COMMISSION STAFF WORKING DOCUMENT 2026 Country Report – Luxembourg Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Luxembourg
Date: 2026-06-03
Institutions: European Commission, Reform and Investment Task Force
Subjects: Luxembourg, budget policy, economic policy, economic recovery, economic reform, employment policy, investment, macroeconomics, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 3.6.2026  SWD(2026) 216 final  COMMISSION STAFF WORKING DOCUMENT 2026 Country Report – Luxembourg Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Luxembourg {COM(2026) 216 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC DEVELOPMENTS AND KEY POLICY 
CHALLENGES 

Growth remains subdued as 
productivity weakens 

high 

features 

living 
Luxembourg 
its 
standards  and  productivity,  but 
slowed,  and 
economic  growth  has 
productivity  has  stagnated  since  the 
early  2010s.  Luxembourg  is  among  the 
world’s  wealthiest  economies,  with  a  gross 
income  per  head  of  around 
national 
EUR 64 000  in  2024  (60  percentage  points 
above the EU average). That prosperity reflects 
very  high  gross  value  added  and  labour 
productivity  levels  in  a  service-led  economy, 
driven by a large, externally oriented financial 
sector,  which  generates  about  a  quarter  of 
value added. High wages and living standards 
have  exerted  a  strong  pull  on  labour,  which 
has  increased  by  70%  in  two  decades:  end-
2025  Luxembourg  counted  nearly  526 000 
workers,  some  43%  of  whom  were  cross-
neighbouring 
border  workers 
countries.  Before  2007, 
economy 
combined  this  specialisation  with  very  rapid 
expansion, as real GDP grew by 4.5% per year 
between 2000 and 2007, but slowed to 2.5% 
in 2010-2019 and 1.1% in 2020-2025. 

from 

the 

(1) 

Since  2010,  labour  productivity  growth 
has  been  almost  exclusively  driven  by 
employment  and  capital  stock  growth.  
Luxembourg’s  economy  has  a  high  degree  of 
internationally-oriented 
specialisation 
financial  and  related  services,  where  value 
added  and  measured  productivity  are  closely 
linked  to  global  financial  conditions.  As  a 
result,  changes  in  global  financial  activity 
translate  into  disproportionately  large  swings 
in output per hour. While productivity  remains 

in 

very  high,  it  has  decreased  by  0.5%  on 
average  per  year  since  2010,  unlike  in  most 
advanced  economies.  This 
reduction  has 
occurred  with  a  progressive  slowdown  in  the 
from  capital  deepening  and 
contribution 
alongside  continued  job  creation  and  resulted 
overall in a slowdown in real GDP.  

Graph 1.1: Real GDP growth, production factors 
contributions, 2001 Q1 - 2025 Q4, year-on-
year percentage changes 

Source: Quarterly national accounts Luxembourg 
Eurostat 

Net 

exports 

Real GDP expanded by 0.6% in 2025, still 
below  the  historical  performance.  Growth 
was  supported  by  private  and  government 
consumption. 
contributed 
negatively  as  imports  accelerated  faster  than 
exports.  The  economic  performance  was  also 
weakened by investments of which the annual 
contribution to GDP is negative since  2022. In 
terms  of  real  gross  value  added,  the  main 
contributors  were  the  public  sector  and,  the 
insurance  sector  driven  by 
finance  and 
increases  in  net  issuance  in  bond  funds  as  a 
result of interest rate cuts. 

(1)  STATEC: National accounts, seasonally adjusted data. 

Services exports are expected to support 
the  economy  despite  a  challenging 

2 

-10.0-5.00.05.010.001020304050607080910111213141516171819202122232425Total Factor ProductivityEmployment hours (Contribution %YoY) Capital Stock (Contribution %YoY)Real GDP (% YoY) 
 
 
     
tension. 

geopolitical 

international  context  and  rising  energy 
costs  while  private  consumption  and 
investment  are  set  to  slow  down.  
Economic  growth  is  expected  to  accelerate  to 
1.6 %  in  2026  and,  2.0 %  in  2027  supported 
mainly by exports of financial services in 2026 
then  domestic  demand  in  2027.    Strong 
volatility  remains  a  risk  in  a  context  of 
Private 
persistent 
consumption  is  expected  to  lose  some  steam 
in  the  coming  quarters.  While  confidence 
improved  at  the  start  of  the  year,  it  fell  by 
9.2pp in  March, the  second  biggest  fall in  the 
EU,  followed  by  a  slight  recovery  in  April 
Although  still  below  average,  the  trend  in 
confidence  surveys  in  the  construction  sector 
has  improved.  The  activity  in  the  sector  is 
recovering slowly and investment in housing is 
expected  to  recover  slightly  in  2026  but  not 
in 
enough 
investment in equipment. 

the  deceleration 

to  offset 

Headline  inflation  is  set  to  increase  in 
in  2027. 
2026  before  edging  down 
Inflation  is  expected  to  accelerate in  2026  as 
energy prices rise following the conflict in the 
Middle  East.  Wage 
increase  based  on 
automatic  indexation,  expected  in  May  2026, 
is  set  to  push  services  prices  up.  In  2027, 
inflation  is  projected  to  decelerate  below  the 
ECB  target  due  to  a  contraction  in  energy 
prices and lower food inflation. 

Structural challenges call for 
diversification 

labour  productivity  has 
Luxembourg's 
declined 
its 
recent  years, while 
in 
productivity  levels  remain  among  the 
highest in the EU. Between 2021 and 2025, 
productivity  growth  has  been  sluggish,  with 
labour  productivity  decreasing  by  1.6%  and 
total  factor  productivity  falling  by  1.8%,  both 
on  average  per  year.  Further,  competitiveness 
developments remain moderate as unit labour 

costs  grew  by  4.1%  in  2024  and  4.9%  in 
2025, well above productivity growth (2). 

A  structural  shift 
in  Luxembourg’s 
economic  set-up  provided  some  support 
to  labour  productivity  growth  in  the  last 
decades  while  growth  within  several 
industries  was  weak.  The  information  and 
communication sector, and administrative and 
support  services,  have  experienced  positive 
productivity  growth,  while  industries  such  as 
construction,  wholesale  and  retail  trade,  and 
financial  services  have  seen  negative  growth 
and declining relative size in the economy (3). 

Luxembourg’s  economy  is  dominated  by 
the  financial  sector,  which  accounts  for 
around a quarter of value added and tax 
revenues, but its productivity growth rate 
is  negative.  Luxembourg’s  growth  model  is 
heavily reliant on the financial sector. Although 
it  remains  very  productive  in  levels (4),  its 
productivity  growth  has  turned  negative  over 
the  past  decades,  pointing  to  diminishing 
efficiency gains. As this has occurred alongside 
an  expansion  of 
it  nevertheless 
contributes  strongly  to  overall  output  growth 
for the economy. At the same time, regulatory 
and  structural  barriers, 
limited 
competition  and  weak  innovation  diffusion, 
improvements (5). 
constrain 
service 
Improving 
activities  through  digitalisation,  innovation  or 
automation 
productivity-
investments  could  be  effective 
enhancing 
strategies  to  raise  productivity  growth  to 
former levels (6). 

productivity 
the  efficiency  within 

fostering 

including 

jobs, 

and 

diversification  within 

the 
Further 
financial 
reduce 
Luxembourg’s  reliance  on  the  funds 

sector 

could 

(2)  ECB  and European Commission Alert Mechanism Report 

2026 SWD. 

(3)  Eurostat (nama_10_a64, nama_10_a64_e, 

nama_10_lp_a21). 

(4)  The financial sector’s gross value added per hour 

worked in 2025 was around EUR 191, at prices of 2015 
(which is equivalent to EUR 268 at current prices). 

(5)  OECD 2025. 

(6)  CNP. 

3 

 
 
Graph 1.2: Domestic employment growth 
between 1998 and 2025 

industry.  Sustainable  finance  and  innovation 
offer  strong  potential,  with  Luxembourg 
already  established  as  a  leader  in  ESG-
compliant  (7)  investment  products.  As  these 
areas  are  expected  to  grow  significantly, 
further  developing  climate  finance,  innovative 
structures  and  transparency  frameworks  will 
be  crucial to maintaining competitiveness and 
supporting sustainable economic growth. 

despite 

investment 

Luxembourg offers a favourable business 
environment, 
regulatory 
in  R&D 
restrictions,  but 
seems  insufficient  to  boost  productivity. 
The  country’s  large  financial  sector  is  facing 
competitiveness,  and  business 
declining 
investment,  particularly  in  R&D,  is  low  (see 
Annex  5).  Key  challenges  include  the  scarcity 
of  skilled  staff,  high  labour  costs  and  late 
payments,  notably  from  the  government  to 
businesses  (8).  This  significantly  affects  small 
and  medium-sized  enterprises  (SMEs).  While 
the  administrative  burden 
is  moderate, 
barriers  to  regulated  professions  are  high. 
However,  Luxembourg 
is  taking  steps  to 
support  start-ups,  scale-ups  and  overall 
competitiveness 
to  enhance  productivity 
growth.  

Luxembourg's  labour  market  is  growing 
strongly,  with  nearly  half  of  workers 
commuting  from  neighbouring  countries, 
but  housing  shortages  and  transport 
congestion  could  hinder  further  growth. 
the 
Luxembourg’s  economy 
continued rise in employment (see Graph 1.2). 
High  housing  costs,  stemming  from  limited 
supply,  could  obstruct  labour  retention  and 
growth,  while  strained  transport  systems 
exacerbate  congestion  and  reduce  working 
hours, which could impede productivity.  

is  built  on 

(7)  ESG stands for Environmental, Social, and Governance, 
a framework used to evaluate how organisations 
manage sustainability, social responsibility, and 
corporate governance. 

(8)  Government to business 1/3 delayed, EU 15.9%, 
business to business 81.5% delayed, EU 47.1%. 

4 

Source: National accounts, seasonally adjusted data 

Increasing housing supply and 
cross-border connectivity is pivotal 

a 

to 

received  a 

supply-demand 

Housing  challenges  are  persistent,  and 
Luxembourg’s housing market is the most 
expensive in the EU. In 2025, house prices in 
Luxembourg  were  60%  higher  than  a  decade 
ago  in  nominal  terms.  High  house  prices  are 
imbalance. 
due 
country-specific 
Luxembourg 
recommendation  (CSR)  in  2025  to  increase 
housing  supply,  by  adopting  a  comprehensive 
land-use  policy  and  a  property  tax  reform. 
Limited progress has been observed. A reform 
of  property  taxation  is  in  preparation,  but  its 
indicative  implementation  date  is  not  until 
2028.  Furthermore,  ongoing  obstacles  could 
cause  further  delays  and  the  date  of  this 
reform’s entry into force remains uncertain. In 
addition,  the  initial  scope  of  the  reform  was 
reduced  following  amendments  (see  Annexes 
3 and 16).  

Mobilising  approximately  2 400 ha  of 
land would  allow  for  the  development of 
125 000  housing  units.  The  2025  CSR 
highlighted  the  need  to  boost  the  supply  of 
(affordable)  housing  and  curb  house  prices. 
Some  steps  have  been  taken,  in  particular 
regarding 
integration  of  affordable 
housing  into  local  development  plans  via  the 
reform  ‘Housing  Pact  2.0’  under  the  recovery 
the 
plan. 
and 
harmonisation  of  the  different  procedures 
from  land  mobilisation  to  housing  delivery 

resilience 

However, 

the 

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0% - 100,000 200,000 300,000 400,000 500,000 600,00019982000200220042006200820102012201420162018202020222024Growth rate (right axis)Domestic employment in persons (left axis)3y moving average growth rate (right axis) 
 
  
incomplete. 

In  addition,  several 
remains 
simplifications  of  the  Pacte Logement  2.0  are 
still  going  through  the  legislative  process, 
although 
to  be 
implemented in 2025 (see Annexes 5 and 16). 

they  were 

expected 

to  encourage 

Cross-border commuting by car is a major 
source of greenhouse gas emissions. Many 
workers  live  across  the  border  due  to  high 
house  prices  in  Luxembourg  and  commute 
every day. The 2025 CSR pointed out the high 
reliance on private cars for cross-border travel 
and  its  repercussions  in  terms  of  emissions 
and  traffic  congestion.    Progress  has  been 
made 
the  use  of  public 
transportation,  such  as  the  entry  into  service 
of  a  park-and-ride  facility  at  Thionville  and 
Longwy  railway  station  and  new  and  longer 
trains  during  peak  hours.  Investments  are 
ongoing to increase cross-border train capacity 
in  the  short  and  the  long  term.  Luxembourg 
had the highest weekly public transport usage 
among  EU  countries  in  2024.  Nevertheless, 
there is still room for improvements on cross-
border 
and  multimodal 
transportation  in  rural  areas  more  distant  to 
the main rail axis (see Annex 19). 

connections 

The  recommendation  to  phase  out  fiscal 
incentives  to  borrow for  housing  has  not 
yet been addressed. Another housing-related 
challenge  identified  in  2025  is  the  support 
provided  by  the  current  tax  framework  to 
housing demand. This exerts upwards pressure 
on  house  prices,  and 
its  effects  are 
exacerbated by limited supply. However, some 
of the temporary tax benefits – which increase 
this support – that were implemented in 2024 
became  permanent  or  were  extended.  This  is 
the case for the increase of the ‘Bëllegen Akt’ 
tax  credit  and  of  the  mortgage 
interest 
deductibility (see Annexes 3 and 16). 

the 

existing 

recommendation 

No  progress  has  been  made  to  address 
the 
to 
strengthen 
macroprudential 
framework.  Overvalued  housing  prices,  the 
significant  share  of  mortgages  with  variable 
rates  and 
level  of  household 
indebtedness  pose  systemic  risks.  No  new 
macroprudential  policies  have  been  put  in 
place.  Additional 
income-related  borrower-
based  measures  such  as  loan-to-value  (LTV) 

the  high 

and debt service-to-income (DSTI) limits could 
be implemented to reduce vulnerabilities. 

Improving the quality of public 
finances would help Luxembourg 
face the challenges posed by 
increasing spending pressures 

Public  finances  are  projected  to  weaken 
in  the  short  term,  under 
increasing 
spending  pressure.  The  general  government 
balance turned to a deficit of  2.0% of GDP in 
2025,  after  a  surplus  of 0.9%  in  2024.  While 
revenues growth has been moderate at 2.5%, 
partially  due  to  a  shortfall  in  revenues  from 
taxes  on  income  and  wealth,  spending  has 
surged  by  8.8%,  driven  by  a  dynamic  current 
expenditure  and  high  public 
investment, 
including 
in  defence,  affordable  housing, 
education and climate-related measures. Over 
the projection period, the government deficit is 
projected to be only partially corrected. 

In 2025, Luxembourg  has been found not 
compliant with its commitments under its 
medium-term fiscal-structural plan. Under 
its  2025-2029  medium-term  fiscal-structural 
plan,  Luxembourg  committed  to  limiting  net 
expenditure growth, aiming to keep the deficit 
well below 3% of GDP by 2029 and maintain 
public  debt  below  the  60%  of  GDP  threshold 
(see  Annex  2).  Higher  than  recommended  net 
expenditure  growth  in  2025  resulted  in  a 
annual  and  cumulative  deviation  equal  to 
1.3%  of  GDP  and  0.6%  of  GDP,  respectively. 
Risks  to  the  above  commitment  involve  lower 
than  projected  economic  growth  resulting  in 
policies 
lower  fiscal 
revenue  growth,  in  a  challenging  political 
spending 
environment, 
pressures,  including  the  projected  increase  in 
age-related spending and the planned increase 
in Luxembourg’s defence expenditure (to reach 
5%  of  gross  national  income  (GNI)  by  2035), 
in line with international commitments.  

to  possibly 

increasing 

leading 

and 

Expenditure on defence in Luxembourg is 
Total  government 
steadily 

increasing. 

