacy  in 
primary  school.  Instead,  children  aged  1-4  are 
offered 
for 
French and Luxembourgish only. 

language  development  activities 

Students’ basic skills are significantly below 
the  EU  average,  with  educational  outcomes 
closely  tied  to  their  socio-economic  and 
linguistic  background  (236).  While  the  share  of 
early school leavers at 7.8% is still well below the 
EU  average  of  9.3%),  school  outcomes  remain 

(234) Eurostat: ilc_caindform25b. 

(235) Luxembourg Centre for Educational Testing (LUCET) of 

Luxembourg University: Early Childhood Education and Care 
in Luxembourg 

(236) Luxembourg’s mean scores in 2018 stood at 483 (EU 

average: 492) in mathematics; at 477 (EU average: 487) in 
science and at 470 (EU average: 487) in reading. 
Luxembourg did not participate in the 2022 PISA survey. 

83 

highly dependent on pupils’ socio-economic status 
and  linguistic  background.  The  AROPE  rate  for 
children,  which  particularly  affects  single-parent 
households,  fell  slightly  by  0.5 percentage  points 
(pps)  to  25.6%  in  2024,  remaining  above  the  EU 
average  of  24.2%  (see  Annex 11).  Luxembourg’s 
average  skills  levels,  as  measured  by  the  OECD 
Programme  for  International  Student  Assessment 
(PISA)  survey  in  2018,  were  significantly  lower 
than the EU average in all three areas tested (237). 
The  score  gap  between  disadvantaged  and  non-
disadvantaged  students  was  the 
largest  one 
observed across all Member States. 

Graph A12.1: Evolution of writing comprehension in 
German in grade 3, depending on the socio-
economic status, between 2018 and 2020 

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

National  data  show  that  at  the  time  of 
starting  school,  pupils  have  the  essential 
literacy. 
basic  skills  to  begin  acquiring 
However,  from  the  start  of  year 3  of  primary 
school (at the age of 8), which is the first time that 
progress  in  basic  skills  is  assessed,  many  pupils’ 
performance  in  German  reading  comprehension 
and  mathematics  falls  noticeably.  This  fall  is 
particularly  pronounced  among  pupils 
from 
disadvantaged  backgrounds (238).  Most  pupils 

(237) The shares of low achievers in 2018 stood at 27.2% in 

mathematics (EU average: 22.9%), 29.3% in reading (EU 
average: 22.5%) and 26.8% in science (EU average: 22.3%). 
Luxembourg did not participate in the 2022 PISA survey. 

(238) Hornung, C., Wollschläger, R., Keller, U., Esch, P., Muller, C. & 
Fischbach, A.: “Nouveaux résultats longitudinaux issus du 
monitoring scolaire national ÉpStan en première et troisième 

5665675754614494340100200300400500600201820192020PointsAdvantaged studentsDisadvantaged students 
 
 
     
 
 
 
 
students in STEM subjects was 27.7% (EU average: 
27.1%) and 9.8% in ICT (EU average: 5.2%). 

Graph A12.2: Education and labour market for 
youth 

improve  their  reading  comprehension  in  German 
by grade 9 (at the age of 14), except pupils from 
disadvantaged  backgrounds  and  those  who  speak 
French or Portuguese at home (239). 

to 
the 

A pilot initiative providing literacy education 
in  French  was  launched  in  four  primary 
address 
2022/2023 
schools 
in 
coalition 
In 
gaps. 
performance 
agreement (240),  the  government  announced  its 
intention  to  extend  the  French  literacy  initiative 
nationwide  from  2026/2027  if  the  pilot  yields 
results.  The  curriculum  of  primary 
positive 
education  is  currently  being  revised  to  make  it 
competency  based.  Introducing  a  national  quality 
framework  in  education  could  guide  schools  to 
draw up their own quality policies and actions. 

Pupils’  digital  skills  have 
improved  but 
continue  to  show  large  performance  gaps. 
Luxembourg  belongs  to  the  few  countries  whose 
eighth-graders’  digital  skills  have  improved  since 
2018,  to  an  average  score  of  493.7  (EU  average: 
496.8)  in  2023 (241).  The  overall  improvement  is 
likely  linked  to  new  measures  reinforcing  digital 
sciences in primary and secondary education as of 
in 
2020/2021.  However,  pupils  with  parents 
higher-level  occupations 
largest 
performance  gap  (59.0  points;  EU  average:  40.9 
points) compared to their peers. 

show 

the 

The  tertiary  attainment  rate  is  among  the 
highest  in  the  EU  and  enrolments  are  above 
the  EU  average  in  STEM  and  ICT  subjects. 
63.8%  of  the  population  aged  25-34  holds  a 
tertiary  degree  (EU  average:  44.2%).  Tertiary 
attainment  is  especially  high  among  the  non-EU-
born  population  (72.4%).  In  2022,  the  share  of 
STEM  graduates  (22.9%)  was  lower  than  the  EU 
average  (26.6%).  However,  the  share  of  tertiary 

année scolaire (cycles 2.1 et 3.1): tendance négative au 
niveau du développement des compétences et 
redoublements inefficaces.” University of Luxembourg, 
Luxembourg Centre for Educational Testing: Rapport national 
sur l'éducation au Luxembourg 2021, p. 44. 

(239) Sonnleitner, P., Kraëmer, C., Gamo, S., Reichert, M., Muller, C.,., 
Keller, U. & Ugen, S.: Etude longitudinale des compétences 
des élèves. University of Luxembourg, Luxembourg Centre for 
Educational Testing: Rapport national sur l’éducation au 
Luxembourg 2018, p. 39. 

(240) Accord de coalition 2023-2028 

Source: Eurostat, LFS 
[edat_lfse_14,edat_lfse_20,edat_lfse_07] 

to 

solid 

leads 

VET  attracts  a  high  share  of  students  and 
employment 
generally 
prospects.  In  Luxembourg,  6  out  of  10  students 
in  medium-level  education  are  in  programmes 
with a vocational orientation (59.2% in 2022 vs an 
EU  average  of  52.4%),  reflecting  the  sector’s 
attractiveness.  However,  at  26.1%,  the  enrolment 
rate  in  medium-level  VET  in  STEM  fields  was 
below  the  EU  average  of  36.3%  in  2023  (242). 
Although  only  one  third  of  recent  VET  graduates 
(34.5% in 2023) (243) had experienced work-based 
learning,  well  below  the  EU  average  (64.6%  in 
2023,  65.3%  in  2024),  recent  VET  graduates  in 
Luxembourg had an employment rate of 80.0% in 
2023  (244),  close  to  the  EU  average  (81.0%  in 
2023,  80.0% 
in  2024).  Benefiting  from  EU 
support,  Luxembourg  has  taken  measures  to 
strengthen  the  VET  system.  For  example,  the 
‘Competence  centres’  will  receive  EUR 375 000  in 
ESF+ funding (2023-2025 period) to address skills 
gaps  in  various  industrial  sectors.  The  ‘Update 

(242) The data is marked “d”, meaning the definition used by 

Luxembourg differs from standard Eurostat methodology, 
and therefore should be considered with caution when 
compared with other countries. 

(241) International Computer and Information Literacy Study 

(ICILS) in Europe – 2023 

(243) No data for 2024. 

(244) No data for 2024. 