5 

 
expenditure on defence is forecast to increase 
from 0.7% of GDP in 2024 (9) to 1.0% of GDP 
in 2025 and 1.2% in 2026 (see Annex 2) and 
further increases are planned to reach 3.5% of 
GNI by 2035 as part of its commitment under 
NATO  and  ‘ReArm  Europe’  (10).  In  January 
2026, Luxembourg issued a defence bond for 
EUR 150 million (0.2% of GDP) with a maturity 
of three years to finance its military spending. 
Luxembourg has so far not requested support 
under  the  SAFE  (Security  Action  for  Europe) 
initiative for defence procurement.  

as 

the 

challenges 

to  address 

Despite  a  recent  reform,  Luxembourg’s 
pension  system  faces  medium  and  long-
term 
demographic 
dynamics  are  projected  to  threaten  its 
sustainability.  The  2024  Ageing  Report 
projects  a  rise  in  pension-related  spending, 
reaching  17.5%  of  GDP  by  2070  –  a  rise  of 
8.1 pps  from  2025.  Luxembourg  received  a 
2025  CSR 
long-term 
sustainability of its pension system, by limiting 
early-retirement  options  and  increasing  the 
participation  and  employment  rate  of  older 
workers.  End-2025,  Luxembourg  adopted  a 
pension  reform  after  a  public  consultation 
process.  The  reform  mainly  consisted  of  an 
increase in the contribution rate by 1.5 pps to 
incentivise 
25.5%, 
prolonging 
tax 
right  for  a 
advantages, 
progressive  pension  and 
the 
mandatory  contribution  period  for  most  early 
retirees (11). Overall, the reform seems neither 
to  be  sufficient  to  address  the  structural 
issues  of  the  sustainability  of  the  pension 
system,  nor  to  significantly  increase  the  low 
participation rate of workers aged 55-64. 

careers 
introducing 

to 
providing 

limited  measures 

increasing 

the 

by 

term.  Luxembourg  has  accumulated  sizeable 
reserves  in  its  pay-as-you-go  Pillar  I  pension 
scheme of around 35.6% of GDP in 2024 (12).  
While  this  is  large  for  a  Pillar  I  reserve,  it  is 
small compared with Pillar II and III funds (e.g. 
Denmark’s  206.4%  of  GDP  and 
the 
Netherlands’  150.9%  of  GDP 
in  2024). 
Benefits in  Luxembourg  remain  generous (the 
average  gross  pension  being  around  75%  of 
the  final  wage  (13)  and  the  pension  system  is 
projected to start running a deficit as of 2029. 
This  deficit  is  projected  to  increase  due  to 
unfavourable  demographic  dynamics  as 
employment is projected to grow less than the 
2.5-3%  needed 
in 
to  keep 
balance (14).  The  reserve  is  projected  to  be 
entirely depleted by 2048 (15). 

the  system 

Luxembourg  has  the  lowest  participation 
rate  of  workers  aged  55-64  of  all 
Member  States.  In  2025,  only  51.9%  of 
people aged 55-64 in Luxembourg were active 
in the labour market, the lowest rate in the EU 
the  statutory 
(average  68.5%)  Although 
retirement  age  is  65,  early  retirement  is 
possible  for  many  from  57  and  for  most 
around  60 (16)  ,  with  generous  entitlements. 
For  an  early  retirement  from  60,  contributors 
can  count  a  multitude  of  non-contributory 
years towards their work requirements  (17). To 
increase  the  participation  rate,  Luxembourg 
could  reinforce  incentives  to  retire  at  the 
statutory retirement age (18).  

Supplementary  pension  schemes  remain 
underdeveloped,  and  replacement  rates 
are  falling  (see  Annexes  2  and  6). 
lowest 
one 
Luxembourg  has 

the 

of 

Luxembourg  has  large  pension  reserves, 
but they risk running out in the medium-

(12)  Régime général - Compte d'exploitation 2024 - CNAP.lu 

d’Pensiounskeess - Caisse nationale d'assurance 
Pension - Luxembourg 

(9)  Nationally  financed  defence  expenditure  as  defined  in 
the  Classification  of  the  functions  of  government 
(COFOG)  in  the  framework  of  the  European  System  of 
National Accounts (ESA2010).  

(10)  Luxembourg’s NATO commitment is expressed in terms 
of GNI and not GDP. GNI is a more pertinent metric for 
Luxembourg as it just reflects the share of income 
remaining in the country. 

(11)  Loi de 19 Decembre 2025 (Pension reform) loi du 19 

(13)  OECD Economic Surveys: Luxembourg 2025. 

(14)  IGSS: Aperçu numéro 29, June 2025, p.7. 

(15)  Bill 8634.  

(16)  IDEA: Working document nr 32, p.16. 

(17)  E.g. study years, military service or childcare. Due to the 
pension reform of 2025, the number of months needed 
to retire at 60 is stepwise increased by eight between 
2026-2030 from 480 to 488 of which 120 must come 
from contributory periods. 

Decembre 2025 (Tax incentives). 

(18)  E.g. IDEA: Working document nr 31.   

6 

 
 
 
in 

inhabitant. 
supplementary 

contribution  rates  in  the  EU  to  its  voluntary 
supplementary  pension  schemes  but 
the 
Increased 
highest  wealth  per 
participation 
pension 
schemes  –  potentially  with  auto-enrolment  – 
could  allow  the  pension  system  to  become 
more 
retirement 
income  sources  and  boosting  funding  for 
European companies through additional equity 
investment (19). In addition, a national pension 
tracking  system  could  improve  transparency 
and  inform  retirement  and  career  planning 
decisions. 

resilient  by  diversifying 

reduce 

is  scope 

There 
revenue 
to 
volatility  by  broadening  the  tax  base. 
Approximately  25%  of  total  tax  revenues 
(including  social  contributions)  originate  from 
the  financial  sector,  exposing  the  country’s 
public  finances  to  external  shocks  to  this 
sector.  Furthermore,  revenues  depend  on  a 
limited number of taxpayers. In 2024, 75% of 
total  corporate  taxes  were  paid  by  0.5%  of 
businesses  (20).  To  diversify  Luxembourg’s 
revenue  sources,  a  national  CO2  price  was 
introduced  for  sectors  not  covered  by  the  EU 
emissions 
Luxembourg 
introduced a CO2 tax of 20 euros per tonne of 
CO₂ (€/t) in 2021 with increments of 5 €/t per 
year to reach 45 €/t in 2026. Luxembourg has 
comparatively 
from 
environmental taxes; while increasing tax rates 
should  increase  tax  revenue,  there  may  also 
be  a  loss  of  receipts  from  sales  to  non-
residents,  who  currently  account  for  72% (21) 
of fuel sold,  and whose behaviour is sensitive 
to  relative  prices  (22).  The  share  of  revenues 
from  recurrent  property  taxes  is  the  second 
lowest  in  the  EU  at  0.1%,  against  an  EU 
average  of  0.9%.  This  was  a  feature  covered 

revenues 

system. 

trading 

low 

(19)  In Luxembourg only 4.1% of the working-age 

population participate in a Pillar II or III pension scheme 
compared with 54.3% in the EU. 

(20)  Report (page 3) from the Finances and Budget 

Commission on the budget available at: https://wdocs-
pub.chd.lu/docs/exped/0153/125/307253.pdf. 

(21)  Statec, 2026. 

(22)  A relative price is the price of a commodity such as a 

good or service in terms of another, i.e. the ratio of two 
prices’. https://iate.europa.eu/entry/result/1623392/en 

by  the  2025  CSRs,  which  recommended 
Luxembourg  to increase  its  housing  supply,  in 
particular  by  adopting  a  comprehensive  land-
reform. 
use  policy  and  a  property 
less 
Luxembourg  makes 
distortive revenue sources. 

limited  use  of 

tax 

the 

and 

period 

labour 

2010-2025, 

Total  current  public  expenditure  has 
substantially  increased  in  recent  years. 
Over 
current 
expenditure increased by 5.9 pps of GDP, while 
it decreased on average in the euro area. The 
compensation  of  public  employees  and  social 
related  expenditure  are  the  main  drivers 
behind  this  increase,  which  reflects,  inter  alia, 
demographic 
market 
developments.  Since  2010,  the  number  of 
public employees has grown by 70%, while the 
population  has  risen  by  only  34%.  There  is 
room  to  increase  the  efficiency  of  the  high 
level of public spending to create fiscal  space 
in  view  of  new  investment  priorities.  While 
some  principles  are  embedded 
the 
budgetary process, Luxembourg does not have 
a  formal  spending  review  framework  which 
could  contribute  to  ensure  public  spending 
efficiency.  In  this  regard,  the  recent  OECD 
review  (23)  provides  suggestions  for  a  review 
of  the  budgetary  processes  with  a  view  to 
achieving  more  efficient  public  spending  (see 
Annex 2). 

in 

The aggressive tax planning 
challenge remains unaddressed 

Aggressive 
remains  a 
tax  planning 
challenge  in  Luxembourg.  Since  it  distorts 
fair  competition  and  compromises  a  fair  tax 
environment  in  the  EU,  tackling  the  CSR  on 
aggressive  tax  planning  remains  essential. 
implementation  of  directives, 
Besides  the 
Luxembourg has adopted limited measures to 
address  this  issue.  Luxembourg  introduced  a 
non-deductibility  rule  for  interest  and  royalty 
payments, however the scope of this measure 
remains 
the 
limited 
country 
European  Union 

to 
list  of 

jurisdictions  on 

third 

(23)  OECD, Review of public finance system in Luxembourg, 

OECD papers on budgeting, 2025. 

7 

 
 
 
 
Box 1:  UN Sustainable Development Goals (SDGs)  

Luxembourg performs  well  on  several  SDGs  related  to  macroeconomic  stability  (SDGs 
16  and  17),  competitiveness  (SDGs  4  and  9)  and  social  fairness  (SDGs  1,  3,  4,  5  and 
10). However, challenges persist for decent work and economic growth (SDG 8), as the 
in-work  at-risk-of-poverty  rate  has  risen  above  the  EU  average  while  the  investment 
share of GDP has declined below it. 

Although Luxembourg shows signs of improvement, it remains below the EU average on 
several  sustainability-related  SDGs  (7,  12  and  13).  This  is  mainly  due  to  high  net 
greenhouse  gas  emissions  per  capita  –  partly  influenced  by  a  large  number  of  cross-
border commuters  – as well as a relatively high energy import dependency and a low 
share of renewable energy in gross final energy consumption (see Annex 17). 

jurisdictions  for  tax  purposes,  which  includes 
those  that  failed  to  comply  with  the  EU’s  tax 
good  governance  criteria  within  a  specific 
timeframe  or  refused  to  engage  with  the  EU 
and  do  not  effectively  address  the  issue  of 
zero-  and  low-tax  jurisdictions.  Luxembourg 
has  not  taken  adequate  measures  to  address 
the  risks  of  aggressive  tax  planning  on 
outbound  payments,  highlighting  the  need  for 
more  comprehensive  action  to  ensure  a  fair 
and transparent tax environment. 

Ensuring economic security is a 
challenge 

security 

challenges 

Economic 
are 
significant.  Luxembourg’s  main  economic 
security  challenge  relates  to  it  being  a  small 
open economy with a large dependency on the 
financial  sector.  Diversification  efforts  in  the 
space sector, logistics and ICT have so far had 
limited  success  as  measured  by  their  relative 
share  in  total  valued  added  and  employment. 
Furthermore, the economy  is  reliant  on  cross-
border workers for a large portion of its labour 
force, making regional mobility crucial to avoid 
heavy  disruption  to  its  economy.  In  addition, 
despite  progress 
energy 
in 
deployment 
(see  Annex  9),  Luxembourg 
remains highly dependent on its neighbours to 
meet  its  energy  needs.  In  this  regard,  a 
coordinated  cross-border  strategy  would  be 
needed to address the needs of its commuting 
improving 
workforce. 
connectivity, 
transport 
infrastructure  with  neighbouring  countries, 

This 
integrating 

renewable 

includes 

rail 

integrating  ticketing  systems  and  improving 
its  material 
last-mile  connections.  While 
import  dependency  is  the  highest  in  the  EU 
(89.4%  in  2024,  against  an  EU  average  of 
22.4%), its circular material  use rate is below 
the  EU  average  and  its  waste  generation  and 
incineration  rates  remain  high,  underlining 
persistent  reliance  on  primary  resources  (see 
Annexes 5 and 8). 

funding 

instruments 

identified 
include 

EU 
provide 
considerable  resources  to  Luxembourg. 
investments  and  structural 
They  support 
reforms 
competitiveness, 
increase 
to 
environmental  sustainability,  skills,  social 
fairness and security, while helping to address 
the  CSRs.  Key 
in 
challenges 
instruments 
the  Recovery  and 
Resilience  Facility  (see  Box  2)  and  Cohesion 
policy  funds  (see  Box  3).  In  addition,  the 
Common  Agricultural  Policy  (CAP)  provides 
Luxembourg  with  an  EU  contribution  of  EUR 
225  million  under  the  CAP  strategic  plan  for 
2023-2027 (24). A further EUR 47.7 million are 
available  under  the  Asylum,  Migration  and 
Integration  Fund  (AMIF),  together  with  the 
Border  Management  and  Visa 
Instrument 
(BMVI)  and  the  Internal  Security  Fund  (ISF). 
Other 
support 
competitiveness  in  Luxembourg,  for  instance 
through  open  calls  under  Horizon  Europe  and 
the Connecting Europe Facility. 

programmes 

also 

EU 

(24)  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 

8 

 
 
 
Box 2: 

Key achievements of the recovery and resilience plan   

Luxembourg’s recovery and resilience plan (RRP) represents a total investment budget 
of  EUR  241.1  million,  corresponding  to  0.3% of GDP.  The  RRP  aims  to  support  the 
green and digital transitions, strengthen economic resilience and address long-standing 
structural challenges identified in the European Semester. 

As of 4 May 2026, EUR 90.2 million (around 37% of the total allocation) has been 
disbursed  following  the  satisfactory  fulfilment  of  36  milestones  and  targets. 
Implementation  has  progressed  steadily,  with  a  growing  number  of  reforms  and 
investments already fulfilled and delivering tangible results on the ground. 

Highlights and impact of the plan 

•  Strengthened  skills  and  employability  through  a  reform  which  improved 
coordination  between  government,  employers  and  training  providers  to 
anticipate  labour-market  needs  and  expand  reskilling  opportunities.  The  RRP 
also supported vocational pathways and training for jobseekers. 

•  Supported  the  supply  of  affordable  and  sustainable  housing  by  means  of 
the  ‘Housing  Pact  2.0’  reform.  This  reform  incentivises  municipalities  to 
implement  local  housing  action  programmes  and  is  complemented  by  the 
expected support for over 6 000 housing energy-efficiency projects. 

•  Advanced the green transition by means of, on the one hand, a reform laying 
down clean-vehicle procurement rules and, on the other, investments supporting 
the roll-out of over 6 000 electric vehicle charging points, around 27 000 zero-
emission  vehicles  and  approximately  75  MWc  of  photovoltaic  capacity  on 
business premises. 

•  Accelerated  the  digital  transformation  in  public  administration  by 
developing a mobile platform and digital procedures for easier access to public 
services,  alongside  the  expected  roll-out  of  digital  tools  for  employment 
services  and  an  electronic  document  management  system  for  the  public 
administration. 

9 

 
 
 
 
Box 3: 

Contribution of cohesion policy funds 

EU  cohesion  policy  funding  is  supporting  Luxembourg’s  efforts  to  boost 
competitiveness,  environmental  sustainability,  as  well  as  skills  and  social 
fairness.  In  the  2021-2027  programming  period,  EU  cohesion  policy  funds  (25)  are 
providing  EUR  39  million  (amounting  to  EUR  89  million  paired  with  national  co-
financing) to Luxembourg.  The value of selected projects corresponded to 88.4% of the 
total allocation as of March 2026, with additional calls for projects in the pipeline. 

• 

Innovation,  business  environment  and  productivity.  Over  EUR  22  million  is 
allocated  to supporting research and innovation, the competitiveness of SMEs and 
the  digitalisation  of  public  services  and  administrative  procedures.  Investments 
target the establishment of start-ups and excellence centres to foster innovation in 
SMEs, as well as the digitalisation of SME processes.  

•  Decarbonisation, energy affordability and sustainability.  EUR 11.7 million is 
dedicated  to  clean  transition  projects,  supporting  the  greening  of  the  public 
transport fleet, biofuel production units and district heating networks. 

•  Skills,  quality  jobs  and  social  fairness.  With  a  total  of  EUR  15.5  million,  the 
European  Social  Fund  Plus  (ESF+)  supports  labour-market  measures  (EUR  2.3 
million),  education  and  training  (EUR  5  million)  and  social  inclusion.  For  the  latter, 
EUR  3.9  million  is  allocated  to  active  inclusion  and  EUR  1  million  to  addressing 
material  deprivation.  Moreover,  5.4%  of  the  ESF+  allocation  targets  measures  to 
combat child poverty and support the Child Guarantee (26). 

in  the  programme’s  aims,  notably  through  targeted 

Using the flexibilities offered by the mid-term review was deemed unnecessary due to 
the already high allocation rate. Nevertheless, the Commission’s strategic priorities are 
reflected 
in 
competitiveness  and  the  energy  transition.  In  addition  to  cohesion  policy  funding, 
Luxembourg  will  allocate  up  to  EUR  66  million  under  the  Social  Climate  Fund  over 
2026-2032  to  help  mitigate  the  social  impact  of  the  new  emissions  trading  system 
(ETS2), supporting vulnerable households.  

investments 

(25)  European Regional Development Fund (ERDF), European 
Social Fund Plus (ESF+), Cohesion Fund (CF) and Just 
Transition Fund (JTF). 

(26)  The European Child Guarantee is an initiative aimed at 
ensuring that every child in Europe at risk of poverty or 
social exclusion has access to essential services. 

10 

 
 
 
 
INNOVATION, BUSINESS ENVIRONMENT AND 
PRODUCTIVITY 

its 

While  Luxembourg  has  made  strides  in 
digitalisation  and  maintaining  a  strong 
financial  sector,  declining  productivity, 
low  R&D 
investment  and  regulatory 
long-term 
barriers  pose  risks  to 
economic  resilience  and  competitiveness. 
In  2025,  Luxembourg  received  a  country-
specific  recommendation  (CSR)  to  refocus  its 
economic  policy  on  driving  innovation  and 
bolstering  high  R&D-intensive  industries.  The 
CSR also sought to strengthen competitiveness 
by promoting greater economic diversification, 
particularly 
financial  sector  and 
accelerating  digitalisation,  especially  among 
small  to  medium-sized  enterprises  (SMEs), 
through  the  uptake  of  advanced  technologies. 
Additionally,  the  CSR  emphasised  the  need  to 
foster  business  scale-up,  improve  productivity 
and reduce barriers to competition in regulated 
services.  While 
professional 
Luxembourg  has made  progress  in  supporting 
innovation 
business 
digitalisation,  persistent  structural  challenges 
these 
the 
limit 
continue 
investments across all industries. 

impact  of 

advancing 

business 

and 

the 

to 

in 

Declining financial sector’s 
productivity weakens economic 
resilience 

level 

financial 

sector  has  a  high 
The 
(output  per  hour 
productivity 
worked),  but  it  has  declined  in  recent 
years.  Since  2016,  output  per  hour  has 
declined in most years, while hours and overall 
output have continued to rise (see Graph 2.1). 
The  recent  decline  in  real  gross  output  per 
hour  in  finance  implies  a  greater  pressure  on 
fees, 
interest  margins  and  commissions, 
revealing  a  structural  issue  rather  than  a 
squeeze  on  value  added  via  rising  purchased 
inputs.  It  also  indicates  that  its  processing 

efficiency has not improved. There is scope for 
productivity  gains,  but  these  gains  have  not 
yet materialised. 

A decline in gross output per hour is also 
observed in professional and ICT services, 
which  have  developed  as  complementary 
activities.  Professional  (27)  and  information 
and  communication  services  have  expanded 
strongly in output and employment since 2000 
but  have  recorded  falling  labour  productivity 
on  average  per  year  over  2016–2024  (see 
Graph 2.1). In both sectors, intermediate inputs 
substantially  contribute  to  gross  output  per 
hour,  but  are  not  as  dominant  as  in  financial 
activities. 
stable 
this 
employment  growth,  the  fall  in  gross  output 
per  hour  implies  a  corresponding  fall  in  value 
added per hour.  

broadly 

Given 

on 

reduction 

resilience 

in  productivity 
the  expansion  of 

that 
The 
accompanies 
the 
financial  sector  could  gradually  put 
of 
the 
pressure 
Luxembourg’s economy. Luxembourg’s high-
skilled  services  cluster  has  been  displaying 
falling  labour  productivity  as  its  output  and 
employment expands. The financial sector and 
its main supporting services remain large and 
high-skill  but  are  becoming  more  volume-
driven  and  input-intensive.  If  other  financial 
centres  are  better  able  to  deliver  increases in 
productivity, they may become more attractive 
than Luxembourg, particularly if they are able 
to  offer  more  affordable  housing  for  staff. 
Given the importance  of  cross-border  finance, 
this  increases  the  risk  that  parts  of  the  value 
chain will move. The gradual reduction in value 
added per worker limits the growth of the tax 
base  and  could  make  it  harder  to  finance 

(27)  This refers to professional, scientific, technical, 
administrative and support services, filed under 
classification M in the statistical classification of 
economic activities.  

11 

 
 
 
Graph 2.1: Real gross output per hour, value added per hour and hours worked. Selected sectors - 
annual percentage change 2000-2024 

Source: National Accounts of Luxembourg, Eurostat 

necessary  expenditure  such  as  housing, 
infrastructure  and  social  services  without 
further reducing the country’s fiscal buffers. 

through 

Luxembourg’s 

The  size  of  the  financial  sector  and  its 
position  in  global  finance  represents  an 
opportunity  for  Luxembourg  to  develop 
its  own  processes  and  services  based  on 
new  technologies  with  a  higher  domestic 
value  added.  Economic  growth  has  been 
supported  by  increasing  value  chain  volumes 
passing 
financial 
centre.  Developing  advanced  tools  within 
Luxembourg  based  on  new  ICT  technologies, 
particularly  AI,  to  raise  processing  efficiency, 
rather  than  relying  on  ever‑greater  external 
business volumes, may  help Luxembourg  turn 
its  financial  sector’s  role  into  a  genuine 
shift, 
capability  platform.  Without 
Luxembourg  may  remain  a  central  node  in 
global  financial  flows  in  gross  terms,  but  its 
capacity  to  convert  that  position  into  robust, 
broad‑based domestic productivity and income 
growth will continue to weaken. 

this 

a 

the 

financial 

financial 

contribution 

recommendation 

The  Council  of  the  European  Union 
to 
addressed 
Luxembourg  to  boost  competitiveness  by 
diversifying 
sector’s 
activities.  National  accounts  data  show  that 
the 
to 
cluster’s 
productivity  growth  was  -0.8  percentage 
points  on  average  per  year  in  2020-2025, 
which  represents  a  continuation  of  previous 
trends.  Rising  external  uncertainty  and 
persistent  domestic  bottlenecks,  increasingly 
weigh  on  activity  across  most  sectors. 
Luxembourg  does  not  appear  to  be  taking 
specific  measures  to  increase  productivity  in 
its 
the 

including 

financial 

sector, 

in 

implementation of the EU's Digital Operational 
Resilience  Act.  The  transposition  of  the  EU  AI 
Act,  tabled  in  the  Luxembourg  Parliament  on 
23 December 2024 (Dossier 8476), is pending 
approval. Delayed national governance creates 
a productivity cost. According to Luxembourg’s 
Financial  Sector  Supervisory  Commission 
(CSSF),  only  10%  of  the  entities  interviewed 
were  fully  ready  to  implement  the  Act,  while 
68% of respondents applied IT outsourcing.  

Low R&D investment and 
administrative barriers impede 
innovation capacity 

Over  the  past  two  decades,  Luxembourg 
has  experienced  a  decline  in  business 
R&D  activity. 
In  2024,  business  R&D 
expenditure accounted for only 0.45% of GDP 
(EU: 1.49%). However, Luxembourg’s economy 
is heavily concentrated around financial funds 
and related service sectors, which is less R&D-
intensive  than  other  industries.  Private-sector 
investment  in  R&D  remains  relatively  low.  In 
2022,  the  country  recorded  1.20  patent 
applications filed under the Patent Cooperation 
Treaty per EUR 1 billion of GDP (in purchasing 
parity standards, well below the EU average of 
2.8).  In  addition,  public  R&D  investment  has 
remained  stagnant  over  the  last  decade,  at  a 
the  EU  average.  This, 
level  well  below 
science-
underexploited 
combined  with 
business 
undermine 
could 
Luxembourg’s  innovative  capacity  in  the  long 
run,  which  is  why,  in  2025,  Luxembourg 
received  a  CSR  to  foster  innovation  and 
support R&D. 

linkages, 

12 

-15%-10%-5%0%5%10%15%00010203040506070809101112131415161718192021222324FINANCIAL AND INSURANCE SERVICESReal Gross Output /Hour % changeHours worked % changeGVA/hour K % change-50%-40%-30%-20%-10%0%10%20%30%40%00010203040506070809101112131415161718192021222324INFORMATION AND COMMUNICATIONReal Gross Output /Hour % changeGVAhour J % change% change-30%-20%-10%0%10%20%30%40%00010203040506070809101112131415161718192021222324PROFESSIONAL, SCIENTIFIC AND TECHNICAL ACTIVITIESReal Gross Output /Hour % changeGVA/hour M % changeHours worked % change 
          
limited.  Although  some 

Public  support  for  business  innovation 
remains 
recent 
initiatives  have  sought  to  strengthen  the 
innovation ecosystem, their overall impact has 
total  business 
In  2024, 
been  modest. 
investment  represented  7.1%  of  GDP,  the 
lowest level in the EU In addition, indirect R&D 
support  mechanisms,  such  as  tax  credits,  are 
limited,  with  most  public  support  provided 
through direct instruments like grants.  

Administrative  barriers  further  constrain 
for 
investment.  The  procedures 
R&D 
accessing  public  funding  are  often  complex, 
which  discourages  some  firms  from  applying. 
At  the  same  time,  Luxembourg’s  strong 
reliance  on  traditional  financing  channels, 
particularly  bank  lending,  creates  additional 
obstacles  for  firms  seeking  to  scale  up 
innovation activities. Improving access to R&D 
funding  and  diversifying 
the  economic 
structure would help strengthen Luxembourg’s 
innovation  capacity  and  support  convergence 
with other EU economies. 

Complex business procedures and 
regulatory burdens challenge 
market efficiency 

procedures 

to  streamline 

faces  complex  business 
Luxembourg 
establishment 
requiring 
multiple administrative steps, but efforts 
these. 
are  underway 
Currently,  business  permit  applications  can be 
completed  online  (28)  using  an  authenticated 
eID (see Annex 7). Additionally, the Ministry of 
the  Economy  tabled  reforms  in  2025  (29)  to 
further  simplify  procedures  and 
reduce 
timelines.  Finally,  the  recovery  and  resilience 
plan  aims  to  transform  the  Luxembourg 
Business  Register,  the  body  administering  the 

Register  of  Beneficial  Owners  and  the  Trade 
and  Company  Register,  into  the  primary  data 
source on legal entities, improving information 
accessibility and reliability for businesses. 

Businesses  face  a  moderate  regulatory 
and administrative burden, with scope for 
additional  simplification. 
In  2025,  the 
proportion of firms citing business regulations 
as  an  obstacle  to  investment  is  significantly 
lower  in  Luxembourg  compared  with  the  EU 
(46%  vs  69%)  (30).  However,  compared  with 
other  OECD  countries,  the  regulatory  and 
administrative burden is higher in Luxembourg 
than the average (2.13 vs 1.74) (31). This is due 
to 
restrictive 
regulations on operating permits for classified 
establishments  and  the  lack  of  harmonisation 
of 
EU,  which 
complicates cross-border transitions. 

e-invoicing  across 

including 

factors, 

several 

the 

and 

freedom 

regulatory 

Nonetheless, 
and 
administrative  barriers  to  the  single 
market  persist  in  Luxembourg,  affecting 
in  particular  freedom  of  provision  of 
services 
of 
establishment. Luxembourg’s  barriers  to  the 
trade in services within the European Economic 
Area  (EEA)  are  among  the  highest  in  the 
EU (32).  Easing  administrative  requirements 
regarding 
implementation  of  posting  of 
workers rules,  for example in the construction 
sector,  could  reduce  regulatory  fragmentation 
within  the  single  market,  facilitate  cross-
border  mobility  and  foster  competitiveness, 
without undermining workers’ protections. 

Late  payments  represent  a  significant 
challenge  for  firms,  particularly  SMEs.  In 
2025,  Luxembourg  was  among  the  Member 
States  with  the  highest  share  of  SMEs 
experiencing  late  payments:  around  one  third 
faced  delays  from  public  entities,  and  81.5% 
from  private  entities,  significantly  above  the 

(28)  Application for, or modification of, a business permit - 

Guichet.lu - Luxembourg. 

(29)  Communiqué du 3 Mars 2025 Lex Delles a présenté de 
nouvelles mesures de simplification administrative au 
profit des PME - Le gouvernement luxembourgeois Lex 
Delles a présenté de nouvelles mesures de 
simplification administrative au profit des PME - Le 
gouvernement luxembourgeois. 

(30)  European Investment Bank, EIB Investment Survey data 

dashboard.  

(31)  OECD,  Product  Market  Regulation  indicators,  Medium 
level indicator: administrative and regulatory burden. 

(32)  European  Commission  calculation  based  on  the  OECD, 

intra-EEA STRI database. 

13 

 
 
 
cloud 

next-generation 

the  EU  averages 

(37), 
slightly  behind 
Luxembourg  is  participating  in  the  important 
project  of  common  European  interest  (IPCEI) 
on 
infrastructure, 
focusing  on  cybersecurity  tools  to  enhance 
data security.  Furthermore, the ‘Fit 4 Digital  – 
AI’ programme supports SME investments in AI 
and  cybersecurity.  The  recovery  and  resilience 
plan  fosters  the  development  of  a  quantum 
communication  ecosystem.  This is in  line  with 
Luxembourg’s  2025  CSR 
to  accelerate 
digitalisation, 
in  particular  the  uptake  of 
advanced digital technologies by SMEs. At the 
same 
remain 
time,  digitalisation  efforts 
uneven across public services, including in the 
justice  system,  where  the  use  of  digital  tools 
to  initiate  and  follow  proceedings  and  access 
judicial decisions remains limited, weighing on 
efficiency and accessibility. 

Limited scale-up financing 
hampers start-ups despite a 
strong financial sector 

Despite being  a global financial hub  with 
a 
liquid  banking  sector,  Luxembourg 
struggles  to  provide  accessible  growth 
financing  for  start-ups.  While  the  country 
offers  broad  access  to  international  capital 
markets, start-ups face challenges in securing 
growth  funding  beyond  the  initial  stages  due 
to limited venture capital (VC) availability and 
banks’  risk-averse  behaviours.  Luxembourg’s 
VC  market  is  slightly  bigger  than  the  EU 
average but shows gaps, particularly for larger 
growth-stage 
focus 
lending on the investment fund industry rather 
than on supporting the domestic non-financial 
sector,  which  limits  start-ups  seeking  larger 
investment rounds (38). Luxembourg received a 
2025  CSR 
to  boost  competitiveness  by 
enabling  business  scale-up  and  productivity 
growth.  The  VC  ecosystem  supports  seed 

investments.  Banks 

(37)  Luxembourg 2025 Digital Decade Country Report | 

Shaping Europe’s digital future. 

(38)  An investment round is a stage of fundraising in which 

a company raises capital from investors in exchange for 
equity. 

EU average (33). Such disruptions to cash flow 
hinder  SMEs’  capacity  to  invest  or  recruit, 
impacting growth potential and contributing to 
business failures, notably in sectors with small 
profit margins (see Annex 5) (34). 

and 

restrictions 

competition 

Regulatory  restrictions  limit  professional 
service 
business 
benefits.  In  2025,  Luxembourg  received  a 
CSR  to  reduce  barriers  to  competition  in 
regulated  professional  business  services. 
Regulatory 
remain  particularly 
significant  for  lawyers,  notaries,  architects, 
civil  engineers  and  accountants.  Barriers, 
including  limited  pathways  to  access  some 
professions, administrative obligations, binding 
tariffs  and  the  prohibition  of  any  form  of 
advertising  and  marketing,  limit  competition 
and  benefits  for  businesses  buying  these 
services.  Regulatory  restrictions  in  retail  still 
in  peer  countries,  despite 
exceed 
decreasing  since  2018.  To  address  this, 
Luxembourg 
legislation  which 
streamlines  regulations  and  making  entry 
requirements  more  flexible  for  architects  and 
civil engineers (35).  

is  finalising 

those 

Luxembourg successfully advances 
business digitalisation despite 
regulatory challenges 

Luxembourg is  making significant  strides 
in  business  digitalisation.  As  of  2024, 
70.27% of SMEs in Luxembourg had at least a 
basic level of digital intensity (up from 66.25% 
in  2022),  remaining  slightly  below  the  EU 
average  of  72.91% (36).  Furthermore,  AI 
adoption  by  enterprises  reached  33.6%  in 
2025,  outperforming  the  EU  average  of 
20.0%.  Although  cloud  computing  usage  at 
43.7%,  and  data  analytics  at  38.2%,  lag 

(33)  European Central Bank and European Commission, SAFE 

survey. 

(34)  OECD, STRI- Luxembourg country note, 2/2026.  

(35)  Projet  de  loi  7932  sur  l'exercice  des  professions 
la  construction  et  de 

libérales  des  secteurs  de 
l'aménagement du territoire.  

(36)  2025 Digital Decade country report. 