84 

0102030405060700246810121416200720082009201020112012201320142015201620172018201920202021202220232024%%LUTertiary education 30-34 (right side)Not in employment, education or training 15-24 (left side)Early school leavers 18-24 (left side) 
 
  
 
cours  du  soir’  project  will  receive  EUR 287 000  in 
ESF+ funding during the same period and aims to 
tailor evening courses to meet market demands. 

in 

is 

to 

scope 

primary 

improve 

incorporate 

teachers’ 
The 

its  ongoing  revision 

continuous 
current 

There 
green 
competencies and skills at school and during 
higher  education.  Learning  for  sustainability 
(LfS) is integrated in both initial teacher education 
professional 
and 
development. 
school 
curriculum does not explicitly include LfS, nor does 
related  educational  concepts. 
it 
is  planned  to 
However, 
incorporate sustainability as a key interdisciplinary 
theme.  The  coalition  agreement  announced  the 
revision  of  the  secondary  school  curriculum  by 
2027,  where  LfS  is  to  be  included  explicitly. 
Luxembourg has taken measures to adapt its VET 
offer  to  the  needs  of  the  green  transition.  The 
National Centre for Continuous Vocational Training 
and 
(CNFPC) 
infrastructure  to  include  new  courses  focusing  on 
Industry 4.0  and  green  skills  such  as  waste 
management,  circular  economy  and  energy 
efficiency.  New  initial  VET  programmes  for  green 
and  digital  occupations  have  been  introduced, 
including  the  ‘Smart  buildings  and  energies’  and 
’Smart technologies’ technician diplomas. 

has  modernised 

offer 

its 

the 

hindering 

labour  market 

The 
is  characterised  by 
persistently  high  skills  shortages,  skills 
mismatches  and  declining  levels  of  digital 
skills, 
economy’s 
competitiveness. 
In  2024,  shortages  were 
reported  in  several  occupations  requiring  specific 
skills  related  to  the  green  transition,  including 
building  structure  cleaners,  environmental  and 
occupational health inspectors and associates, and 
civil 
Skills 
mismatches  increased  from  23.0%  to  26.8%  in 
2024, significantly above the EU average (19.2%). 
In  addition,  80%  of  all  small  and  medium-sized 
enterprises find it difficult to find workers with the 
right  skills  (246).  The  level  of  adults’  digital  skills, 
vital for the twin transition, has declined. In 2023, 
60.1% of the population aged 16-74 had basic or 
above  basic  overall  digital  skills,  above  the  EU 
average  (55.6%)  but  down  from  2021  levels 
(when  it  was  at  63.8%),  at  a  time  when  most 

technicians (245). 

engineering 

Member  States  recorded  rises  in  this  area.  The 
share of women with digital skills (56.6% in 2023 
vs  an  EU  average  of  54.5%)  is  much  lower  than 
that of men (63.6% vs an EU average of 56.7%). 
Reskilling,  and  in  particular  digital  upskilling,  are 
therefore  key  areas  for  improvement  to  address 
skills  mismatches  and  maintain  competitiveness. 
Several  relevant  initiatives  have  been  launched. 
These  include  the  public  employment  service’s 
(ADEM)  JobInsights.lu (247),  which  provides  real-
time  data  on  job  openings  and  labour  market 
trends,  particularly  in  relation  to  IT  skills.  Another 
‘Skillsbridges’  vocational 
is 
training  programme  (part  of  the  Recovery  and 
Resilience  Plan),  which  offers  adults  courses  to 
facilitate  career  changes  in  the  context  of  the 
green and digital transitions. 

the  government’s 

adult 

growth 

productivity 

Luxembourg’s 

rate  of  people  with 

While  adult  participation  in  training  rose  in 
2022,  higher  participation  rates  would 
and 
enhance 
competitiveness.  Adult  participation  in  training 
increased from 42.6% in 2016 to 45.2% in 2022. 
Moreover, 
learning 
participation rate has consistently stood above the 
EU  average  (respectively,  37.4%  in  2016  and 
39.5% 
in  2022).  However,  challenges  persist 
regarding  the  participation  of  older  workers  in 
learning  programmes  (29.0%  vs  EU  average  of 
29.9%,  but  well  below  Luxembourg’s  overall 
average).  Although  above  the  EU  average,  the 
low-level 
participation 
qualifications  (20%  vs  EU  average  of  18.4%)  is 
below  Luxembourg’s  overall  average.  Given  the 
limited  progress  achieved  so  far,  there  is  still  a 
significant 17.3 pps gap between the current adult 
training  rate  and  Luxembourg’s  national  2030 
skills target of 62.5% (248) which is 2.5 pps above 
the EU headline target of 60%. The ESF+ supports 
in 
measures 
connection  with  skills  needs  for  both  jobseekers 
and 
older  workers. 
including 
Disadvantaged  groups  are  covered  via  integrated 
training  and 
pathways 
professional 
workshops 
reintegration.  The 
is 
supported by the ESF+ as an operation of strategic 
importance  and  aims  to  support  labour  market 
reintegration.  Going  forward,  the  implementation 
of  individual  learning  accounts  (ILAs)  could  help 

social 
‘Skills4Job’  programme 

including 
and 

employees, 

promoting 

to  work, 

learning 

lifelong 

for 

(245) European Labour Authority 2025 EURES Report on labour 

shortages and surpluses 2024, based on data from EURES 
National Coordination Offices. 

(246) Education and training monitor 2024. 

(247) The online tool Jobinsights.lu. 

(248) Adult Education Survey 2022 

85 

 
 
 
improve  adult  learning,  regardless  of  individuals’ 
socio-economic backgrounds. 

86 

 
ANNEX 13: SOCIAL SCOREBOARD 

Table A13.1:Social Scoreboard for Luxembourg 

(1) Update of 5 May 2025. 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 2025 for details on the 
methodology (https://employment-social-affairs.ec.europa.eu/joint-employment-report-2025-0). 
Source: Eurostat 

87 

45,27,860,19,85,54,6874,26,41,6105,320,025,627,019,18,056,61,0Critical situationTo watchWeak but improvingGood but to monitorOn averageAdult participation in learning (during the last 12 months, excl. guided on the job training, % of the population aged 25-64, 2022)Equal opportunities and access to the labour marketSocial Scoreboard for LuxembourgBest performersBetter than averageEarly leavers from education and training(% of  the population aged 18-24, 2024)Young people not in employment, education or training(% of the population aged 15-29, 2024)Gender employment gap(percentage points, population aged 20-64, 2024)Income quintile ratio (S80/S20, 2024)Dynamic labour markets and fair working conditionsSocial protection and inclusionShare of individuals who have basic or above basic overall digital skills(% of the population aged 16-74, 2023)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2024)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2024)Self-reported unmet need for medical care (% of the population aged 16+, 2024)Disability employment gap (percentage points, population aged 20-64, 2024)Housing cost overburden (% of the total population, 2024)At risk of poverty or social exclusion (AROPE) rate (% of the total population, 2024)Employment rate(% of the population aged 20-64, 2024)Unemployment rate(% of the active population aged 15-74, 2024)Long term unemployment(% of the active population aged 15-74, 2024)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2023)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2024) 
 
 
 
 
 
 
  
 
 
ANNEX 14: HEALTH AND HEALTH SYSTEMS 

but 

faces 

system 

Luxembourg’s  health 
performs 
some 
comparatively  well 
challenges  that  need  be  addressed  if  the 
country  is  to  improve  the  health  of  its 
fairness,  while 
social 
population  and 
boosting the competitiveness of its economy. 
Challenges 
the 
management  of  the  health  system;  (ii)  lack  of  a 
(iii)  health 
dedicated  public  health  strategy; 
workforce shortages; and (iv) lagging digitalisation 
of the health sector.  

(i)  fragmentation 

include: 

in 

Life  expectancy  at  birth  in  Luxembourg 
rebounded  above  its  pre-COVID-19  level and 
was  among  the  highest  in  the  EU  in  2023. 
While  women  can  expect  to  live  3.4  years  longer 
than  men,  they  live  1.3  years  less  in  good  health 
than men. Treatable mortality is among the lowest 
in  the  EU,  suggesting  that  Luxembourg’s  health 
system  is  effective.  Yet,  it  also  has  one  of  the 
highest spending rates per capita, indicating room 
for efficiency gains. 