14 

 
 
 
Lack of regular impact 
assessments undermines 
legislative effectiveness 

its 

Luxembourg’s  legislative  process  lacks 
regular 
impact  assessments,  which 
effectiveness. 
undermines 
Improvements would be beneficial, particularly 
in  ex  post  and  mid-term  impact  assessments, 
which  are  not  published 
regularly.  This 
absence  hinders  comprehensive  evaluation  of 
the  effectiveness  and  impact  of  legislation. 
to  prioritise 
The  current  practice 
benefits, 
analysing 
potentially 
the  effectiveness  of 
legislation  and  its  positive  contribution  to 
society.  The  absence  of  mandatory  impact 
assessments  for  new  laws  and  regulations 
also hinders competition and limits businesses’ 
capacity 
inclusive 
stakeholder  engagement across varied groups 
would  improve the  regulatory  framework (see 
Annex 7). 

costs 
limiting 

(40).  More 

innovate 

rather 

tends 

than 

to 

funding  and  incubation  but  falls  short  in 
financing scale-ups. Institutional investors play 
a  modest  role  in  funding,  reflecting  a  small 
domestic  market.  Consequently,  companies 
seeking  investment  rounds  between  EUR  25 
million  and  EUR  200  million  often  turn  to 
foreign  VC  markets,  particularly  in  the  United 
States or France. 

Public support mainly targets early-stage 
start-ups  but  falls  short  in  addressing 
scale-up  financing  needs.  Public  support 
mechanisms  provide  meaningful  assistance 
during  the  early  development  of  innovative 
firms.  The  government  introduced  a  20%  tax 
credit  for 
invest 
equity  into  start-ups  which  are  less  than  five 
years  old.  In  addition,  initiatives  such  as  the 
‘Luxembourg  Future  Fund  2’  promote  co-
investments with VC firms. 

individual  investors  who 

over 

bonds 

equity, 

corporate 

early-stage 

Investment  preferences  among  affluent 
private  investors  further  constrain  the 
availability of capital for start-ups. Start-
ups  report  that  high-net-worth  individuals 
often favour traditional asset classes, such as 
dwellings 
technology 
ventures.  Encouraging  greater  investment  in 
private 
and 
investments  funds,  including  European  long-
term  investment  funds  (ELTIFs),  could  help 
for 
unlock 
innovative  firms.  Institutional  investors  could 
play a greater role in financing start-ups. End-
2024,  the  Pillar  I  reserve  fund  had  46.2%  of 
its assets in equity, 34.3% in bonds and loans, 
5%  in  property  and  5%  in  the  money  market 
(39),  while  Pillar  II  and  III  funds  have  a  high 
variety  of  asset  allocations  depending  on  the 
fund  ranging  from  equity-focused  to  even 
more bond-oriented than the Pillar I reserve.  

additional 

funding 

sources 

(39)  FDC strategic asset allocation. 

(40)  European Commission. Flash Eurobarometer 567 / 568 
on satisfaction with administrative services (2026). 

15 

 
 
 
DECARBONISATION, ENERGY AFFORDABILITY AND 
SUSTAINABILITY 

2025, 

Luxembourg 

boosted 
In 
investments and reforms in several areas 
to  improve  public  transport  and  the 
energy  efficiency  of  households  and 
industry, and to support local authorities 
renewable  energy.  The 
in  deploying 
country-specific 
(CSRs) 
recommendations 
received  in  2025  aimed  to  (i)  reduce  overall 
reliance  on  fossil  fuels  by  investing  in  energy 
cross-border 
improve 
efficiency; 
(ii) 
interconnections; 
permitting 
(iii) 
procedures  for  renewable  energy  deployment; 
and  (iv)  support  municipalities  in  deploying 
renewable  energy.  Despite  these  efforts,  the 
action  taken  so  far  still  do  not  go  far enough 
to  address  the  challenges  faced.  In  addition, 
gaps in  environmental  governance  have  given 
rise  to  other  challenges,  notably  related  to 
surface  water  and  groundwater  quality  and 
forest health (see Annex 10). 

ease 

Last  year,  Luxembourg  strengthened  its 
renewable  energy  policy,  supporting 
energy  efficiency  and  renewable  energy 
installations. 
In  anticipation  of  growing 
renewable  energy  generation  and  electricity 
demand, the grid operator aims to expand the 
high voltage grid and improve interconnections 
with  Germany.  Luxembourg  also  made 
progress  on  transport  decarbonisation  and 
efficiency by installing electric vehicle charging 
infrastructure,  upgrading  rail  line  and  train 
stations.  Finally,  Luxembourg  has  adopted  51 
concrete  measures  to  accelerate  and  simplify 
the deployment of renewables.  

High road emissions persist 
despite investments in sustainable 
mobility and public transport 
infrastructure  

Graph 3.1: Greenhouse gas emissions under EU 
Emissions Trading System (ETS) projections; 
and current ETS-ESR relative shares (LU vs. 
EU) 

Source: STATEC 

Luxembourg  is  investing  in  sustainable 
mobility, but road emissions remain high. 
Luxembourg  faces  pressure  in  reducing  road 
transport emissions, which account for 59% of 
its  emissions  under 
the  Effort  Sharing 
Regulation  (ESR).  This  is  a  result  of  the 
country’s  reliance  on  road  vehicles  for  both 
passenger and freight transport (see Annex 8). 
However,  a  significant  portion  of 
these 
emissions  comes  from  non-residents,  with 
72% of fuel sales attributable to international 
carriers  and  individuals  in  transit  or  living  in 

16 

 2 4 6 8203020402050Total GHG emissions (MtCO2-eq)WAM projections LUWEM projections LUNational GHG target LU11%33%89%66%LUEUShares of total GHG emissionsETSESR 2 4 6 8203020402050Total GHG emissions (MtCO2-eq)WAM projections LUWEM projections LUNational GHG target LU11%33%89%66%LUEUShares of total GHG emissionsETSESR 
 
   
vehicle 

its  electric 

border  regions  in  2024 (41).  It  is  still the  case 
that  Luxembourg’s  dependence  on  cars  is 
reflected  in  one  of  the  highest  motorisation 
rates  in  the  EU  and  significant  congestion 
issues. The 2025 CSR emphasised the need for 
Luxembourg  to  focus  on  decarbonising  its 
transport sector through enhanced investment 
in  public  transport  infrastructure  and  cross-
is  actively 
border  networks.  The  country 
charging 
expanding 
infrastructure  and  provides 
incentives  for 
people  to  use  electric  vehicles,  as  financed 
under  the  recovery  and  resilience  plan.  There 
are also ongoing investments in rail, tram and 
bus  infrastructure.  The  delivery  of  new  train 
sets  and  work  on  the  new  Luxembourg-
Bettembourg  line  are  part  of  these  efforts. 
Furthermore,  Luxembourg  is  cooperating  with 
neighbouring  countries,  including  France  and 
Belgium,  to  improve  cross-border  transport 
and  increase  capacity,  particularly  at  peak 
times.  To  further  reduce  transport-related 
emissions, Luxembourg could increase the use 
of  more  sustainable  modes  of  transport  (rail, 
inland  waterways  and  public  transport)  and 
strengthen  environmental  taxation (see  Annex 
8). 

Limited energy efficiency 
improvements challenge fossil fuel 
reduction efforts despite new 
standards and incentives 

energy 

sectors 

through 

remains 

Progress  in  reducing  reliance  on  fossil 
fuels 
efficiency 
investments  in  both  residential  and  non-
residential 
limited. 
Despite  a  supportive  financing  framework, 
energy  savings  are  offset  by  an  increasing 
number of dwellings (see Annex 9). Still, in line 
with the 2025 CSR, Luxembourg has advanced 
its  energy  transition  policy  by  extending  the 
‘Climate Bonus – Living’ (Klimabonus Wunnen) 
and  ‘Climate  Bonus  –  Mobility’  (Klimabonus 
Mobilitéit)  schemes  beyond  2025,  providing 
ongoing  financial  support  for  energy-efficient 

and 

renewable 

energy 
renovations 
installations  (42).  Despite  these  plans,  further 
efforts  would  be  useful  to  meet  the  targets 
outlined  in  Luxembourg’s  2020  Long-Term 
Renovation Strategy. 

New  standards  and  incentives  target 
energy  efficiency  in  the  non-residential 
in 
sectors.  To  promote  decarbonisation 
commercial buildings, as reflected in the 2025 
CSR, Luxembourg offers a range of incentives, 
including financial support for decarbonisation 
measures  (currently  under  review),  planned 
assistance  for  the  renovation  of  commercial 
premises,  the  Climate  Pact  mainly  targeting 
small  to  medium-sized  enterprises,  and  the 
Energy Efficiency Obligation Scheme (EEOS). 

Streamlined permitting and grid 
modernisation would be beneficial 
to achieve renewable energy 
targets 

in 

through 

transition 

to 
and 
renewable 

simplify 
Efforts  are  underway 
assist 
procedures 
permitting 
municipalities 
energy 
deployment.  Luxembourg  took  forward  its 
the 
renewable  energy 
national  consultation 
‘Simple  –  Quick  – 
Renewable’ (‘Einfach – Séier – Erneierbar’) (43). 
In  May  2025,  51  measures  were  adopted  to 
speed  up  renewable  energy  deployment  and 
enhance  energy  sovereignty,  including  faster 
permitting,  efficient  land  use  for  wind  and 
solar,  increased  participation  by  individuals 
financial 
and  municipalities,  strengthened 
support,  and  grid  reinforcement  for  electricity 
sharing  and  storage.  In  2025,  solar  capacity 
rose to 731 MW and wind to 217.9 MW (44). To 

(42)  Prolongation et adaptation partielle des régimes d'aides 

financières 'Klimabonus Wunnen' et 'Klimabonus 
Mobilitéit' - Le gouvernement luxembourgeois. 

(43)  Présentation des mesures concrètes issues de la 
consultation nationale sur l’énergie renouvelable 
«Einfach - Séier - Erneierbar»: Un manifesto pour 
l’avenir énergétique du Luxembourg - Actualités - 
Portail de l'environnement - emwelt.lu - Luxembourg. 

(41)  LUSTAT Data Explorer • Consommation de carburant par 

(44)  Energieauer: key energy figures for Luxembourg - 

mode de transport, STATEC, 2026. 

Energieauer. 

17 

 
 
 
Management  Plan  (RBMP)  (47)  revealed  a 
deterioration,  with  no  surface  water  bodies  in 
good  ecological  or  chemical  status  and  most 
of  groundwater  in  poor  chemical  status.  This 
situation poses challenges to the environment 
and  economic  activities,  with  poor  surface- 
and  groundwater  quality  already  resulting  in 
the  loss  of  drinking  water  in  protected  areas. 
Water pollution  costs  EUR  60 million  per  year 
(48). 

and 

investments 

Strategic 
policy 
enhancement  are  crucial  for  ensuring 
water  protection.  The  urban  wastewater 
treatment system is in line with EU directives. 
Despite  this,  Luxembourg’s  urban  wastewater 
discharges  remain  a  significant  pressure, 
contributing to less than good water quality in 
76.9%  of  river  water  bodies,  50%  of  lakes, 
and 31.5% of groundwater bodies, the highest 
percentages in the EU. Although Luxembourg’s 
annual investment of EUR 339 million in water 
management,  an  investment  gap  of  EUR  125 
million  annually  remains  for  comprehensive 
water  protection  (49).  Given  that  Luxembourg 
does  not  currently  apply  environmental  taxes 
on  pollution,  there  is  potential  to  enhance 
implementation of the “polluter pays” principle.  

The economy is vulnerable to nature loss 
due  to  significant  reliance  on  ecosystem 
services  and  freshwater  resources.  Over 
44% of (50) Luxembourg’s gross value added is 
tied  to  sectors  relying  on  healthy  terrestrial 
and 
including 
utilities, 
agriculture, 
healthcare  and  tourism.  However,  freshwater 
bodies  are  impacted  by  dams,  construction 

environments, 
construction,  water 

freshwater 

(47)  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. Link. 

(48)  EC, IEEP, Green taxation and other economic 

instruments – Internalising environmental costs to make 
the polluter pay (p. 35-36, Table 5), 2021. Link. 

(49)  Environmental investment needs & gaps assessment 

programme, 2024 update, DG Environment. 

(50)  European Commission, Joint Research Centre (JRC), 

Hirschbuehl et al., The EU economy’s dependency on 
nature, 2025. 

Despite 

installations. 

further  encourage  renewable  energy  projects 
and  follow 
the  2025  CSR,  Luxembourg 
launched  competitive  tenders  for  large-scale 
photovoltaic 
this 
progress, sustained efforts would be of benefit 
to  meet  Luxembourg’s 
target  of  37% 
renewable  energy  in  the  energy mix  by  2030. 
In  particular,  Luxembourg’s  South  Region  (the 
main  focus  of  the  Territorial  Just  Transition 
Plan)  has  high  untapped  potential  in  solar 
energy (see Annex 18). 

Plans are in place to modernise the high-
voltage  grid  and  increase  its  capacity, 
including  cross-border  interconnections. 
Guided  by  the  2025  CSR,  Luxembourg’s  grid 
operator plans to expand the high-voltage grid 
and reinforce cross-border interconnections by 
2040.  Doing  the  latter  is  critical,  given  the 
country’s high import dependency rate, with an 
interconnection  rate  of  105%.  In  particular, 
plans 
interconnectivity  with 
Germany  could  increase  this  capacity  to  over 
400%  by  2030  (45).  In  addition, Luxembourg’s 
near-complete 
roll-out  of  smart 
meters  facilitates  consumer  participation  in 
energy-saving  programmes,  but 
technical 
restrictions  limit  access  by  demand-response 
resources  (46)  to  balancing  markets,  with 
pooling  confined  to  Luxembourg’s  bidding 
zone. 

to  enhance 

(98.8%) 

Poor water quality and ecosystem 
degradation threaten 
environmental and economic 
stability 

Luxembourg  has  the  worst  surface-  and 
groundwater  quality 
is 
affected  by  significant  chemical  and  nutrient 
pollution  and  physical  alteration  of  water 
(Annex  10).  The  3rd  River  Basin 
bodies 

in  the  EU. 

It 

(45)  Source: NECP LU 2021-2030, updated by July 2024, 

section 2.4.1 / p. 82. 

(46)  Demand-response resources are devices that facilitate 
final customers to change the electricity load from their 
current consumption patterns in response to market 
signals, whether alone or through aggregation. 

18 

 
 
 
and  urban  development.  Despite  significant 
territory  being 
portions  of  Luxembourg’s 
protected 
designated 
habitat 
areas, 
degradation 
remains  widespread,  with 
ecosystems  particularly  affected  by  land  take 
(51)  and  artificialisation  (52),  pollution  and 
climate  change.  Recent  efforts,  such  as  river 
renaturation  projects  supporting  freshwater 
ecosystem restoration, should  be sustained to 
align with the EU biodiversity strategy.  

and 

land  to  urban  and 
to 
contribute 
fragmentation 

Forest  health  faces  growing  pressures 
from  both  land  take  and  climate  change. 
Rapid  artificialisation  and  ongoing  loss  of 
infrastructure 
natural 
expansion 
ecosystem 
and 
degradation 
biodiversity  loss,  weakening  forest  resilience. 
At the same time, heatwaves and droughts in 
recent  years  have  weakened 
trees  and 
to  diseases, 
increased 
notably  bark  beetle  infestations.    As  a  result, 
forest health has deteriorated significantly: the 
proportion  of  healthy  trees  fell  from  79%  in 
1984 to 15% in 2024 (53). These trends reduce 
capacity 
forests’ 
to  provide  ecosystem 
including  biodiversity  protection, 
services, 
storage. 
water 
Luxembourg is seeking to strengthen its forest 
policy  framework  to  better  address  rising 
climate-related pressures (54). 

their  vulnerability 

regulation,  and 

carbon 

Fragmented governance hampers 
effective environmental 
management and climate 
resilience efforts 

to 

of 

new 

Luxemburg's 

The  Ministry 

Luxembourg  has  recently  renewed  its 
climate  adaptation  framework  following 
the  end  of  the  2018–2023  strategy, 
whose  evaluation  highlighted  significant 
the 
shortcomings. 
Environment, Climate and Biodiversity adopted 
adaptation 
Luxembourg’s 
national 
strategy  on  22  April  2026 
improve 
resilience  to  floods,  heatwaves  and  droughts. 
The  2025-2035  strategy 
identifies  key 
vulnerabilities  and  proposes  over  150 
measures. 
decentralised 
governance  sees  local  authorities  playing  a 
crucial  role  in  implementation,  supported  by 
national instruments such as the Climate Pact 
2.0  and  the  Nature  Pact.  Although  domestic 
programme  engagement  is  strong,  municipal 
participation  in  the  EU  Covenant  of  Mayors 
remains  limited.  Although  some  sectors  have 
established  efficient  cooperation  among  local 
actors,  fragmented  approaches  to  governance 
create  obstacles,  hindering  not  only  large-
scale  action 
implementation,  but  also 
economic  incentive  harmonisation,  and  policy 
integration  of  climate  and  environmental 
issues. 