Graph A14.1: Life expectancy at birth, years 

Source: Eurostat (demo_mlexpec) 

could 

governance 

Stronger 
improve 
efficiency  and  reduce  fragmentation  of 
healthcare  delivery.  Health  spending  per  capita 
in Luxembourg is among the highest in the EU, as 
is  public  expenditure  on  health  as  a proportion  of 
total  health  spending.  Reform  efforts  in  recent 
years focused on cost containment and refocusing 
hospital  services  through  a  shift  to  day  care  and 
ambulatory  services.  However,  the  health  system 
remains  hospital-centred  with  a  greater  reliance 
on specialised care services. Further gains could be 
achieved  by:  (i)  providing  incentives  for  efficiency 
improvements;  (ii)  introducing  mechanisms  for 
priority setting in budget allocation; and (iii) better 
Furthermore, 
planning 
integrated  care  could  be  improved  through  the 
extension  of  integrated  care  networks.  This  would 
especially  reinforce  the  role  of  primary  care  and 

outpatient 

care. 

in 

incentivise  the  uptake  of  the  “referring  physician” 
model. Recent reforms aim to improve the general 
operating  framework  for  the  healthcare  system. 
The  first  national  health  plan,  published  in  2023, 
following  the  Gesondheetsdësch  included  in  the 
recovery  and  resilience  plan  (RRP),  identifies  the 
major  health  system  challenges,  analyses  various 
possible  scenarios,  and  proposes  priorities  and 
related  strategies  (although  with  no  concrete  or 
measurable  objectives).  To  address  institutional 
fragmentation,  the  merger 
in  2023  of  two 
ministries  into  the  Ministry  of  Health  and  Social 
Security  set  a  path  towards  stronger  governance, 
alignment  and  coordination  in  health policies.  The 
establishment  of  the  National  Health  Observatory 
in  2022  and  the  health  system  performance 
framework, 
under 
assessment 
development,  are 
improving 
steps 
capacities  for  evidence-based  governance  and 
integration,  and  the  use  of  data  from  various 
sources to develop effective policies.  

currently 

towards 

Graph A14.2: Treatable mortality 

Age-standardised death rate (mortality that could be avoided 
through optimal quality healthcare) 
Source: Eurostat (hlth_cd_apr) 

An  enhanced  focus  on  prevention  could  also 
contribute  to  efficiency  gains. 
In  2022, 
spending  on  prevention  in  Luxembourg  accounted 
for  4.6%  of  total  spending  on  health,  lower  than 
the  EU  average  of  5.5%.    Although  Luxembourg 
performs  well  on  health  outcomes,  having  one  of 
the  lowest  levels  in  the  EU  of  mortality  from 
cardiovascular  diseases  and  cancer,  behavioural 
risk factors remain a source of concern. Excessive 
alcohol  consumption  has  been  a  long-standing 
public  health  issue  and  young  people  have  high 
rates of regular vaping (249). Although prevention is 
highlighted  as  a  priority  in  the  2023  National 
health  plan,  Luxembourg  has  no  overarching 

(249) OECD/European Commission (2024), Health at a Glance: 
Europe 2024: State of Health in the EU Cycle, Chapter 4. 

88 

82.782.282.783.083.481.380.480.180.681.420192020202120222023LuxembourgEU68.563.660.354.760.491.389.291.793.389.720182019202020212022per 100 000 populationLuxembourgEU 
 
           
       
 
 
 
Table A14.1:Key health indicators 

*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 based on 2022 (or latest 2021) data except for Luxembourg (2017). Doctors’ density data refer to practising 
doctors in all countries except Greece, Portugal (licensed to practise) and Slovakia (professionally active). Density of nurses: data 
refer to practising nurses (EU recognised qualification) in most countries except France and Slovakia (professionally active) and 
Greece (hospital only). **‘Available hospital beds’ covers somatic care, not psychiatric care. ***The EU median is used for patents. 
Source:  Eurostat database; European Patent Office; ****European Centre for Disease Prevention and Control (ECDC) for 2023. 

strategy dedicated to public health and prevention, 
which could facilitate a shift from curative care to 
preventive care and secure funding that prioritises 
a  ‘health  in  all  policies’  approach.    Luxembourg’s 
antibiotic  consumption  is  below  the  European 
average  and  antimicrobial  resistance  concerns 
have  been  on  the  political  agenda  for  several 
years.  Luxembourg  participates  in  the  EU4Health-
funded joint action on antimicrobial resistance. The 
2018 National antibiotic plan was crucial to boost 
cross-sectoral  programmes,  policies  and  research 
aimed at enhancing public health outcomes. 

11.7 

There  were 

small  population, 

Luxembourg  relies  heavily  on  a  foreign-
trained  health  workforce  and  cross-border 
workers,  which 
raises  concerns  about 
significant fluctuations in staffing levels and 
accessibility  of  care.  The  density  of  doctors  in 
Luxembourg is  the lowest  in  the  EU  (3 per  1 000 
inhabitants vs an EU average of 4.2). However, due 
to  Luxembourg’s 
specific 
specialised  and  complex  treatments  are  available 
per 
abroad. 
1 000 population  in  2022,  compared  to  an  EU 
average  of  7.6.  An 
increasing  proportion  of 
hospital  employees  commute  from  neighbouring 
countries  (44.9%  in  2019  and  48%  in  2023). 
Health  professionals  can  settle  where  they  wish, 
leading 
the 
to  geographical  disparities 
distribution  of  health  workers.  In  2017,  general 
practitioner (GP) density ranged from 0.19 GPs per 
1  000  population  in  Vianden  to  1.14  in  Redange, 
with  higher  densities  in  cantons  with  hospitals.  A 
2019  governmental  report  focused  on  workforce 
availability,  stressed  that  by  2034,  between  59% 
and 69% of medical doctors are expected to retire.  

nurses 

in 

are 

under 

development 

In  response  to  these  challenges,  the  health 
workforce reform included in the RRP has led 
to  the  development  of 
initial  education 
programmes  for  health  professionals.  A 
specific  training  in  general  medical  practice  has 
been  introduced  at  the  University  of  Luxembourg, 
as  well  as  bachelor’s  degrees  in  general  nursing 
and  certain  nursing  specialisations 
(medical 
technical  assistants  in  surgery,  anaesthesia  and 
intensive  care,  paediatrics  and  psychiatry).  Other 
including 
courses 
midwifery, medical technical assistant in radiology 
and 
specialisations.  Other 
elements  of  the  reform  are  expected  to  focus  on 
boosting the attractiveness of healthcare jobs, and 
retention  policies.  Public  campaigns  have  been 
launched  in  order  to  enhance  the  appeal  of 
healthcare  professions  and  attract  more  students 
to medical faculties.  A planned legal framework to 
encourage  multiprofessional  practices  and  task-
sharing  will  build  on  incentives  such  as:  (i) 
compensation  for  duties;  (ii)  pay  for  interns;  and 
(iii)  support for setting up group practices. Finally, 
a  digital  healthcare  workforce  registry,  supported 
under  the  RRP,  will  improve  health  workforce 
planning. 

certain  medical 

The Luxembourgish health system’s potential 
to  drive  innovation  and  foster  industrial 
in  the  EU  medical  sector 
development 
remains untapped. Luxembourg is among the EU 
countries  with  a  relatively  low  level  of  public 
spending  on  health  research  and  development,  in 
part  reflecting  the  overall  limited  size  of  the 
country  and 
its  health  system.  This  is  also 
reflected  in  the  low  number  of  European  patents 
generated  in  2023  in  the  combined  areas  of 
pharmaceuticals,  biotechnologies  and  medical 

89 

20192020202120222023EU average* (latest year) Cancer mortality per 100 000 population219.3203.1203.4195.4n.a.234.7 (2022)Mortality due to circulatory diseases per 100 000 population 238.6 224.4 213.2 220.3n.a.336.4 (2022)Current expenditure on health, purchasing power standards, per capita3 7413 8114 1724 316n.a.3 684.6 (2022)Public share of health expenditure, % of current health expenditure 85.0 86.5 86.2 86.1 85.981.3 (2022)Spending on prevention, % of current health expenditure 2.55.36.44.63.55.5 (2022)Available hospital beds per 100 000 population** 345 340 335 320n.a.444 (2022)Doctors per 1 000 population*3.0n.a.n.a.n.a.n.a.4.2 (2022)*Nurses per 1 000 population* 11.7n.a.n.a.n.a.n.a.7.6 (2022)*Mortality at working age (20-64 years), % of total mortality17.415.616.416.315.614.3 (2023)Number of patents (pharma / biotech / medical technology)595752344229 (2023)***Total consumption of antibacterials for systemic use,                    daily defined dose per 1 000 inhabitants****21.116.115.919.120.220.0 (2023) 
 
          
 
devices  (250).  Luxembourg  also  reports  low  clinical 
trial      activity,  further  underscoring  the  challenge 
for  the  EU  industry  to  reap  benefits  from  the 
single market through multi-country trials (251).   