Advancements are being made in projects 
to  support  sustainable  agriculture  and 
ecosystem restoration, but environmental 
pressures  remain  high.  Luxembourg  made 
progress  on  organic  farming,  which  increased 
from  4.6%  in  2020  to  7.2%  in  2024  (55),  but 
remains  below  the  2030  national  target  of 
15%  (see  Annex  10).  Agriculture  is  impacting 
livestock 
Luxembourg’s  ecosystems,  with 
density  contributing  to  systemic  agricultural 
pressures,  notably  through  ammonia  (NH3) 
emissions. NH3 air pollution costs Luxembourg 
EUR  334  million  annually  (56),  indicating  gaps 

(55)  Eurostat, Share of organic farming in utilised 

agricultural area, 2026. Link. 

(56)  European Commission, Directorate-General for 

Environment, IEEP, Green taxation and other economic 

(51)  ‘land take’ means the conversion of natural and semi-

natural land into artificial land 

(52)  ‘artificial land’ means land used as a platform for 

constructions and infrastructure or as a direct source of 
raw material or as archive for historic patrimony at the 
expense of the capacity of soils to provide other 
ecosystem services 

(53)  Biodiversity in figures - Statistics Portal - Luxembourg. 

(54)  Présentation du troisième Inventaire forestier national: 
des forêts luxembourgeoises face au défi climatique - 
Le gouvernement luxembourgeois. 

19 

 
 
 
 
in  nutrient  management  strategies.    Some 
areas  (57)  in  Luxembourg  also  presented  a 
higher than EU average contribution regarding 
pesticide residues concentrations in soils. 

are 

being 

forest 

climate 

intensified 
conservation 

to 
Efforts 
to 
strengthen 
enhance 
resilience.  Despite 
protective  measures  covering  38.6%  of  its 
territory  (see  Annex  10),  Luxembourg  faces 
substantial challenges. Forest health has been 
severely impacted by climate change and pest 
those  problems, 
outbreaks.  To  address 
Luxembourg  has  updated  its  ‘Climabonus  – 
(‘Klimabonus  Bësch’)  plan  and 
Forest’ 
introduced  the 
‘Climabonus  –  Marsh  and 
Meadow’  (‘Klimabonus  Mouer  a  Wiss’)  plan  in 
2025  to  support  forest  conservation  and 
ecosystem strengthening (58). 

instruments – Internalising environmental costs to make 
the polluter pay (p. 32-33, Table 3), 2021, Link. 

(57)  While only one area was monitored in Luxembourg in 
the EU-wide study (EC, JRC, Vieira et al., Pesticides 
residues in European agricultural soils - Results from 
LUCAS 2018 soil module, 2023. Link), Luxembourg’s 
ministry of environment reports that it is likely that 
levels are enhanced above natural background in some 
soils for pesticides, based on a study covering several 
collecting sites across the country (Government of the 
Grand Duchy of Luxembourg, M.Kibblewhite, M.Grego, 
Towards a Holistic Soil Protection for Luxembourg, 
2021, Link). 

(58)  ‘Klimabonus Mouer a Wiss’ - Un nouveau soutien 

financier pour les propriétaires privés engagés dans la 
préservation des écosystèmes - Ministerium für 
Umwelt, Klima und Biodiversität - Die Luxemburger 
Regierung. 

20 

 
 
SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS 

ongoing 

in  skills, 

reforms, 
recent 

Challenges 
labour  market 
participation  and  social  inclusion  persist 
with 
despite 
implementation 
policy 
of 
measures still at an early stage.  In 2025, 
Luxembourg  received  recommendations  to 
improve  educational  outcomes  and  ensure 
equal opportunities, address skills mismatches 
and  labour  shortages,  notably  by  increasing 
participation in adult learning and among older 
workers,  and  strengthen  the  resilience  of  the 
through  better 
health  system, 
including 
response, 
In 
workforce 
to 
launched 
Luxembourg  has 
skills 
strengthen 
reduce 
development, 
in  education  and  promote 
inequalities 
longer  careers, 
vocational  pathways  and 
although  implementation  remains  at  an  early 
stage  and  disparities  in  outcomes  persist. 
There  is  progress  in  strengthening  the  health 
system,  with  reforms  advancing  workforce 
planning,  training  capacity,  governance  and 
digitalisation.  While  these  efforts  address  key 
structural challenges, pressures persist related 
labour  market 
skills  mismatches, 
to 
participation  and  social 
(see 
inequalities 
Annexes 1, 12 and 13).  

availability. 

reforms 

In  the  context  of  subdued  economic 
growth,  rising  unemployment  weighs  on 
competitiveness  and  social  cohesion.  The 
unemployment  rate  has  risen  above  the  EU 
average for the first time since 2009, although 
youth  unemployment  and  rates  of  young 
people  not 
in  employment,  education  or 
training fell. Luxembourg has by far the lowest 
employment  and  activity  rates  in  the  EU  for 
older workers, many of whom leave the labour 
market  early.  These  trends  are  linked  to 
structural  features  of  the  economy  –  in 
particular,  a  high  share  of  high‑wage, 
high‑productivity  jobs  in  specialised  sectors  – 
and  to  persistent  inequalities  in  educational 
outcomes  driven  by  socio‑economic  and 
language  background.  They  also  contribute  to 
rate, 
the  high 

in‑work  at-risk-of-poverty 

21 

particularly  among  low‑qualified,  non‑EU‑born 
workers  and  single‑parent  households,  in  a 
context  where  taxes  and  transfers  reduce 
inequality  less  than  in  most  other  Member 
States.  

Graph 4.1: Activity, employment and 
unemployment rates (1), Q1-2009 to Q3-2025 

(1) Activity and employment rates (percentage of population), 
total economy, ages 20-64, seasonally adjusted. Unemployment 
rate (percentage of labour force), total economy, ages 15-74, 
seasonally adjusted. 
Source: Eurostat, LFS [lfsi_emp_q, une_rt_q] 

Skills mismatches are an obstacle 
to labour market performance and 
competitiveness 

Skills  mismatches  contribute  to  rising 
unemployment.  In  2025,  the  unemployment 
rate increased for the third year in a row and 
remains above the EU average (6.5% vs 6.0%). 
Macroeconomic  skills  mismatches  rose  to 
34.4%  in  2025,  far  above  the  EU  average 
(19.2%),  pointing  to  a  gap  between  labour 
market  needs  and  the  outcomes  of  education 
rates 
and 
training  systems.  Employment 
to 
among  university  graduates  continue 

01234567894550556065707580852009-Q12010-Q12011-Q12012-Q12013-Q12014-Q12015-Q12016-Q12017-Q12018-Q12019-Q12020-Q12021-Q12022-Q12023-Q12024-Q12025-Q1% of labour force% of populationLUUnemployment rate 15-74 (rhs)Activity rate 20-64Employment rate 20-64 
 
   
improve,  while  the  rate  has  fallen  in  recent 
years  among  those  with  at  most  a  lower-
secondary  qualification  (85.1%  vs  54.7%  in 
2025).  In  that  context,  Luxembourg  received 
country-specific  recommendations  (CSRs)  in 
2025 
the  participation  and 
employment  rate  of  older  workers  and  to 
address skills mismatches by stimulating skills 
development.  

increase 

to 

guaranteeing 

simultaneously 

long-term  unemployment 

The  employability  and  employment  rate 
of  older  workers  remain  a  challenge. 
Luxembourg  has  the  lowest  employment  and 
activity  rates  in  the  EU  for  workers  aged  55–
64,  while 
is 
particularly  high  among  jobseekers  aged  45 
and over. Participation in adult learning is also 
limited, reducing the ability of older workers to 
adapt to changing skills needs, including digital 
skills. To address the CSR on strengthening the 
employment  perspectives  of  older  workers 
the 
while 
sustainability 
system, 
the 
Luxembourg has introduced certain measures. 
These  include  tax  incentives  to  delay  early 
retirement,  an  extension  of  contribution 
periods and partial pension schemes combined 
with part-time work. These measures come on 
top  of  existing  measures,  such  as  reduced 
social  security  contributions  for  employers 
hiring  45+-year-olds  or  the  ‘Boost  your  skills’ 
project for the same age group, cofinanced by 
the  European  Social  Fund  Plus  (ESF+).  While 
these  measures  go  in  the  right  direction, 
further  progress  would  benefit  from  a  more 
stronger 
coordinated  approach, 
support for training and active ageing. 

including 

pension 

of 

Youth 
labour  market  outcomes  have 
improved  overall.  Despite  remaining  above 
the EU average, youth unemployment declined 
in  2025  The  unemployment  ratio,  which 
provides  a  complementary  picture,  also 
improved  in  2025.  Rates  of  young  people  not 
in employment, education or training have also 
eased recently, but remain linked to structural 
leaving, 
factors 
such  as  early 
are 
among 
particularly 
disadvantaged  and 
those  with  migrant 
backgrounds.  Only  63.6%  of  young  people 
aged 16-24 have basic digital skills, below the 
EU  average.  Luxembourg  will  increase  the 
obligatory  schooling  age  from  16  to  18  in 
September  2026,  which  should  reduce  early 

school 

those 

who 

or 

for 

training.  As 

school  leaving  and  potentially  also  reduce 
rates  of  young  people  not  in  employment, 
education 
youth 
employment  more  generally,  some  measures 
have been taken, such as the reinforced Youth 
the  ESF+,  and 
Guarantee,  supported  by 
targeted  national 
initiatives  such  as  the 
‘initiation  to  employment  contract’.  Additional 
efforts  are  needed  to  strengthen  outreach, 
guidance  and  the  labour  market  relevance  of 
training. 

outcomes 

employment 

particularly 

Vocational  education  and  training  (VET) 
underused, 
remains 
in 
science, 
technology,  engineering  and 
mathematics  (STEM)  and  among  women. 
for  VET 
While 
graduates are generally favourable, enrolment 
in  STEM-oriented  VET  programmes  remains 
to  persistent 
low,  pointing 
comparatively 
challenges  in  broadening  the  skills  pipeline  in 
technical  fields  despite  ongoing  reforms  to 
strengthen  STEM  education.  Luxembourg  is 
taking steps to improve the attractiveness and 
flexibility  of  VET  pathways,  including  better 
links with higher education and more language 
options,  and  these  further  efforts  should  be 
beneficial. 

the 

steps 

taken 

matching 

funded  by 

has 
skills 

to 
Luxembourg 
strengthen 
and 
intelligence.  The  skills  plan  (‘Skills-Plang’) 
launched  in  2025  supports  companies  in 
anticipating  and  financing  evolving  skills 
needs,  while  the  ‘Skillsbridges’  up-/re-skilling 
recovery  and 
initiative, 
resilience  plan,  was  expanded  in  2025,  with 
new training modules on AI, green IT and data 
science.  These  come  on  top  of  existing 
initiatives,  such  as  the  JobInsights  tool,  which 
provides  real-time  data  on  vacancies,  skill 
needs  and 
labour  market  developments. 
However,  further  progress  would  benefit  from 
stronger  cooperation  between  education  and 
training  providers,  the  public  employment 
service  and  employers,  as  well  as  more 
targeted  approaches  for  both  young  people 
and older workers. 

22 

 
Educational outcomes are stable, 
but inequalities and efficiency 
remain a challenge  

Overall,  educational  outcomes  remain 
relatively stable. National ÉpStan tests data 
levels 
that  average  competency 
indicate 
remained  broadly  stable  between  2020  and 
2022,  although  some  declines  were  observed 
in  language  subjects.  Luxembourg  has  also 
improved  students’  digital  skills  in  recent 
years.  A  revised  primary  school  curriculum,  to 
be  implemented  in  the  2026/2027  school 
year,  aims  to  improve  quality  and  respond  to 
emerging  challenges,  including  digitalisation, 
multilingualism and well-being.  

High levels of education spending are not 
fully  matched  by  outcomes.  Public 
expenditure  on  education  amounted  to  5.0% 
of GDP in 2024 (EU: 4.8%) and 10.6% of total 
government  spending  (EU:  9.6%),  with  the 
highest  spending  per  student  in  the  EU.  The 
cost of the system is driven in particular by a 
low  student–teacher  ratio  (8.8  in  2023  vs  an 
EU  average  of  12.2),  high  rates  of  grade 
repetition  and  comparatively  high  teacher 
salaries  This 
reflects  demanding  entry 
requirements, including fluency in three official 
outcomes 
languages.  However, 
remain  below  the  EU  average  in  international 
assessments (PISA 2018; Luxembourg did not 
participate  in  2022),  and  the  efficiency  of 
public  spending  appears  limited,  especially  in 
terms of equity.  

learning 

system 

education 

language 

socio-economic 
and 
The 
background  of  students  remain  key 
drivers  of  educational  inequalities.  The 
multilingual 
poses 
challenges,  particularly  for  students  who  do 
not speak the language of instruction at home 
and  contributes  to  persistent  performance 
gaps.  These  disparities  are  closely  linked  to 
socio-economic background and are reinforced 
by  early  streaming  into  different  educational 
tracks.  Luxembourg  has  one  of  the  largest 
gaps 
in  student  performance 
depending on parents’ level of education (ICILS 
2023).  

in  the  EU 

education, 

Reforms  aim  to  address  multilingualism 
and  improve  equity,  but  their  impact 
would  benefit  from  being  monitored. 
Luxembourg  has  adopted  a  reform  allowing 
greater  choice  of  language  of  literacy  in 
primary 
gradual 
implementation starting in 2027. This has the 
potential  to  improve  learning  outcomes  and 
equity,  but  close  monitoring  would  be 
beneficial.  Further  efforts  are  required  to 
strengthen basic  skills,  support  disadvantaged 
students  and  schools,  and  increase  flexibility 
between educational pathways.  

with 

Health system performance is 
strong, but workforce shortages 
and fragmentation remain key 
challenges 

and 

vulnerabilities 

Luxembourg’s  health  system  performs 
well overall, with strong health outcomes, 
while  ongoing  reforms  aim  to  address 
workforce shortages and improve system 
resilience.  Health  outcomes  remain  among 
the  best  in  the  EU,  with  high  life  expectancy 
and low treatable mortality. However, reliance 
on  foreign-trained  and  cross-border  health 
workers,  alongside  fragmentation  in  service 
delivery  and  limited  use  of  health  data, 
creates 
constrains 
efficiency.  In  response  to  the  2025  CSR, 
Luxembourg  has  stepped  up  reforms  to 
strengthen  workforce  availability  and  system 
resilience. The National Health Plan 2023 sets 
targets to increase the number of doctors and 
training 
nurses,  supported  by  expanded 
programmes, 
recruitment  measures  and 
improved  workforce  planning.  Reforms  to 
governance,  care  organisation  and  digital 
health  –  including  integrated  care  networks, 
the  Hospital  Act  and  investments  in  digital 
tools  –  aim  to  improve  coordination  and 
efficiency. While challenges remain, the reform 
agenda is ongoing and is expected to gradually 
address structural pressures on the system. 

23 

 
Enhancing job quality and reducing 
inequalities is key to fostering 
social cohesion and sustaining 
Luxembourg’s competitiveness 

challenges for Luxembourg, also in light of the 
measures implemented or planned (59). 

labour 

strong 

Income  inequality  and  in-work  poverty 
have been ongoing issues in recent years 
despite 
market 
performance  in  some  areas.  Luxembourg 
performs well in areas such as gender equality 
and  job  stability.  Nevertheless,  the  nominally 
high  social  minimum  wage  still  leaves  many 
workers  below  the  poverty  threshold  (60%  of 
the  national  median  equivalised  disposable 
income  after  social  transfers),  with  in-work 
poverty particularly affecting the non-EU-born, 
the 
single-parent 
households.  

low-qualified 

and 

role, 

contributing 
factors 

Luxembourg  has  taken  steps  to  address 
poverty, but structural challenges persist. 
Despite  some  improvement  in  overall  poverty 
indicators, child poverty remains elevated, with 
single-parent 
particularly 
households 
vulnerable.  This  is  due  to  several  factors, 
including  the  composition  of  Luxembourg’s 
the  financial  and 
labour  market,  where 
in  particular  play  a 
insurance  sectors 
income 
significant 
include  high 
polarisation.  Other 
housing  costs 
the 
taxes  and 
inequality-reducing  effect  of 
in 
low 
is 
transfers,  which 
Luxembourg  compared  with  other  Member 
States.  Measures  under  the  European  Child 
Guarantee and the new national action plan to 
prevent  and  combat  poverty  aim  to  address 
these 
comprehensive 
through  a 
approach  covering  education,  employment, 
housing  and  social  services.  Continued  efforts 
will  improve  take-up  of  social  benefits  and 
address the structural drivers of inequality. 

(see  Annex  16)  and 

relatively 

issues 

to 

These  findings  are  consistent  with  the 
second-stage  analysis  under  the  social 
convergence 
framework.  The  analysis 
points  to  challenges  related  to  the  labour 
market,  including  rising  unemployment,  but 
does  not  point  to  overall  social  convergence 

(59)  European Commission, SWD(2026)122. The analysis 
relies on all the available quantitative and qualitative 
evidence and the policy response undertaken and 
planned. 

24 

 
 
 
simplifying 
renewable energy deployment; 

permitting 

processes 

for 

•  enhancing  sustainable  and  efficient 
transport  by  investing  in  public  transport 
transport, 
infrastructure, 
strengthening  cross‑border  networks,  as 
well  as  networks 
in  rural  areas,  and 
improving  multimodal  passenger  hubs  and 
last‑mile connections; 

decarbonising 

•  fostering  upward  social  convergence 
improving  the  school  system’s 
by 
performance  and  ensuring  equal 
opportunities in schools by raising basic 
skills  and  providing  targeted  support  for 
disadvantaged  students  and  schools,  to 
reduce  the  impact  of  different  linguistic 
backgrounds  on  educational  outcomes, 
vocational 
improve 
higher 
education 
education; 

transitions 
and 

training 

into 

and 

•  promoting  human  capital  development 
and  addressing  skills  mismatches  by 
stimulating lifelong learning and improving 
active labour‑market policies. 

In  other  areas,  Luxembourg  would  benefit 
from: 

•  strengthening  environmental  policy 
and  resource  management  to  improve 
climate  and  water  resilience, 
including 
addressing water quality, further promoting 
promoting 
agriculture, 
sustainable 
sustainable 
management, 
forest 
strengthening  cross-sectoral  governance 
and investing in circularity. 

KEY FINDINGS 

In  areas  covered  by  existing  country-specific 
recommendations,  Luxembourg  would  benefit 
from: 

•  strengthening the sustainability of the 
pension system by implementing reforms 
its 
that 
financial 
ensure 
sustainability, 
in  particular  by  further 
early‑retirement  options  and 
limiting 
the  employment  of  older 
increasing 
workers; 

long‑term 

•  preventing  distortions  of  competition, 
safeguarding  public 
finances  and 
ensuring  fair  taxation  by  taking  further 
action  to  mitigate  aggressive  tax  planning, 
through  sufficient  taxation  of  outbound 
payments  of 
interest  and  royalties  to 
zero‑/low‑tax jurisdictions;  

•  addressing  housing  affordability  by 
substantially 
increasing  housing  supply 
through  a  comprehensive  land‑use  policy 
and a property tax reform, while reinforcing 
coordination  between  housing  policy, 
spatial  planning, 
transport  and  urban 
planning; 

•  boosting  competitiveness  by  promoting 
diversification in the financial sector, with a 
focus  on  investing  in  high  R&D-intensive 
activities  and  removing  barriers  to  the 
provision  of  services  and  to  competition  in 
regulated professions;  

• 

incentivising  more 

increasing  financing  available  to  the 
economy  by 
retail 
participation in financial markets, alongside 
improved  availability  of  supplementary 
pension schemes; 

•  reducing  reliance  on  fossil  fuels  and 
accelerating  the  green  transition  by 
increasing  energy  efficiency  in  buildings, 
supporting  renewable  energy 
initiatives, 
modernising  the  high‑voltage  grid  and 

25 

 
 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

A1.  CSR implementation 

Fiscal 

A2.  Fiscal developments and debt sustainability 

A3.  Taxation 

Productivity 

A4. 

Innovation to business 

A5.  Single market and industry 

A6.  Savings, investment and access to finance 

A7.  Effective institutional framework 

Sustainability 

A8. 

Industry decarbonisation, circularity and climate mitigation 

A9.  Affordable energy transition 

A10.  Climate adaptation, preparedness and environment 

Fairness 

A11.  Labour market 

A12.  Social policies 

A13.  Education and skills 

A14.  Social scoreboard 

A15.  Health and health systems 

A16.  Housing 

Horizontal 

A17.  Sustainable development goals 

A18.  Competitive regions 

A19.  Transport 

LIST OF TABLES 

A1.1. 
A2.1. 
A2.2. 
A2.3. 
A3.1. 
A4.1. 

2025 CSR implementation and Commission assessment 
Projected change in age-related expenditure in 2025-2040 and 2025-2070 
Supplementary pension schemes - Scope for expansion 
Fiscal Governance Database indicators and Public Accounting Maturity 
Taxation Indicators 
Key innovation indicators 

29 

32 

38 

38 

42 

47 

47 

52 

61 

68 

73 

73 

81 

87 

95 

95 

99 

102 

106 

107 

111 

117 

117 

119 

124 

32 
39 
40 
41 
43 
50 

 
 
 
Single Market and Industry 
Savings and Investments Union summary diagnostics 
Financial sector indicators 
Luxembourg. Selected indicators on better regulation practices for primary legislation 
Digital Decade key performance indicators: availability of digital public services 
Key clean industry and climate mitigation indicators: Luxembourg 

A5.1. 
A6.1. 
A6.2. 
A7.1. 
A7.2. 
A8.1. 
A10.1.  Key Adaptation Indicators 
A14.1.  Social Scoreboard for Luxembourg 
A15.1.  Key health indicators 
A18.1.  Main development trends, challenges and the concentration of resources 
A18.2.  Key indicators for Luxembourg 

LIST OF GRAPHS 

Composition of non-financial corporations' funding 
Capital markets and financial intermediaries 
Composition of HH financial assets per capita and as % of GDP 
Trust in the justice system, regional / local authorities and in government 

Contributions to the change in general government balance (% of GDP) 
Primary spending evolution and composition - percentage of GDP - 
Compositional change (% total spending) since 2019 
Tax revenue by economic function in 2024, LU (outer ring) and EU-27 (inner ring) 
Tax wedge for single and second earners as a % of total labour costs, 2025 
Business R&D expenditure as % of GDP, 2010-2024 

A2.1. 
A2.2. 
A2.3. 
A3.1. 
A3.2. 
A4.1. 
A5.1.  Manufacturing industry production: total and selected sector, index (2021=100), 2015-2024 
A6.1. 
A6.2. 
A6.3. 
A7.1. 
A7.2.  Most time-consuming aspects of service delivery 
A8.1. 
Greenhouse gas emissions in the effort sharing sectors, 2005, 2023, and 2024 
A9.1. 
Electricity and gas prices for household and non-household consumers, first half of 2025 
A9.2. 
Low-carbon electricity generation vs. electricity wholesale prices, 2025 
A9.3. 
Luxembourg’s installed renewable capacity vs electricity generation mix 
A12.1.  At-risk-of-poverty or social exclusion rate and its components (AROP, SMSD, LWI) 
A15.1.  Life expectancy at birth, years 
A15.2.  Treatable mortality 
A16.1.  House prices, rents and price-to-income evolution in LU and EU27 since 2005 
A16.2.  Borrowing costs and housing loans 
A16.3.  House supply indicators in LU since 2005 
A16.4.  Selected housing affordability indicators 
A17.1.  Progress towards the SDGs in Luxembourg 

60 
61 
67 
69 
70 
80 
94 
106 
109 
120 
122 

38 
38 
38 
42 
44 
48 
58 
62 
62 
63 
68 
69 
76 
82 
82 
84 
99 
107 
107 
112 
112 
113 
116 
117 

30 

 
 
 
 
 
 
ANNEX 1: CSR IMPLEMENTATION  

Table A1.1:  2025 CSR implementation and Commission assessment 

(Continued on the next page) 

31 

Luxembourg faces challenges in a wide range of policy areas, as identified in the country-specific recommendations (CSRs). Luxembourg was recommended, among other things, to strengthen innovation and R&D while boosting competitiveness through diversification, in particular in the financial sector, digitalisation, and more support for business scale-up; accelerate the green transition by promoting sustainable and efficient transport, energy efficiency, renewable energy, and grid upgrades; and address education inequalities and skills mismatches while improving health system capacity and governance. The Commission has assessed the degree of implementation of the 2025 CSRs considering the policy action taken by Luxembourg to date*. To do so, the Commission has taken into account the information provided by Luxembourg in its Annual Progress Report as well as other information sources. This annex provides summary information on the policy actions taken or planned by Luxembourg for each CSR. More detailed information on these actions is included in the relevant chapters and other annexes of the report. *CSR 2 is not assessed in CeSaR. RRP 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. Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  1.1 Reinforce overall defence and security spending and readiness while ensuring debt sustainability in line with the European Council conclusions of 6 March 2025. Total general government defence expenditure in 2026 is projected at 1.2% of GDP, corresponding to an increase of 0.5 ppt. compared to 2024. Total general government defence expenditure in 2027 is projected at 1.2% of GDP, corresponding to an increase of 0.5 ppt. compared to 2024. Substantial progress 1.2 Ensure that net expenditure respects the path recommended by the Council on 21 January 2025. Annual and cumulated deviations in 2025 amounted to 1.3% of GDP and 0.6% of GDP, respectively. Annual and cumulated deviations in 2026 projected to -0.6% of GDP and 0.0% of GDP, respectively.  Limited progress 1.3 Address the long-term sustainability of the pension system, in particular by limiting early-retirement options and increasing the participation and employment rate of older workers by enhancing their employment opportunities and employability. Increase in the contribution rate from 24% to 25.5%.  Extension of the contribution period for early retirement at age 60 from 40 years to 40 years and 8 months by 2030.  Introduction of tax incentives to encourage older workers to remain professionally active.   Introduction of partial pension schemes to promote longer careers, allowing part-time work while drawing part of the pension.  Measures to reduce expected increase in spending are largely absent.  Adoption of a reform to postpone the time the pension system balance would start returning recurrent deficits by 3-4 years, around 2029 according to calculations by IGSS (page 2 and 3 of fiche financier of bill 8634).  Implementation of main structural pension-related measures to run gradually until 2030.    Limited progress 1.4 Increase housing supply, in particular by adopting a comprehensive land-use policy and a property tax reform, developing large-scale district projects on public land,  The draft Bills on the reform of the recurrent land and property taxation and the new Tax on unoccupied property, presented to the Parliament in 2022, are still pending approval, and have been watered down through the Parliamentary process.  Limited progress 1.5 and strengthening coordination with urban planning Introduction of Bill 8481 establishing guarantees for 10–30% of affordable housing in all new developments.  Adoption of Article 29bis reform as part of the Housing Pact 2.0. Planning of draft bill for mid-2026: 1) Simplified and consolidated building code; 2) 2-month implicit approval procedure.  Ongoing broader structural alignment between land mobilisation, spatial Some progress  
 
 
 
     
 
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32 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  planning, and housing supply.  Amendments to Housing Pact 2.0 to simplify procedures and improve municipal support (tabled in 2025 and remain under parliamentary consideration).  Planned adoption of reform of pre-emption rights in the Housing Pact 2.0 (part of the urban planning package). 1.6 and cross-border public transport. Continuation of investments, e.g. entry into service of park & ride at Thionville railway station.  Expansion of public bus network.  Investment in rail infrastructure (e.g., Bettembourg rail hub).  Execution of preparatory work on fare harmonisation and mobility planning.  Renewal of rolling stock.  Continued cooperation under the framework of the Greater Region, contributing to the betterment of sustainable urban mobility and cross-border connectivity. Continued implementation of the 2035 national mobility plan.  Increase of train capacity between FR and LU to 13 500 seats by 2026.  Redevelopment of the Bettembourg train station by 2029.  Planning of national projects financed by each border country reinforcing cross-border mobility (FR-LU) + (BE-LU).   Some progress       1.7 Mitigate risks related to the housing market by phasing out fiscal incentives to borrow   No progress 1.8 and by strengthening the macroprudential framework.  A uniform 80% loan to value (LTV) cap for all investor loans is in effect again from June 2025 following the expiry of the temporary flexibility, thereby maintaining borrower based macroprudential safeguards.  No progress 1.9 Take further 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, other than those included in the agreed EU list of non-cooperative jurisdictions for tax purposes.    No progress   3.1 Focus economic policy related to investment on fostering innovation and supporting high R&D intensive activities. Launch of a grant programme supporting spin-offs from public research.  Reform of the aid scheme for R&D to prioritise strategic innovation areas. Revision of the National Research Strategy.  Commitment of EUR 300 million of the Société National de Crédit et d’Investissement to support companies in strategic sectors.  Introduction of the Fit 4 Scale programme. Establishment of science and technology parks dedicated to collaborative research among innovative companies, start-ups, and public research. Limited progress 3.2 Boost competitiveness, including by promoting Adoption of the EU's Digital Operational Resilience Act. The transposition of the EU AI Act, tabled in the Parliament on 23 December 2024 Limited progress  
 
 
     
 
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33 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  diversification, in particular in the financial sector,  Luxembourg’s financial regulator, the CSSF, has taken a future-forward approach to digital assets, and has issued detailed guidance and FAQs that clarify how alternative investment funds can invest in virtual assets.  In February 2025, Luxembourg published a law on digital finance in the Official Journal, aligning national law with the EU Markets in Crypto-Assets Regulation (MiCAR) and establishing a national framework for crypto-asset service providers. (Dossier 8476), is pending approval. 3.3 accelerating digitalisation, in particular in the uptake of advanced digital technologies by SMEs, Launch of a series of new co-funding packages aimed at raising the uptake of digital technologies by SMEs, including an AI package and a cybersecurity package.  Launch of the “Cyber Factory” providing SMEs access to AI models, source codes, and data.Launch of AI Factory to support organisations integrating AI technologies.  Continuation of the Fit 4 Digital programme to help companies adopt AI solutions.  Some progress 3.4 and enabling business scale-up and productivity growth. Introduction of SICAR’s (Société d’Investissement en Capital à Risque) tax exemptions to increase venture capital investments.  Introduction of a "start-up tax credit" to encourage investment in young companies.  Launch of the financial aid scheme for the creation of spin-offs from public research.  Introduction of the Fit 4 Scale programme to support scale-ups, with initial support limited to five companies.  Launch of the Scale-Up Action Plan. Some progress 3.5 Reduce barriers to competition in regulated professional business services. Adoption of law to adapt opening hours in the retail sector for more flexibility and freedom, including the possibility to extend opening hours. Adoption of a law on the practice of liberal professions in the construction and land use planning sectors.  Adoption of a law on the access to and training for the professions of barrister, notary and bailiff. Limited progress   4.1 Improve sustainable and efficient transport by further promoting the decarbonisation of transport Provision of financial incentives for electric vehicles.  Expansion of EV charging infrastructure.  Increase of CO₂ tax on fossil fuels, reaching EUR 45/tCO₂ in 2026.  Some progress 4.2 and investing in public transport infrastructure   Upgrade of the Luxembourg–Bettembourg rail line.   Optimisation of the public bus network.  Purchase of 34 new railcars. Deployment of real-time transport information systems.  Operationalisation of TEN-T multimodal hubs. Some progress 4.3 and cross-border networks.   Opening of a 2x3-lane motorway section linking Croix de Gasperich to the Berchem service area and introducing key innovations including a continuous priority lane for carpooling and buses, as well as a bus lane using the hard shoulder. Upgrade of Thionville-Metz rail line.  Redevelopment of Bettembourg station. Some progress 4.4 Reduce overall reliance on fossil fuels by investing in energy efficiency in both the   Support for existing building renovations via  RRP-funded subsidies for the deployment of photovoltaic power Some progress  
 
 
     
 
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(Continued on the next page) 