Luxembourg  is  lagging  behind  in  the  uptake 
of  e-health  and  the  overall  digitalisation  of 
its  health  system,  and  has  yet  to  overcome 
gaps in data storage and sharing. For instance, 
in  2024,  the  share  of  people  accessing  their 
personal health records online (22.0%) was below 
the  EU  average  (27.7%).  Although  Luxembourg 
has a unique patient identifier, it does not have a 
national health information system that facilitates 
the  collection,  quality  control,  provision  and 
processing of data for assessing population health, 
the  use  of  services  and  the  performance  of  the 
health  system.  Luxembourg  is  however  preparing 
the  Data  Governance  Act  and  the  digitalisation 
strategy,  which  aim  at 
the 
information  technology  systems  of  the  various 
health  providers.  The  aim  is  to  improve  health 
information  flows  for primary  users  and  facilitate 
the  secondary  use  of  data,  while  also  improving 
integrated care and supporting a holistic approach 
to  patient  care  by  multidisciplinary 
teams. 
Investments under the RRP aim to boost the digital 
transformation  of 
the  healthcare  sector  by 
accelerating telemedicine. In May 2023, additional 
national  funding  was  granted  for  accelerating 
digitalisation  including  to  implement  electronic 
health  records.  Luxembourg  also  participates  in 
the EU4Health joint action on the European Health 
Data  Space  and  benefits from  a  grant  supporting 
digital infrastructure and secondary use of data in 
healthcare.  

streamlining 

(250) European Patent Office, Data to download | epo.org. 
(251) EMA (2024), Monitoring the European clinical trials 

environment, p. 9. 

90 

 
 
 
HORIZONTAL 
ANNEX 15: SUSTAINABLE DEVELOPMENT GOALS 

dimensions 

This  Annex  assesses  Luxembourg’s  progress 
on  the  Sustainable  Development  Goals 
the 
(SDGs) 
of 
along 
social 
sustainability, 
competitiveness, 
fairness and macroeconomic stability. 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  poverty,  fight  inequalities  and  tackle 
climate 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 
the EU. 

While  Luxembourg  is  moving  away  from 
to 
several 
SDG 
competitiveness 
is 
improving  on  SDG  9.  Luxembourg  performs 
well  on  SDGs  4  and 9 but  needs to  catch  up 

indicators 
(SDGs  4  and  8), 

related 

it 

with the EU average on SDG 8.  The number of 
patent  applications  to the  European  Patent  Office 
is  above  the  EU  average  (192  applications  per 
million  inhabitants  vs  156  in  the  EU)  (SDG  9). 
Meanwhile,  the  rate  of  young  people  aged  15-29 
neither  in  employment  nor  in  education  and 
training  increased  from  6.5%  in  2019  to  9.8%  in 
2024 but remains below the EU average of 11.0% 
(SDG  8).  Furthermore,  the  percentage  of  adults 
with  at  least  basic  digital  skills  decreased  from 
63.8%  of  individuals  aged  16  to  74  in  2021  to 
60.1%  in  2023  (EU  average:  55.6%)  (SDG 4).  The 
recovery  and  resilience  plan  (RRP)  envisages 
reforms and investments to promote a data-based 
public 
economy 
of 
administration. 
includes  measures  on 
improving  skills  and  on  up-  and  reskilling  to  help 
people join the labour market, with additional skills 
measures  financed  by  the  ESF+.  For  instance, 
training  under  the  RRP’s  ‘Future  Skills’  measure 
targeted  jobseekers,  with  a  target  participation 
rate of 30% for those aged 45 and above. 

digitalisation 

It  also 

and 

Graph A15.1: 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 
five 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 28 April 2025. Data refer mainly to the period 2018-2023 or 2019-2024. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

91 

 
 
 
 
 
 
 
Luxembourg  is  improving  on  several  SDG 
indicators  related  to  sustainability  (SDGs 2, 
7,  9,  11,  12,  13  and  15).  Luxembourg 
performs  well  on  SDGs  9, 11  and  15  but 
needs  to  catch  up  with  the  EU  average  on 
SDGs  2,  7,  12  and  13.  Luxembourg  has  made 
progress  on  organic  farming, 
increasing  the 
proportion of agricultural land dedicated to organic 
farming  from  4.2%  in  2017  to  6.2%  in  2022, 
albeit still below the EU average of 10.5% (SDG2). 
When  it  comes  to  the  proportion  of  terrestrial 
protected areas, Luxembourg performs better than 
the  EU  average,  with  37.9%  of  its  total  area 
consisting of terrestrial protected areas compared 
to  26.1%  across  the  EU  (SDG  15).  On  SDG  6, 
Luxembourg’s  Water  Exploitation  Index  (WEI+) 
remained  stable  at  0.7%  of  renewable  water 
resources between 2017 and 2022, still below the 
EU average of 5.8% in 2022. On SDG 7, the share 
of  renewable  energy 
in  gross  final  energy 
consumption  increased  from  8.9%  in  2018  to 
14.4%  in  2023  (EU  average:  24.6%).  In  contrast, 
energy  import  dependency  as  a  percentage  of 
imports in  gross  available  energy decreased  from 
95.2%  in  2018  to  90.6%  in  2023  but  remains 
above  the  EU  average  of  58.3%.  Despite  a  slight 
decrease  from 1.31 in  2018  to  1.30  in  2023,  the 
consumption footprint per inhabitant (SDG 12) still 
exceeds 
(0.93).  Similarly, 
Luxembourg  improved  on  net  greenhouse  gas 
emissions  (SDG 13),  decreasing  from  16.9  tonnes 
per  capita  in  2018  to  10.6 tonnes  in  2023,  but 
remaining  above  the  EU  average  of  6.8  tonnes. 
The  air  emission  intensity  of  fine  particulate 
matter from industry decreased from 0.07 to 0.05 
grams  per  euro,  below  the  EU  average  of  0.06 
(SDG  9).  The  country  further 
its 
performance  on  the  recycling  of  municipal  waste 
as  a  percentage  of  total  waste  generated  (SDG 
11)  from  49.0%  in  2018  to  56.2%  in  2023,  well 
above the EU average (48.2%). 

the  EU  average 

improved 

While Luxembourg is improving on some SDG 
indicators related to social fairness (SDGs 3, 
5,  7  and  10),  it  is  moving  away  from  others 
(SDGs 1, 4 and 8). Luxembourg performs well 
on SDGs 1, 3, 4, 5 and 10 but needs to catch 
up with the EU average on SDGs 7 and 8. The 
percentage of people with good or very good self-
perceived  health  aged  16  or  over  increased  from 
68.6%  in  2018  to  74.1%  in  2023  (EU  average: 
67.9%)  (SDG  3).  Moreover,  the  percentage  of  the 
population  unable  to  keep  their  home  adequately 
warm  remains  stable  at  2.1%,  well  below  the  EU 

average  of  10.6%  (SDG  7).  Furthermore,  the 
relative  median  at-risk-of-poverty  gap  shows 
improvement,  decreasing  from  23.6%  in  2018  to 
17.2% in 2023 (SDG 10), while the in-work-at-risk 
of  poverty  rate  increased  between  2018  and 
2023,  reaching  14.8%,  above  the  EU  average 
(8.3%) (SDG 8). On SDG 5, Luxembourg reduced its 
gender  employment  gap  (from  9.1 pps  of  those 
aged  20-64  in  2019  to  5.5 pps  in  2024;  EU 
average  10.0 pps).  Also,  positions  held  by  women 
in  senior  management  as  a  percentage  of  board 
members increased from 13.1% in 2019 to 22.8% 
in  2024  but  remained  below  the  EU  average  of 
32.6%. 
In  terms  of  the  percentage  of  the 
population  self-reporting  an  unmet  need  for 
medical  care,  Luxembourg  performs  better  than 
the EU average (0.8% vs 2.4% for the EU in 2023) 
(SDG 1). On SDG 4, tertiary educational attainment 
as  a  percentage  of  the  population  aged  25-64 
jumped  from  56.1%  in  2019  to  63.8%  in  2024, 
well above the EU average of 44.2%. However, the 
number  of  early  leavers  from  education  and 
training as a percentage of the population aged 18 
to 24 also increased from 7.2% in 2019 to 7.8% in 
2024 (EU average 9.3%). 