34 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  residential and non-residential sectors. Klimabonus Wunnen, pre-financing, and a 3% annual renovation mandate for public buildings.   Continuation of long-standing voluntary agreement for energy efficiency involving large electricity and gas consumers, with mandatory energy audits under EU guidelines. Progressive implementation of the national decarbonisation roadmap, which includes reforms and financial support, renewable self-consumption, and carbon contracts for different uses.  Introduction of prefinancing for the installation of photovoltaic panels. generation units in business premises.  Introduction of an aid scheme for energy efficiency renovations and calls for tenders for renewable energy deployment. 4.5 Modernise the high-voltage grid and increase its capacity, improve cross-border interconnections, and ease permitting procedures for renewable energy deployment. Adoption of 51 measures to accelerate and simplify permitting procedures for renewable energy production: installation of photovoltaic panels, wind turbines and heat pumps.  Adoption of a law for the establishment of a hydrogen transport network.  Improved granularity of the solar cadastre. Development of the high-voltage grid and improvement of interconnections, particularly with Germany, between now and 2040.  Commissioning of the 380kV interconnection line between Luxembourg and Germany by 2029.  Introduction of network expansion projects to increase Luxembourg's electricity interconnectivity with Germany to more than 400% by 2030.  Review of legislative texts to speed up permitting procedures for decarbonisation and renewable energy projects. Some progress 4.6 Support municipalities in deploying renewable energy. Continuation of the provision of financial and technical assistance to local authorities to deploy renewable energy.  Continuation of the provision of advisory services and data tools to municipalities to plan and implement the deployment of renewable energy.  Availability of subsidy schemes to aid renewable energy investments like PV-deployment and district heating development.  Launch of "Einfach – Séier – Erneierbar" initiative to simplify renewables deployment through digitalised permitting procedures, optimised land use, and citizen involvement, as well as enhanced financial support schemes and strengthened electricity grid for sharing and storage.  Some progress 5.1 Improve performance and ensure equal opportunities in schools,  Introduction of a guichet unique (one-stop-shop) for inclusive education to simplify procedures and centralise information for inclusive education support procedures. Launch of the “Service d’Intégration et d’Accueil” to inform students and parents (particularly those from abroad) about the education system.  Adoption of the chèque-service accueil (CSA) reform to ensure financially accessible Introduction of a new competency-based curriculum in fundamental education in the 2026/2027 school year.  Adaptation of national assessment tools (EpStan).  Modernisation of the secondary education curriculum. Limited progress  
 
 
     
 
Table (continued) 

(Continued on the next page) 

35 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  access to early childhood education and care. 5.2 including by adopting a national school quality framework General national school quality framework was adopted in 2023.  No progress 5.3 and an external school evaluation system,   The government relies on existing elements for school evaluation, including the National School Quality Report, achievement reports, and international studies. Development of dashboards and of a national education data strategy. No progress 5.4 and by adapting teaching to the needs of disadvantaged students and those from various linguistic backgrounds.  Increase in resources to increase the number of full-time equivalents for support teams and specialised staff for students with special educational needs.  Introduction of co-education classes for socio-emotional development and new socio-therapeutic centres.  Continued implementation of the plurilingual education programme and homework support in education and care services.  Launch of the “Service d’Intégration et d’Accueil” to inform students and parents (particularly those from abroad) about the education system. Adoption of the ALPHA reform (“zesumme wuessen”) to allow families to choose literacy in French or German, benefitting students who don’t speak German or Luxembourgish at home.  Updates of secondary education curriculum.  Increase in the number of public European schools and international tracks, to address the linguistic needs of students. Some progress 5.5 Address skills mismatches, in particular for the green and digital transitions, by stimulating skills development. Expansion of RRP-funded Skillsbridges initiative to include modules on Green IT & AI, Data Science, and Soft Skills.  Expansion of ADEM training offers.  Launch of Skills Plang to support upskilling and reskilling for employees undergoing major green and digital transitions.  Launch of new digital platform to improve talent attraction. Launch of the “Work in Luxembourg” portal.  Expansion of national AI training course to wide public accessibility.  Training initiatives supporting the green transition, delivered notably through the Centre National de Formation Professionelle Continue (CNFPC). Introduction of an accelerated one-year vocational qualification pathway (“1re DAP – 1 an, 1 métier”).  Launch of three specialised academies focusing on Data & AI, Cybersecurity, and Quantum Computing to address labour shortages in strategic tech sectors.  Creation of a database for vocational trainings. Bill 8635 on youth employment: Under parliamentary review with expected adoption in Q2 2026, the bill seeks to expand traineeship access for all registered jobseekers and harmonise social protection for youth employment measures, aiming to improve pay stability and employment prospects for those under 30.   Launch of a digital strategy with a skills component.  Ongoing work to establish a legal framework for higher vocational education.  Presentation of the second digital inclusion action plan. Some progress 5.6 Improve the resilience of the health system by accelerating the reforms and ensuring appropriate availability of health workers. Introduction of incentives and training programmes to increase the domestic supply of health professionals.  Introduction of measures to strengthen primary and ambulatory care. Development of a comprehensive public health legal act.  Recruitment of 1,200 doctors and 3,800 nurses by 2030 according to the 2023 National Health Plan.  Substantial progress  
 
 
     
 
Table (continued) 

Source: Luxembourg's reporting and Commission assessment 

36 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  Ongoing discussions regarding the introduction of a master’s degree in medicine at the University of Luxembourg to complement the bachelor’s programme, with a potential launch targeted for 2029, pending evaluation results.  RRP-funded reform on the remits of health professionals.  RRP-funded reform on telemedicine solutions for remote medical follow-up of patients.   
 
   
 
FISCAL 
ANNEX 2: FISCAL DEVELOPMENTS AND DEBT SUSTAINABILITY 

2025 to 30.2% in 2027, mostly due to due to the 
budget  deficits  and  social  security  fund-related 
stock-flow adjustments.  

Graph A2.1: Contributions to the change in general 
government balance (% of GDP) 

This annex discusses selected topics in public 
finances  and  developments  on 
fiscal-
structural  country-specific  recommendations 
(CSRs)  addressed  to  Luxembourg  in  July 
2025.  These  CSRs  include  a  call  to  reinforce 
defence 
readiness  while 
and 
implementing  a  fiscal  strategy  in  line  with  the 
Council  Recommendation  of  21  January  2025. 
Luxembourg  was  also  recommended  to  address 
the long-term sustainability of the pension system.  

spending 

On 21 January 2025, the Council adopted the 
Recommendation  endorsing  Luxembourg’s 
medium-term  fiscal-structural  plan  (60).  The 
plan  includes  a  fiscal  adjustment  over  four  years 
(61). 

Developments in the government 
balance, debt and public expenditure 
(62) 

Source: European Commission 2026 Spring Forecast 

Graph A2.2: Primary spending evolution and 
composition - percentage of GDP - 

Luxembourg’s  government  deficit  amounted 
to  2.0%  of  GDP  and  the  country’s  debt-to-
GDP ratio amounted to 26.5% of GDP at the 
end  of 2025.  In  2025,  the  government  deficit  is 
mostly  explained  by  a  shortfall  in  revenues  from 
taxes  on  income  and  wealth,  and  by  sustained 
spending,  primarily  driven  by  a  dynamic  current 
expenditure  and  higher  public 
investment, 
including in defence, affordable housing, education 
and climate-related measures (graph A2.1).  In the 
Commission  Spring  2026  Forecast,  the  general 
government  balance  is  projected  to  remain  in 
deficit  over  the  forecast  horizon:    the  deficit  is 
expected to decline to 1.2% of GDP in 2026 and to 
raise  again  to  1.5%  of  GDP  in  2027,  as  ageing-
related  costs,  defence  spending  and 
interest 
expenses continues to push spending higher. Public 
debt is expected to increase from around 26.5% in 

(60) OJ C, C/2025/650, ELI: EUR-Lex - 32025H00650 – EN – EUR-

Lex 

(61) Compliance by Luxembourg with the maximum growth rates 
of net expenditure recommended by the Council is assessed 
in COM(2026)200. 

(62) Figures underpinning fiscal surveillance (net expenditure 
growth) are provided in the Fiscal Statistical Tables 
(SWD(2026)200) providing background data relevant for the 
assessment of the budgetary policies of the Member States. 

Source: Eurostat 

Graph A2.3: Compositional change (% total 
spending) since 2019 

Source: Eurostat.  
Note: Based on economic literature, the categories considered 
to have the higher growth impact include education, R&D, 
health, transport and communication (See Barbiero and 
Cournede (2013), Gemmel et al. (2016), Lupu et al (2018), 
Cepparulo and Mourre (2020) and OECD (2025)).   

37 

-4-3-2-10123452021202220232024202520262027RevenueExpenditureChange in budget balance% of GDP510152035404550200720082009201020112012201320142015201620172018201920202021202220232024Primary expenditureSpending with higher impact on GDP (rhs)-0.50-0.250.000.250.50EducationGeneralservicesCultureR&DHousingInterestspendingHealthCom-municationPublicorderEnvironmentTransportSocialprotectionOthereconomicDefence 
 
 
 
  
 
  
 
   
 
 
While  primary  expenditure  has  increased 
sharply, expenditure with a higher impact on 
GDP had remained broadly stable over three 
decades. As regards the composition of spending, 
largest 
social  protection  accounts 
proportion  of  total  expenditure  (above  40%), 
followed  by  health,  economic  affairs  (63),  general 
public  services  and  education,  all  above  10%.  In 
the  case  of  education,  spending  is  among  the 
highest  on  average 
the  EU.  However, 
in 
performance  in  basic  skills  remains  below  the  EU 
average,  which 
there  are 
suggests 
inefficiencies in public spending (see Annex 13). 

that 

the 

for 

Since  2019,  public  expenditure  on  defence 
and  other  economic  affairs  has  increased 
sharply,  with  the  rise  in  defence  spending 
reflecting  recent  security  developments  (see 
Graph  A2.2).  Spending  on  transport,  social 
protection  and  environment  has  risen  more 
modestly. By contrast, spending on communication 
has  remained  broadly  stable,  while  spending  on 
research  and  development,  health  and  education 
has fallen. This trend deserves attention, as these 
categories  are  generally  considered  conducive  to 
growth.  

Public  investment  is  set  to  remain  at  a  high 
level.  After  accounting  for  5.0%  of GDP in  2025, 
investment is projected to decline to 4.9% of GDP 
in 2026. This reflects government plans to support 
transitions,  mobility, 
the  green  and  digital 
economic  diversification  and  military 
related 
expenditure.  As  part  of  its  recovery  and  resilience 
plan,  Luxembourg  supports  the  construction  of 
photovoltaic  power-generation  units  on  business 
premises.  The  government  is  also  pursuing  its 
ambitions  in  the  hydrogen  sector,  harnessing 
regional cooperation (see Annex 9). 

Luxembourg  has  high  tax  revenues  as  a 

proportion  of  GDP.  In  2024  Luxembourg’s  total 
tax  revenues  as  a  percentage  of  GDP  (including 
compulsory 
contributions) 
social-security 
amounted  to  42.7%,  compared  to  an  EU  average 
of 40.4%. Total tax  revenues are projected to fall 
to  42.3%  of  GDP  in  2025  and  increase  again  to 
43.4 % of GDP in 2026, according to Commission 
Spring 2026 Forecast (64).  

Labour taxes make up the largest proportion 
of  total  tax  revenues,  but  the  tax  mix  in 
Luxembourg  also  relies  strongly  on  capital 
taxation,  including  taxation  of  household 
capital  income,  compared  to  the  EU  average. 
Luxembourg is planning a property tax reform, but 
it is unclear when it will be implemented. Tax relief 
for  mortgage  interest  incentivises  debt-financed 
property  ownership  and  will  probably  lead  to 
house-price 
tax  provisions 
combined  with  the  relevant  economic  indicators 
strongly  suggest  that  the  country  is  used  as  a 
conduit for capital flows and financial optimisation 
by multinational groups and that there might be a 
high risk of aggressive tax planning (see Annex 3).  

increases.  Legal 

Cost of ageing 

Total ageing-related spending in Luxembourg 
is  projected  to  rise  by  about  2.5  percentage 
points  (pps)  of  GDP  by  2040,  and  by  nearly 
11 pps  by  2070  (see  Table  A2.1).  The  overall 
increase  is  the  result  of  a  projected  steep  rise  in 
pension  expenditure;  spending  on  long-term  care 
and  healthcare  are  also  expected  to  increase 
significantly.  

Public  pension  spending  as  a  proportion  of 
GDP is projected to rise by about 2 pps in the 

Table A2.1:  Projected change in age-related expenditure in 2025-2040 and 2025-2070 

(63)  This  refers  to  the  set of  government  activities,  policies,  and 
expenditures aimed at regulating, supporting, and developing 
economic  activity  across  major  sectors,  including  general 
economic  and 
labour  policies,  agriculture  and  natural 
resources, energy, industry, construction, and other economic 
functions  not  elsewhere  classified.  Although  transport  and 
communication,  as  well  as  research  and  development 
activities, are normally considered part of this function, they 
are treated separately in the graph presented. 

Source: 2024 Ageing Report (EC/EPC). 

38 

(64)  Data retrieved from the AMECO database (https://economy-

finance.ec.europa.eu/economic-research-and-
databases/economic-databases/ameco-database_en) 

LU17.31.90.30.3-0.12.419.8LUEU24.30.50.30.4-0.30.925.2EULU17.38.11.01.6-0.210.627.9LUEU24.30.20.60.8-0.31.325.6EUageing-related expenditure change in 2025-2070 (pps GDP) due to:ageing-related expenditure pensionshealthcarelong-term careeducationtotalageing-related expenditure 2025 (% GDP)change in 2025-2040 (pps GDP) due to:ageing-related expenditure 2040 (% GDP)pensionshealthcarelong-term careeducationtotal 
 
 
 
  
 
Table A2.2:  Supplementary pension schemes - Scope for expansion 

Source: European Commission. 

the 

to  address 

coming  decades  and  by  around  8 pps  by 
2070.  At  17.5%  of  GDP  in  2070,  gross  spending 
on public pension benefits is projected to be by far 
the  highest  in  the  EU.  In  2025,  Luxembourg 
received  a  CSR 
long-term 
sustainability  of  the  pension  system,  in  particular 
by limiting early-retirement options and increasing 
the  participation  and  employment  rate  of  older 
workers. 
In  December-2025,  after  a  public 
consultation  Luxembourg  adopted  a  pension 
reform,  which  consists  of  i)  an  increase  in  the 
contribution  rate  by  1.5  pps  to  25.5%,  ii)  limited 
measures,  such  as  tax  advantages,  to  encourage 
people  to  extend  their  careers  iii)  introducing  the 
right  for  a  progressive  pension,  and  iv)  increasing 
the  mandatory  contribution  period  for  most  early 
retirees  (65).  Overall,  the  reform  does  not  go  far 
enough  to  address  the  structural  issues  of  the 
to 
sustainability  of 
significantly 
low 
increase 
participation rate of workers aged 55-64. 

the  pension  system  or 

currently 

the 

Supplementary  pension  schemes  can  boost 
the  resilience  of  the  pension  system  by 
diversifying  retirement  income  sources.  In 
Luxembourg,  however,  there  has  been  limited 
uptake: at the end of 2024, private pension assets 
amounted to around 2% of GDP while participation 
rates  were  around  4%  of  the  working-age 
population (see Table A2.1) (66). This coincides with 
rising  medium-term  spending  pressures  on  public 
pensions  and  a  projected  decrease 
the 
replacement  rate  by  4 pps  between  2025  and 
2040 (Table A2.2) (67). 

in 

(65)  Loi de 19 Decembre 2025 (Pension reform) ; Loi de 19 

Decembre 2025 (Tax incentives). 

(66)  Source: OECD Pension Market in Focus 2025. The highest 

participation rate in at least one supplementary pension plan 
is reported.  

(67)  The (gross) replacement rate refers, depending on data 

availability, to both public and private pensions. It is based 
on projections from the 2024 Ageing Report.  

Public healthcare expenditure is projected to 
be  4.1%  of  GDP  in  2025  (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(68). Public expenditure on long-term care 
is projected to be 1.1% of GDP in 2025 (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.  

National fiscal frameworks 

studies 

produces 

(STATEC), 

In  Luxembourg  there  are  two  independent 
fiscal institutions (IFIs). The National Council of 
Public  Finances  (CNFP)  has  a  narrow  mandate: 
monitoring  compliance  with  fiscal  rules,  while  its 
sister  IFI,  the  national  institute  of  statistics  and 
economic 
the 
macroeconomic forecast. The CNFP is ostensibly a 
stand-alone  entity,  yet  when  it  comes  to  staff 
expenses  and  other  operating  expenses  it  seems 
to  be  fully  integrated  into  the  MoF  budget,  and 
funding  is  not  enshrined  in  law.  Its  access  to 
information  is  currently  regulated  only  by  a 
memorandum 
STATEC’s 
forecasts are subject to ex post assessment by the 
CNFP.  As  a  statistical  office,  STATEC  has 
undergone external reviews, albeit not focusing on 
its IFI function.  

understanding. 

of 

Luxembourg  does  not  have  a  formal, 
institutionalised  spending-review  process. 
The  impetus  to  launch  spending  reviews  depends 
on  the  fiscal  situation.  However,  the  difficulty  of 
phasing out energy-support measures could be an 
indication  of  some  political  resistance  to  altering 

(68)  Key performance characteristics, recent reforms and 

investments of the Luxembourgish healthcare system are 
discussed in Annex 15 ‘Health and health systems’. 