While  Luxembourg 
improving  on  one 
is 
indicator  related  to  macroeconomic  stability 
(SDG  16),  it  is  moving  away  from  others 
(SDGs  8  and  17).  Luxembourg  performs  well 
on  SDGs  16  and  17  but  needs  to  catch  up 
with  the  EU  average  on  SDG  8.  General 
government  gross  debt  (SDG 17)  increased  from 
22.3%  of  GDP  in  2019  to  26.3%  in  2024  but 
remains very  low  compared  to  the  EU  average  of 
81.0%.  Meanwhile,  the  investment  share  of  GDP 
decreased  slightly  from  16.2%  in  2018  to  16.1% 
in  2023,  remaining  below  the  EU  average  at 
21.7% (SDG 8).  Finally, on SDG 16, the percentage 
of the population that perceived the independence 
of  the  justice  system  as  “very  good”  and  “fairly 
good”  increased  from  70%  in  2019  to  77%  in 
2024,  much  higher  than  the  EU  average  of  52%. 
Luxembourg’s  RRP  includes  measures  to  promote 
a  transparent  and  fair  economy,  such  as  making 
anti-money 
of 
professionals  that  provide  trust  and  company 
services more effective and increasing the quality 
and  transparency  of  the  business  register,  which 
will  help  authorities  better  identify  the  ultimate 
beneficiaries of legal entities. 

supervision 

laundering 

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

92 

 
ANNEX 16: CSR PROGRESS AND EU FUNDS IMPLEMENTATION 

Luxembourg faces  structural  challenges  in a 
wide  range  of  policy  areas,  as  identified  in 
the country-specific recommendations (CSRs) 
addressed  to  the  country  as  part  of  the 
European  Semester.  They  refer,  among  other 
things, 
to  taxation  policy,  energy  efficiency, 
pension  systems,  the  labour  market,  skills  and 
training,  transport,  the  business  environment,  and 
research and innovation. 

The Commission has assessed the 2019-2024 
CSRs  considering  the  policy  action  taken  by 
Luxembourg to date and the commitments in 
its  recovery  and resilience  plan  (RRP).  At  this 
stage,  Luxembourg  has  made  at  least  ‘some 
progress’  on  57%  of  the  CSRs  (252),  and  ‘limited 
progress’ on 98% (Table A16.2). 

programmes  is  advanced  and  implementation  of 
selected projects had gained momentum.  

Luxembourg’s  RRP  contains  13  investments 
and  10  reforms  to  stimulate  sustainable 
growth  and  support  green  transition  and 
digitalisation.  A  year  before  the  end  of  the  RRF 
timespan,  implementation  is  on  its  way,  with 
around  13.4%  of  the  funds  disbursed.  At  present, 
Luxembourg  has  fulfilled  42%  of  the  milestones 
and  targets  in  its  RRP  (256).  Increased  efforts  are 
needed to ensure completion of all RRP measures 
by 31 August 2026.  

Graph A16.1: Distribution of RRF funding in 
Luxembourg by policy field 

competitiveness, 

EU funding instruments provide considerable 
resources  to  Luxembourg  by  supporting 
investments  and  structural  reforms  to 
increase 
environmental 
sustainability  and  social  fairness,  while 
helping  to  address  challenges  identified  in 
the  CSRs.  In  addition  to  the  EUR 241.1  million 
funding  from  the  Recovery  and  Resilience  Facility 
(RRF) in 2021-2026, EU cohesion policy funds (253) 
are  providing  EUR 39  million  to  Luxembourg 
(amounting  to  EUR 90  million  with  national  co-
financing) 
to  boost 
competitiveness  and  growth.  Support  from  these 
instruments combined represents around 0.35% of 
these 
2024  GDP 
instruments  to  different  policy  objectives 
is 
outlined 
in  Graphs  A16.1  and  A16.2.  This 
substantial  support  comes  on  top  of  financing 
provided  to  Luxembourg  under  the  2014-2020 
multiannual  financial  framework,  which  financed 
projects  until  2023  and  has  had  benefits  for  the 
economy  and  Luxembourgish  society.  Project 
selection  under  the  2021-2027  cohesion  policy 

(255).  The  contribution  of 

for  2021-2027 

(254) 

(252) 7% of the 2019-2024 CSRs have been fully implemented, 

6% substantially implemented, and some progress has been 
made on 44%. 

(253) In 2021-2027, cohesion policy funds include the European 
Regional Development Fund, the European Social Fund Plus 
and the Just Transition Fund. The information on cohesion 
policy included in this annex is based on adopted 
programmes with the cut-off date of 5 May 2025. 

(254) European territorial cooperation (ETC) programmes are 

excluded from the figure. 

(255) RRF funding includes both grants and loans, where 

(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 circle 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. 
Source: European Commission 

Luxembourg  also  receives  funding  from 
several other EU instruments, including those 
listed in Table A16.1. Most notably, the common 
agricultural policy (CAP) provides Luxembourg with 
an EU contribution of EUR 224.8 million under the 
CAP  strategic  plan  2023-2027  (257).  Operations 
amounting  to  EUR 9.3  million  (258)  have  been 
signed  under  the  InvestEU  instrument  backed  by 
the  EU  guarantee,  improving  access  to  financing 
for riskier operations in Luxembourg. 

(256) As of mid-May 2025, Luxembourg has submitted 2 payment 

requests, the last one being under assessment. 

(257) An overview of Luxembourg’s formally approved strategy to 
implement the EU’s common agricultural policy nationally 
can be found at: https://agriculture.ec.europa.eu/cap-my-
country/cap-strategic-plans/luxembourg_en   

applicable. GDP figures are based on Eurostat data for 2024. 

(258) Data reflect the situation on 31.12.2024. 

93 

Green transitionDigital transformationSmart, sustainable andinclusive growthSocial & territorial cohesionHealth & resilienceNext generation 
 
 
  
 
 
 
competitiveness 
improve 

Cohesion  policy  funds  aim  to  increase  the 
and 
of 
productivity 
Luxembourg’s 
the 
firms  and 
business  environment.  The  European  Regional 
Development  Fund  (ERDF)  is  used  to  promote 
innovation,  including  in  material  technologies  and 
manufacturing,  as  well  as 
to  diversify  the 
economy  by  supporting  high-growth  small  and 
medium-sized  enterprises  (SMEs)  and  start-ups, 
with  an  allocation  of  EUR  22.6  million.  The 
European  Social  Fund  Plus 
(ESF+)  supports 
upskilling and reskilling initiatives, for unemployed 
or  inactive  people  and  for  workers,  dedicating 
around  EUR 5.6  million  (36%  of  the  total  ESF+ 
allocation)  to  developing  digital  skills  and  jobs  in 
Luxembourg,  and  EUR 2.5  million  (16.5%  of  the 
total ESF+ allocation) to green skills and jobs. The 
ESF+  is  also  used  to  support  training  initiatives 
which provide beneficiaries with new skills to work 
in the social and solidarity economy. 

Graph A16.2: Distribution of cohesion policy 
funding across policy objectives in Luxembourg 

Source: European Commission 

are 

funds 

contributing 

Other 
to 
competitiveness in  Luxembourg, for instance 
through  open  calls.  The  Connecting  Europe 
Facility  (CEF) has  supported  strategic investments 
in key transport infrastructure projects to enhance 
connectivity, sustainability and efficiency along the 
Trans-European Transport Network. The CEF Digital 
has  advanced  the  deployment  of  5G  in  smart 
communities,  enabling  smart  urban  services  and 
healthcare,  as  well  as  connected,  automated 
mobility  across  the  border  to  Germany.  Horizon 
Europe  has  supported  research  and  innovation 
from  scientific  breakthroughs 
to  scaling  up 
innovations,  with  research  in  Digital,  Industry  and 
Space,  and  Climate,  Energy  and  Mobility  as  top 
priorities in Luxembourg.  

Luxembourg’s  RRP  also  contains  ambitious 
business 
improve 
measures 

the 

to 

environment  and  competitiveness.  As  part  of 
the  measures  covered  by  payment  requests 
submitted  over 
the  past  year,  Luxembourg 
completed measures aimed at digitising the public 
sector  via  the  development  of  the  ‘MyGuichet.lu’ 
mobile application. 

EU  funds  are  playing  a  significant  role  in 
promoting  environmental  sustainability  and 
green  transition  in  Luxembourg  during  the 
current  seven-year  EU  budget  (multiannual 
financial  framework).  The  ERDF  has  a  strong 
in 
focus  on  promoting  the  green  transition 
Luxembourg,  with  an  overall  allocation  of  EUR 
10.6  million.  This  includes  investments  in  smart 
and  clean  mobility  and  the  uptake  of  renewable 
energy  sources  and  action  to  increase  energy 
efficiency.  Luxembourg  is  drawing  on  the  Just 
Transition  Fund  (JTF)  to  contribute  to  reaching 
carbon  neutrality  in  the  south  of  the  country 
through  clean  transport  and  renewable  energy 
strategic  plan 
projects.  Luxembourg’s  CAP 
allocates  EUR 45.5  million 
rural 
(75%  of 
development 
to  environmental  and 
climate  objectives  and  EUR 41  million  (25%  of 
direct  payments)  to  eco-schemes,  supporting 
biodiversity,  organic  farming  and  sustainable 
to 
practices.  For  example,  farmers  wanting 
abandon  the  use  of  pesticides  in  their  farms  will 
receive financial support. 

funding) 

Luxembourg’s  RRP,  including  the  REPowerEU 
chapter, has a comprehensive set of reforms 
and  investments  for  the  green  transition. 
Green  mobility  measures 
include 
implementation  of  a  legal  framework  setting  a 
minimum  percentage  of  clean  vehicles  in  public 
procurement  contracts  and  a  support  scheme  for 
electric vehicle charging points. 

covered 

Promoting  fairness  and  social  cohesion  are 
among  the  key  priorities  of  EU  funding  in 
Luxembourg. The ESF+ fosters social cohesion in 
inclusion  projects 
Luxembourg  through  active 
targeting  disadvantaged  people  and  vulnerable 
groups,  fostering  integrated  pathways  to  work, 
partnerships with economic actors for sustainable 
professional  integration,  workshops  for  social  and 
professional  reintegration  and  dedicated  actions 
for people with a migrant background. The ESF+ is 
also used to support the Child Guarantee and fight 
child  poverty  through  specific  actions  in  the  field 
of  education.  At  least  3 260  unemployed  people, 
3 000  children  and  young  students,  and  1 290 
disadvantaged  people  (including  people  with  a 

94 

Smarter EuropeGreener EuropeConnected EuropeSocial EuropeEurope closer to citizensJTF specific objective 
  
disability  or  from  a  migrant  background)  will 
benefit under the ESF+ programme. 

Luxembourg’s  RRP  contains  several  reforms 
and  investments  related  to  fairness  and 
include  upskilling  the 
social  policies.  These 
workforce  with  the  launch  of  the  ’Skillsbridges’ 
programme,  the  Housing  Pact  2.0  to  increase  the 
supply of housing, and the digitalisation of health. 
The  Technical  Support  Instrument  (TSI)  has  been 
supporting 
and 
implementing growth-enhancing reforms, including 
the 
identifying 
in 
the  Global  Biodiversity 
implementation  of 
the 
Framework,  which  could  contribute 
establishment  of 
is 
supported by the Luxembourgish RRP. 

‘Naturpakt’  which 

Luxemburg 

designing 

solutions 

financial 

the 

for 

to 

in 

Table A16.1:Selected EU funds with adopted allocations - summary data (million EUR) 

(1) The cut-off date for data on disbursements under the RRF is 31 May 2025. 
(2) Cohesion policy 2014-2020 allocations include REACT-EU appropriations committed in 2021-2022. 
(3) These amounts relate only to disbursements made from 2021 onwards and do not include payments made to the Member 
State before 2021.  Hence the figures do not comprise the totality of payments corresponding to the 2014-2020 allocation. The 
cut-off date for data on disbursements under EMFAF and EMFF is 29 April 2025.  The cut-off date for data on disbursements 
under cohesion policy funds, AMIF, BMVI and ISF is 5 May 2025. 
(4) AMIF - Asylum, Migration and Integration Fund; BMVI - Border Management and Visa Instrument; ISF - Internal Security Fund. 
(5) Expenditure outside the CAP strategic plan is not included. 
(6) The cut-off date for data on EARDF disbursements is 5 May 2025. The information on EAGF disbursements is based on the 
Member State declarations until March 2025.  Disbursements for the Direct Payments (EAGF) started in 2024. 
Source: European Commission 

95 

Instrument/policyDisbursed since 2021   (1)             RRF grants (including the RepowerEU allocation)32.4RRF loans0.00 Instrument/policyAllocation 2014-2020 (2)Allocation 2021-2027 Disbursed since 2021 (3)    (covering total payments to the Member State on commitments originating from both 2014-2020 and 2021-2027 programming periods) Cohesion policy (total) 182.4 38.9 161.0European Regional Development Fund (ERDF) 89.2 14.1 77.0European Social Fund (ESF, ESF+) 93.3 15.5 80.8Just Transition Fund (JTF) 9.3 3.2Migration, border management and internal security - AMIF, BMVI and ISF (4) 35.8 47.823.8The common agricultural policy under the CAP strategic plan (5)Disbursements under the CAP Strategic Plan (6)Total under the CAP strategic plan76.7European Agricultural Guarantee Fund (EAGF)62.3European Fund for Agricultural Development (EAFRD)14.4224.8163.960.9Allocation 2021-2026 241.10Migration and home affairsAllocation 2023-2027 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
Table A16.2:Summary of 2019-2024 CSRs 

(Continued on the next page) 

96 

LuxembourgAssessment in May 2025Relevant SDGs2019 CSR 1Limited progressIncrease the employment rate of older workers by enhancing their employment opportunities and employability.Limited progressSDG 8Improvethelong-termsustainabilityofthepensionsystem,includingbyfurther limiting early retirement.Limited 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 progressSDG 9and innovation,Limited progressSDG 9stimulating skills development,Some progressSDG 4improving sustainable transport,Some progressSDG 11and increasing housing supply, including by increasing incentives and lifting barriers to build.Limited progressSDG 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-termfiscalpositionsandensuringdebtsustainability,while enhancing investment. No longer relevantSDG 8, 16Improvetheresilienceofthehealthsystembyensuringappropriateavailability of health workers.Some progressSDG 3Accelerate reforms to improve the governance of the health system and e-health. Some progressSDG 32020 CSR 2Substantial progressMitigate the employment impact of the COVID-19 crisis, with special consideration for people in a difficult labour market position.Substantial progressSDG 82020 CSR 3Some progressEnsure effective implementation of measures supporting the liquidity of businesses, in particular SMEs and the self-employed. Full implementationSDG 8, 9Front-loadmaturepublicinvestmentprojects[tofostertheeconomicrecovery] Some progressSDG 8, 16and promote private investment to foster the economic recovery. Not assessed / No input to addSDG 8, 9Focusinvestmentonthegreenanddigitaltransition,inparticularonsustainable transport Some progressSDG 11and buildings, Some progressSDG 7, 8cleanandefficientproductionanduseofenergy,contributingtoaprogressive decarbonisation of the economy. Some progressSDG 7, 9, 13Foster innovation [in particular in the business sector] Limited progressSDG 9and digitalisation, in particular in the business sector. Some progressSDG 92020 CSR 4Limited progressEnsureeffectivesupervisionandenforcementoftheanti-moneylaunderingframeworkasregardsprofessionalsprovidingtrustandcompany services, and investment services. Some progressSDG 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) 

97 

2021 CSR 1No longer relevantIn2022,pursueasupportivefiscalstance,includingtheimpulseprovidedbytheRecoveryandResilienceFacility,andpreservenationallyfinancedinvestment.No longer relevantSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term.No longer relevantSDG 8, 16At the same time, enhance investment to boost growth potential.Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticular investment supporting the green and digital transition. No longer relevantSDG 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthecoverage,adequacyandsustainabilityofhealthandsocialprotectionsystems for all.No longer relevantSDG 8, 162022 CSR 1Limited progressIn2023,ensurethatthegrowthofnationallyfinancedprimarycurrentexpenditureisinlinewithanoverallneutralpolicystance,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Stand ready to adjust current spending to the evolving situation.No longer relevantSDG 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymaking use of the Recovery and Resilience Facility and other Union funds.No longer relevantSDG 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachievingprudent medium-term fiscal positions.No longer relevantSDG 8, 16Improvethelong-termsustainabilityofthepensionsystem,inparticularbylimitingearlyretirementandbyincreasingtheemploymentrateofolder workers.Limited progressSDG 8Takeactiontoeffectivelytackleaggressivetaxplanning,includingbyensuringsufficienttaxationofoutboundpaymentsofinterestandroyalties to zero and low-tax jurisdictions.Limited progressSDG 8, 162022 CSR 2Proceedwiththeimplementationofitsrecoveryandresilienceplan,inlinewiththemilestonesandtargetsincludedintheCouncilImplementingDecision of 13 July 2021.Submitthe2021-2027cohesionpolicyprogrammingdocumentswithaviewtofinalisingtheirnegotiationswiththeCommissionandsubsequently starting their implementation.2022 CSR 3Limited progressReducetheimpactofinequalitiesonpupils’performanceandpromoteequal opportunities for all students in the educational system.Limited progressSDG 4, 8, 102022 CSR 4Some progressReduce overall reliance on fossil fuelsLimited progressSDG 7, 9, 13by accelerating the deployment of renewables,Substantial progressSDG 7, 9, 13electricity transmission capacity,Some progressSDG 7, 9, 13andinvestmentinenergyefficiencyinboththeresidentialandnon-residential sectors.Some progressSDG 7Supportmunicipalitiesindevelopingdetailedlocalplansforthedeploymentofrenewableenergy,includingwindpowerandphotovoltaics, and for district heating and cooling systems.Some progressSDG 7, 9, 10, 11, 13Furtherpromoteelectrificationoftransportandinvestinpublictransportnetworks and infrastructures.Some progressSDG 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) 

(Continued on the next page) 

98 

2023 CSR 1Some progressWind down the emergency energy support measures in force, using the related savings to reduce the government deficit, as soon as possible in 2023 and 2024. Should renewed energy price increases necessitate new or continued support measures, ensure that these are targeted at protecting vulnerable households and firms, fiscally affordable, and preserve incentives for energy savings.Some progressSDG 8, 16Ensure prudent fiscal policy, in particular by limiting the nominal increase in nationally financed net primary expenditure in 2024 to not more than 4.8%(1). (1) Which is estimated to correspond to an annual improvement in the structural budget balance of at least 0.3% of GDP for 2024, as described in recital 24.Full implementationSDG 8, 16Preserve nationally financed public investment and ensure the effective absorption of RRF grants and other EU funds, in particular to foster the green and digital transitions.Some progressSDG 8, 16For the period beyond 2024, continue to pursue a medium-term fiscal strategy of gradual and sustainable consolidation, combined with investments and reforms conducive to higher sustainable growth, to achieve a prudent medium-term fiscal position.Full implementationSDG 8, 16Reduce risks related to the housing market, in particular by reducing mortgage interest deductibility, and by taking measures to increase the supply of buildable land.Limited progressSDG 8Address the long-term sustainability of the pension system, in particular by limiting early retirement options and increasing the employment rate for older workers.Limited progressSDG 8Increase action to effectively tackle aggressive tax planning, in particular by ensuring sufficient taxation of outbound payments of interest and royalties to zero/low-tax jurisdictions.Limited progressSDG 8, 102023 CSR 2Proceed with the steady implementation of its revised recovery and resilience plan and swiftly finalise the REPowerEU chapter with a view to rapidly starting the implementation thereof. Proceed with the swift implementation of cohesion policy programmes, in close complementarity and synergy with the recovery and resilience plan.2023 CSR 3Limited progressImprove the performance of the school education system and promote equal opportunities for all students, in particular by adapting teaching to the needs of disadvantaged students and those from various linguistic backgrounds.Limited progressSDG 42023 CSR 4Some progressReduce reliance on fossil fuelsLimited progressSDG 7, 13by accelerating the deployment of renewable energy, increasing electricity transmission capacity, easing permitting procedures andSubstantial progressSDG 7, 9, 13investing in energy efficiency in both the residential and non-residential sectors.Some progressSDG 7, 9, 13Support municipalities in developing detailed local plans for deploying renewable energy, including wind power and photovoltaics, and for district heating and cooling systems.Some progressSDG 7, 9, 13Further promote the electrification of transport and invest in public transport networks and infrastructure.Some progressSDG 7, 9, 13Step up policy efforts aimed at the provision and acquisition of skills and competences needed for the green transition.Some progressSDG 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. 
 
 
  
 
Table (continued) 

Source: European Commission 

99 

2024 CSR 1Limited progressSubmit the medium-term fiscal-structural plan in a timely manner.Full implementationSDG 8, 16 Wind down the emergency energy support measures before the 2024/2025 heating season.Some progressSDG 7Address the long-term sustainability of the pension system, in particular by limiting early retirement options and by increasing the employment rate for older workers.Limited progressSDG 8Accelerate the adoption of a comprehensive land use policy and a property tax reform and prioritise the development of large-scale district projects on government-owned land.Limited progressSDG 8, 11Increase action to effectively tackle aggressive tax planning, in particular by ensuring sufficient taxation of outbound payments of interest and royalties to zero/low-tax jurisdictions.No progressSDG 8,162024 CSR 2Continue with the swift and effective implementation of the recovery and resilience plan, including the REPowerEU chapter once adopted, ensuring completion of reforms and investments by August 2026. Accelerate the implementation of cohesion policy programmes. In the context of the mid-term review, continue focusing on the agreed priorities, while considering the opportunities provided by the Strategic Technologies for Europe Platform initiative to improve competitiveness.2024 CSR 3Limited progressImprove the performance and equity of the school education system, including by adapting teaching to the needs of disadvantaged students and those from various linguistic backgrounds.Limited progressSDG 4, 10Address labour shortages and skills mismatches in particular for the green transition.Some progressSDG 42024 CSR 4Some progressBoost competitiveness by supporting business and greenfield investment, in particular in high R&D intensive activities.Limited progressSDG 9,8Reduce reliance on fossil fuels by investing in energy efficiency and renewable energy.Limited progressSDG 7, 13Further promote the electrification of transport and invest in public transport networks and infrastructure.Some progressSDG 11RRP 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 programming is monitored in the context of the Cohesion Policy of the European Union. 
 
  
 
ANNEX 17: COMPETITIVE REGIONS 

Living,  working  and  leisure  arrangements 
around  Luxembourg  function  largely  in  a 
cross-border  setting.  While  Luxembourg  is  a 
relatively  wealthy  Member  State  with  high  levels 
of  productivity,  increasing  pressures  related  to 
housing and personal mobility, which are linked to 
the  cross-border  dynamic,  may  risk  stifling  both 
national and regional growth potential. 

The capital city and the areas surrounding it 
are  more  economically  active  than  the more 
remote  communes 
in  the  post-industrial 
south  and  the  rural  north  of  the  country. 
However,  predominantly  residential  areas,  which 
must  offer  local  public  services,  are  increasingly 
situated cross-border. 

Competitiveness 

the  EU-27  average 

Luxembourg's  GDP  per capita is  significantly 
higher  than  the  EU  average.  In  2023,  it  was 
in  terms  of 
237%  of 
purchasing  power  standard  (PPS)  per  inhabitant. 
GDP per capita in PPS is declining when compared 
to the EU average: from 282% in 2014 to 256% in 
2020, to 237% in 2023. 

Labour productivity, measured as GDP in PPS 
per  hours  worked,  was  164%  of  the  EU 
average  in  2023,  down  from  191%  in  2014 
and  173%  in  2020.  GDP  growth  per  head  in 
recent years performed below the EU average, due 
to an increase in population size and stagnation in 
productivity growth. 

Productivity  growth  has  been  sluggish.  R&D 
in 
expenditure  as  a  percentage  of  GDP 
Luxembourg  has  consistently  remained  below  the 
EU average. In 2023, it was 1.03% in Luxembourg, 
compared  to  the  EU  average  of  2.22%,  while 
business  spending  in  R&D,  at  0.48%  of  GDP,  was 
well  below  the  EU  average  of  1.47%.  Levels  of 
individual  basic  or  above  basic  digital  skills 
declined  in  Luxembourg  from  63.8%  in  2021  to 
60.1% in 2023, although they are still higher than 
the EU average (55% in 2023). In addition, people 
with a high level of education are concentrated in 
Luxembourg  City  and  the  surrounding  area.  While 
only 8.7% of city adult residents have a low level 
of  education,  in  rural  areas  and  towns  this 
percentage is between 17.7% and 22.1%. 

Graph A17.1: Labour productivity per hour worked 

Unit: Real GDP per hour worked (EUR, 2015 prices). 
Source: ARDECO (JRC). 

has 

been 

successful 

Luxembourg 
in 
attracting  workers.  The  working-age population 
(aged  20-64)  has  increased  considerably  (+2.1% 
per  year)  in  the  last  10  years,  while  it  has 
stagnated in the EU. This shows that Luxembourg 
is  attractive  to  workers,  although  skills  shortages 
remain  (see  Annex  4).  Internet  access  is  almost 
universal (99% of households in 2023, 6 pps more 
than  the  EU  average),  also  in  rural  areas  (98%). 
The  gender  employment  gap  (5.5  pps)  is  smaller 
than  the  EU  average  (10  pps).  Luxembourg's 
Quality  of  Government  Index  score  is  one  of  the 
highest  in  Europe  (1.305)  and  has  improved  – 
particularly 
the  areas  of  quality  and 
accountability,  and  impartiality  –  compared  to 
2010 (1.166) (259). 

in 

Social fairness 

outside 

conditions 

indicators, 

labour  market 

While  Luxembourg  generally  scores  well 
across 
labour 
market 
cities  are 
generally  less  favourable,  with  people  living 
outside  cities  also  at  higher  risk  of  poverty. 
In  2024,  the  employment  rate  (for  people  aged 
20-64)  was  in  line  with  the  EU  average  but  was 
higher  in  cities  than  in  towns  and  suburbs  and 
rural  areas.  Employment  rates  are  lower  for 
women  than  for  men,  especially  in  towns  and 
suburbs.  The  percentage  of  people  at  risk  of 
poverty  or  social  exclusion  is  also  much  higher  in 

(259) European Quality of Government Index 2024| University of 

Gothenburg 

100 

3040506070809010020122013201420152016201720182019202020212022202320242015 EUR per hour workedLuxembourgEU27 
 
  
 
 
 
rural  areas  and  towns  and  suburbs  than  in  urban 
areas (see Table A17.1). 

Table A17.1:Socio-economic indicators by degree 
of urbanisation, 2024 

(56.9%)  and  rural  areas  (55.1%),  with  a  gap 
persisting  at  30-40  pp  for  a  decade.  Access  to 
primary  schools in  rural  areas  – measured  as  the 
percentage of children within a 15-minute walking 
distance from the nearest school – reached 32.2%, 
higher than the EU average of rural areas in more 
developed regions of the EU (28.9%) (261), and far 
below urban areas (83.8%). Improving educational 
outcomes would help to encourage more people to 
work or look for a job outside cities and tackle the 
higher risk of poverty in these areas. 

issue 

housing 

is  an 
the 

in 
Housing  affordability 
Luxembourg.  Although 
cost 
overburden rate (262) matched the EU average level 
in 2024, it remained higher than in most other EU 
countries. The rates were similar for every degree 
of  urbanisation:  in  cities  (9.8%  in  Luxembourg 
versus  an  EU  average  of  9.8%),  in  towns  and 
suburbs  (8.5%  in  Luxembourg  against  an  EU 
average  of  7.8%)  and  rural  areas  (5.9%  in 
Luxembourg versus an EU average of 6.3%). Over 
the last 20 years, rural communities have seen the 
strongest  relative  growth  in  housing  due  to  lower 
prices  and  the  opportunities  they  offer  to  build 
single-family  homes,  which  are  still  very  popular. 
The  national  government  intends  to  achieve  a 
more  efficient  uptake  of  available 
land  for 
improve  housing 
in  order 
development 
conditions,  including  the  potentially  building  more 
housing (263). 

to 

Greenhouse  gas  (GHG)  emissions  decreased 
in  2023  but  remain  well  above  the  EU 
average.  In  2023,  Luxembourg’s  average  GHG 
emissions  per  capita  were  11.9  tonnes  of  CO2 
equivalent,  compared  to  7.1  tonnes  in  the  EU  on 
average  (see  also  Annex  9).  The  biggest  emitters 
are  the  transport  sector  (accounting  for  61%  of 
emissions  in  2023,  compared  to  44%  in  2008), 
manufacturing  (13%  of  total  emissions  in  2023 
versus 21% in 2008) and agriculture (11% of total 
emissions in 2023 versus 9% in 2008). Therefore, 
emissions  tend  to  be  increasingly  linked  to  road 
transport.  The  decline  in  emissions  linked  to 

(261) Measured as an average for 24 Member States, no data 

available for Bulgaria, Malta and Latvia 

(262) Housing cost overburden is defined as the percentage of the 
population living in households where the total housing costs 
(‘net’ of housing allowances) represent more than 40% of 
disposable income. 

(263) Programme Directeur d’Aménagement du Territoire 2035 

Source: Eurostat 

Labour market conditions are worse for non-
EU  migrants,  especially  in  rural  areas.  In 
2024,  their  employment  rate  (20-64)  was  62.0% 
in rural areas, compared to 76.5% in cities (and 6 
pps  lower  than  the  EU  average  for  non-EU 
migrants  in  rural  areas).  Even  those  with  tertiary 
education  have  an  employment  rate  of  only 
68.6%, compared to 83.1% in cities and to 73.5% 
for  non-EU  migrants  in  rural  areas  in  the  EU  on 
average. Employment rates are particularly low for 
non-EU migrant women in rural areas (only 54.7%, 
compared to 71.4% for men). Similar patterns are 
observed in unemployment rates, which are nearly 
double  of  the  national  average  for  non-EU 
migrants (12.1% vs 6.4%) and are especially high 
in rural areas (estimated at around 13% compared 
to 11.6% in cities). 

Cross-border workers occupy 6 out of 10 jobs 
(260).  Therefore,  a 
created  in  the  country 
relatively  significant  number  of  people  working  in 
Luxembourg do not live in Luxembourg’s territory. 

Lower  labour  market  participation  outside 
cities  is  correlated  with  lower  educational 
attainment.  In  2024,  the  percentage  of  people 
aged  25-34  with  a  tertiary  degree  was  much 
higher in cities (85.4%) than in towns and suburbs 

(260) Rapport général sur la sécurité sociale 2024 - Inspection 

générale de la sécurité sociale - Le gouvernement 
luxembourgeois 

. 

101 

CitiesTowns and suburbsRural areasPopulation with high educational attainment (% of population aged 25-64)79.547.148.7Young adults with high educational attainment (% of population aged 25-34)85.456.955.1Employment rate (% of population aged 20-64)81.371.872.9Female employment rate (% of women aged 20-64)79.168.071.1Unemployment rate (% of labour force)6.07.35.8NEET: Neither in employment nor in education or training  (% of population 15-29)6.411.79.7At-risk-of-poverty or social exclusion (% of total population)12.920.323.7 
 
  
 
 
 
 
given  the  high  number  of  workers  who  travel 
across the border from neighbouring countries. 

manufacturing  activity,  situated  mainly  in  the 
south  of  the  country,  could  be  attributed  to  more 
limited  volumes  of  production  and  adoption  of 
greener technologies. 

Public  transport  is  now  free  throughout  the 
country,  but  challenges  related  to  personal 
mobility  remain  significant.  The  percentage  of 
population in a 120-km radius that can be reached 
within 1.5 hours by car was 81.5% in Luxembourg, 
compared  to  the  EU  average  of  77%  in  2021, 
while the same indicator referring to rail transport 
was  below  the  EU  average  in  2019:  12.6%  in 
Luxembourg, compared to 15.7% in the EU. 

exacerbate 

Luxembourg 

The difficulties in finding affordable housing 
challenges 
in 
concerning  transport  and  GHG  emissions. 
Personal  mobility 
is  of  major  concern  for 
Luxembourg  residents,  especially  outside  the 
capital  and  for  cross-border  commuters,  as 
congestion on the main roads is growing. In 2019, 
45%  of  residents  spent  more  than  30  minutes 
commuting each way, and a third spent more than 
40  minutes  each  way.  This  is  linked  to  the 
development  of  flows  induced  by  economic  and 
demographic  growth,  but  also  to  the  increase  in 
distances  between  places  of  employment, 
residence,  commerce  and  leisure.  Urban  sprawl 
only  exacerbates  the  problem,  as  it  means  that 
people are more often dependent on a private car 
to get around (264). 

Shifting  towards  electric  transport  would 
help  to  tackle  GHG  emissions.  Access  to 
(265)  could  be 
infrastructure 
alternative  fuel 
improved,  as  the  number  of  electric  vehicle 
charging  points  withing  a  10 km  drive  is  416, 
below  the  average  for  more  developed  regions  in 
the EU (539). The development of electric mobility 
is  supported  by  a  cohesion  policy  financed 
measure  to  fully  electrify  local  public  transport 
specifically in the south of the country as well  as 
by  the  recovery  and  resilience  facility,  which 
supports the deployment of charging points across 
the  country.  However,  alleviating  the  pressures  of 
congestion  requires  well-coordinated  measures, 
considering  also  the  cross-border  perspective, 

(264) Programme Directeur d’Aménagement du Territoire 2035 

(265) Indicators of access to alternative fuel infrastructure are 

based on calculations by DG REGIO and the JRC, using data 
from the European Alternative Fuels Observatory (EAFO), 
Eurostat, TomTom and Eco-Movement. 

102