39 

Assets in 2024 (% GDP)Participation in 2024 (% working-age population)LU1.6-4.04.1LUEU32.4-2.855.9EUGross replacement rate at retirement: (pps change 2025-2040)  
 
 
 
 
   
 
Table A2.3:  Fiscal Governance Database indicators and Public Accounting Maturity 

(1) "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. 
The score for public accounting reflects the degree of maturity in relation to the International Public Sector Accounting Standards 
(IPSAS). Countries with an accounting maturity of 70% or more in relation to IPSAS are deemed to apply accrual accounting. For 
more information, see the report on public accounting in the EU (COM(2025)746 and accompanying Staff Working Document 
SWD(2025)396)." 
Source: Fiscal Governance Database, European Commission 

spending  priorities.  Accrual  accounting  improves 
the  transparency  of  a  public  body’s  financial 
position  and  performance  and  can  support 
sustainability  and  intergenerational  equity.  Most 
Member  States  (14)  have  implemented  accrual 
accounting  across  the  general  government  sector 
and five are set to do so by 2030 (69). Luxembourg 
currently  lags  behind  the  EU  average  (see  Table 
A2.3)  as  it  has  not  yet  implemented  accrual 
accounting  at  central  and  local  government  level 
and  is  set  to  improve  it  at  central  government 
level in the medium term (70).  

(69)  Report on public accounting in the EU (COM(2025)746 and 
accompanying Staff Working Document SWD(2025)396). 
Countries with an accounting maturity of 70% or more in 
relation to International Public Accounting Standards are 
deemed to apply accrual accounting. 

(70)  Annexes 3.1 and 3.4 of SWD(2025)396. 

40 

2024LuxembourgEU AverageCountry Fiscal Rule Strength Index (C-FRSI)10.9114.81Medium-Term Budgetary Framework Index (MTBFI)0.780.722025 Public accounting maturity of general government43%65% 
 
 
  
 
ANNEX 3: TAXATION 

the 

information  on 

This  annex  provides  an 
indicator-based 
overview  of  Luxembourg’s  tax  system.  It 
includes 
tax  mix,  on 
competitiveness  and  fairness  aspects  of  the  tax 
system,  and  on  tax  collection  and  compliance.  It 
also provides information on the risk of aggressive 
tax  planning  in  Luxembourg.  In  the  area  of 
taxation, 
for  Luxembourg 
highlighted the need for a property tax reform and 
to phase out fiscal incentives to borrow, as well as 
for  further  action  to  effectively  tackle  aggressive 
tax planning. 

the  2025  CSRs 

in 

tax 

burden 

Luxembourg 

The 
is 
2 percentage  points  (pps)  above  the  EU 
average.  In  2024,  tax  revenues  in  Luxembourg 
(including  social  security  contributions)  reached 
41.4%  of  GDP,  slightly  higher  than  the  previous 
year  (40.1%)  (see  Table A3.1)  (71).  The  difference 
with  the  EU  average  reached  2 pps,  up  from 
1.1 pp.  in  2023.  Luxembourg’s  tax  revenues  from 
labour  taxation  in  2024  as  a  share  of  GDP  were 
19.3%, a decrease from 2023 (19.8%) and below 
the EU average for 2024 (20.3%). Meanwhile, the 
share  of  consumption  taxes  (9.5%  of  GDP)  was 
below the EU average (10.6%), including a below-
average contribution of VAT revenues.  

Revenues  from  capital  taxes  as  a  share  of 
GDP remained the highest in the EU in 2024, 
likely driven by the high share of corporate income 
tax  revenues (6.5%).  While  the  share  of  revenues 
from property taxes is relatively high, the share of 
revenues  from  recurrent  property  taxes  is  the 
second  lowest  in  the  EU  at  0.1%  against  an  EU 
average  of  0.9%.  Capital  taxes  have increased  as 
a  share  of  GDP  and  reached  12.6%  of  GDP  in 
2024, up from 11.2% the previous year.  

Revenues  from  environmental  taxes  as  a 
share of GDP have decreased in recent years, 
from 1.7% in 2019 to 1.2% in 2024, below the EU 
average of 2.1%. There is room for a greater use 
of  environmental  taxes,  which  come  largely  from 
taxes on energy, as environmental taxation mostly 
consists  of  transport  fuel  taxes.  Luxembourg  has 
begun  to  pivot  its  tax  policy  to  support  the  clean 
and  digital  transitions,  for  example  via  the 
increased  investment  tax  credit  regime (72)  and  a 

(71)  Preliminary Eurostat data point to a tax-to-GDP ratio of 

40.9% in 2025. 

(72)  Modernisation of the tax relief for investment - Guichet.lu - 

Luxembourg. 

tax  credit 

specialised 
targeting  digital  and 
ecological transformation. However, gaps in green 
tax policies remain, with limited incentives for the 
manufacturing  of  related  technologies,  and  the 
limited  reach  of  these  instruments  to  early-stage 
firms. 

Graph A3.1: Tax revenue by economic function in 
2024, LU (outer ring) and EU-27 (inner ring) 

Source: Taxation Trends Data, DG TAXUD 

it 

Luxembourg’s  corporate  income  tax  (CIT) 
rate  is  higher  than  the  EU  average.  It  was 
stable at 24.9% between 2019 and 2024 and was 
reduced to 23.9% in 2025 to bring it closer to the 
EU  average.  Since  2013, 
includes  a  7% 
surcharge to support a national employment fund. 
In comparison, the EU average CIT rate was 22.2% 
in  2025.  Luxembourg’s  average  effective  CIT rate 
stood  at  24.6%  in  2024,  still  above  the  EU 
average of 19.1%. Luxembourg’s tax base is highly 
concentrated, with approximately 25% of total tax 
revenues  (including  social  contributions)  provided 
by  the  financial  sector.  This  means  that  external 
shocks  to  this  sector  can  have  a  sizeable  impact 
on  Luxembourg’s 
is  also 
concentrated  within  the  financial  sector,  where 
0.58%  of  businesses  pay  75%  of  total  corporate 
taxes (73).  

revenues. 

tax 

It 

Luxembourg’s  tax  framework  provides  for 
various  incentives  that  effectively  lower 
households’  and  companies’  tax  burden.  The 
intellectual property (IP) tax regime, in place since 
2018,  establishes  conditions  under  which  a 
taxpayer may benefit from a partial exemption of 
80%  on  eligible  net 
income  generated  by 
qualifying IP assets. This translates into an overall 

(73)  Cour des comptes, Avis sur le budget pour l’exercice 2025 et 
relative à la programmation financière pluriannuelle 2024 à 
2028. 

41 

51.526.821.646.623.030.4Taxes on labourTaxes on consumptionTaxes on capital 
 
 
          
 
 
 
Table A3.1:  Taxation Indicators 

(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 2024. Estimates for Luxembourg fall outside plausible ranges. EU-27 refers to the median value. For more 
data on tax revenues as well as the methodology applied, see the Data on Taxation Trends webpage. 
Source: European Commission, OECD, ISORA. 

effective  tax  rate  of  4.8%  on  such  income.  A  tax 
credit  of  18%  is  applied  to  investments  and 
operating expenses to engage in digital, ecological, 
and energy transformation. Certain entities benefit 
from  specific  regulatory  requirements,  such  as  a 
full  CIT  exemption  on  investment  funds,  or  a 
0.25% subscription income tax on private wealth-
management companies.  

Venture capital investments in start-ups and 
other  early-stage  ventures  grew  by  51%  in 
2024. SICAR – an investment vehicle designed for 
investments in private equity and venture capital – 
also  benefits  from  exemptions  on  income  and 
gains  from  transferable  securities  qualifying  as 
investment in risk capital and from net wealth tax. 
Starting  in  2026,  a  new  measure  proposes  to 
introduce  a  ‘start-up  tax  credit’  to  encourage 
individuals  to  invest  in  young  and  innovative 
companies. The tax credit is limited to 20% of the 
investment  amount 
to  a  maximum  of 
(up 
EUR 100 000 per tax year).  

Luxembourg’s 
is 
income-tax 
relatively low across the income distribution. 
Luxembourg’s  tax  wedge (74)  in  2025  was  lower 

burden 

(74)  The  tax  wedge  is  an  indicator  of  the  tax  burden  on  labour 
that  can  be  assessed  at  various  levels  of  earnings.  It  is 

than the EU average at lower income levels (i.e. for 
single  earners  at  50%  and  67%  of  the  average 
wage),  slightly  higher  than  the  EU  average  at 
100%,  and  higher  than  the  EU  average  at  167% 
of  the  average  wage. 
Incentives  for  second 
earners,  who  are  often  women,  to  take  up  work, 
could  be  improved  further.  The  tax  wedge  for 
second earners at 67% of the average wage was 
noticeably 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 countries. 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 

security 

defined as the sum of personal income taxes, employee and 
employer  social-security  contributions  and  other  mandatory 
contributions,  expressed  as  a  percentage  of  total  labour 
costs  (composed  of  the  net  wage,  personal  income  tax, 
social 
contributions,  and  other  mandatory 
contributions).  Tax  wedge  data  in  the  2026  country  reports 
are calculated by the Joint Research Centre of the European 
Commission and based on the EUROMOD model, while in the 
past  reports  they  were  based  on  the  OECD  tax  and  benefit 
model.  While  the  underlying  methodology  is  very  similar, 
differences  in  the  assumptions  can  lead  to  different  results 
between both models. 

42 

Median (EU-27)2019202220232024202520192022202320242025Tax structureTotal taxes (including compulsory actual social contributions) (% of GDP)40.039.340.141.440.939.939.739.039.4Taxes on labour (% of GDP)18.318.819.819.320.620.119.920.3of which, social security contributions (SSC, % of GDP)11.010.911.210.813.012.712.713.0Taxes on consumption (% of GDP)9.39.49.19.511.210.910.510.6of which, value added taxes (VAT, % of GDP)6.36.86.46.77.17.47.17.1Taxes on capital (% of GDP)12.411.211.212.68.18.78.58.5Personal income taxes (PIT, % of GDP)9.510.511.211.39.69.49.39.6Corporate income taxes (CIT, % of GDP)6.04.54.86.52.63.23.23.1Total property taxes (% of GDP)2.42.62.31.82.22.11.91.8Recurrent taxes on immovable property (% of GDP)0.10.10.10.11.21.00.90.9Environmental taxes (% of GDP)1.71.21.21.22.62.12.12.1Effective carbon rate in EUR per tonne of CO2 equivalentsnana112.9nanana84.8naTax wedge at 50% of average wage (single person) (*)24.926.726.426.327.132.431.631.531.531.6Tax wedge at 100% of average wage (single person) (*)38.840.441.240.440.740.139.739.939.940.0Corporate income tax - effective average tax rates (1) (*)24.624.624.624.620.019.219.019.3Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)5.25.35.96.37.88.07.97.8Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)12.89.817.4na31.832.630.7naVAT gap (% of VAT total tax liability, VTTL) (**)1.7-2.90.2na10.57.38.2naEU-27LuxembourgProgressivity & fairnessTax administration & complianceBy tax baseSome tax types 
 
 
 
 
        
 
(75) before and after taxes and social transfers. For 
Luxembourg  the  tax-benefit  system  reduces  the 
Gini  coefficent  by  6.3 pps,  less  than  the  EU 
average reduction of 7.8 pps. 

Graph A3.2: Tax wedge for single and second 
earners as a % of total labour costs, 2025 

Note: The second earner tax wedge shows a household’s tax 
wedge resulting from the wage that a second earner taking 
up a job at 67% of the average wage receives. It does not 
show the total tax wedge of the household. The household is 
assumed to have a first earner at 100% of the average wage 
and no children. For the methodology of the tax wedge for 
second earners, see OECD (2024), Taxing Wages 2024. 
Source: European Commission 

Revenue  from  estate  and  inheritance  taxes 
amounted  to  0.2%  of  GDP  in  2024,  the  sixth-
largest  share  among  the  EU-27.  While  capital 
gains  derived  from  the  disposal  of  movable 
properties  are  subject  to  progressive  income  tax 
rates,  they  are  not  taxed  if  the  holding  period 
exceeds six months or if they amount to less than 
EUR 500. Capital gains on the sale of a taxpayer’s 
main  residence  are  also  exempt  from  tax.  A  CO2 
tax  credit  is  in  place  for  employees,  pensioners, 
and  the  self-employed  to  mitigate  the  impact  of 
the  CO2  tax  for  people  with  lower  incomes.  The 
2026  budget 
increases  the  tax  credit  from 
EUR 192 to EUR 216 per year for gross salaries or 
net profits between EUR 936 and EUR 40 000, and 
for  pensions  between  EUR 300  and  EUR 40 000. 
For  incomes  above  EUR 80 000,  the  credit  is 
reduced to zero. 

(75)  The  Gini  coefficient  measures  the  extent  to  which  the 
distribution  of  income  within  a  country  deviates  from  a 
perfectly  equal  distribution.  A  coefficient  of  0  expresses 
perfect equality where everyone has the same income, while 
a coefficient of 100 expresses full inequality where only one 
person has all the income. 

country-specific 

To address a severe housing challenge, and a 
recommendation, 
2025 
Luxembourg has initiated a property taxation 
reform,  that  is  undergoing  parliamentary 
review.  The  ongoing  reform  of  property  taxation 
aims  to  overhaul  land-related  taxes,  including  a 
reform  of  the  land  tax  (impôt  foncier)  and  a  new 
national  tax  on  the  mobilisation  of  land  (impôt 
national  à  la  mobilisation  de  terrains).  However, 
subsequent  changes  reduced  its  initial  ambition. 
The  indicative  timeline  envisages  implementation 
in 2028 and the first fiscal exercise in 2030 (76).  

limited.  Some  of 

At  the  same  time,  progress  on  the  phasing 
out  of  fiscal  incentives  supporting  housing 
demand  has  been 
the 
temporary  tax  benefits  for  housing  introduced  in 
2024  are  becoming  permanent (77).  For  example, 
the  increase  of  the  'Bëllegen  Akt'  tax  credit  on 
notarial  instruments  to  EUR 40 000,  available  for 
the  purchase  of  a  primary  residence,  was  made 
permanent  in  2025.  The  2024  increase  of  the 
mortgage  interest  deductibility  has  also  been 
maintained. As discussed in the Housing Annex 16, 
the  demand-side  support  risks  further  inflating 
house prices. 

Tax  expenditures  related  to  direct  and 
indirect  taxes  are  expected  to  result  in 
foregone  tax  revenues  of  2.07%  of  GDP  in 
2026,  or  EUR 1 949 million (78).  National 
authorities report 25 types of direct and 10 types 
of  indirect  tax  expenditures.  In  terms  of  direct 
taxes, tax credits are expected to have the largest 
effect  on  tax  revenues  (0.54%  of  GDP  in  2026), 
including  the  introduction  of  a  new  tax  credit  for 
start-ups.  Deduction  rules  are  also  expected  to 
significantly impact tax revenues (0.52% of GDP in 
2026)  linked  to  the  increase  in  the  mortgage 
interest  deductibility.  On  the  indirect  tax  side,  the 
greatest  expected  impact  on  tax  revenues  comes 
from  registration  and  transcription  fees  –  the 
'Bëllegen  Akt'  tax  credit  (0.37%  of  GDP  in  2026), 
followed  by  the  super-reduced  VAT  rate  of  3% 
(0.27% of GDP in 2026).  

(76)  Projet de loi sur l’impôt foncier et l’impôt à la mobilisation de 

terrains. 

(77)  Nouvelles  modalités  pour  bénéficier  des  avantages  fiscaux 

temporaires en matière de logement. 

(78)  Ministry of Finance (Luxembourg), 2025. Budget 2026 – 
Volume 2 : Projet de loi de programmation financière 
pluriannuelle pour la période 2026-2029. 

43 

27.132.940.746.745.52025303540455050100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - LUSingle earner - EU averageSecond earner -  LUSecond earner -  EU average 
          
 
 
 
efforts 

While  Luxembourg  regularly  reports  on  tax 
on  monitoring 
expenditures, 
compliance  gaps  are  limited  to  VAT.  Tax 
expenditures  are  reported  annually  as  part  of 
Although 
Luxembourg’s 
Luxembourg  collaborates  with  the  Commission  in 
the estimation of the VAT compliance gap, it does 
not  conduct  compliance  gap  estimation  activities 
in CIT, PIT, or excise duties (79). 

budgetary 

cycle. 

Luxembourg’s 
in  which  household 

In  the  latest  ‘VAT  gap  in  Europe’  study,  the 
estimates  of  Luxembourg’s  VAT  compliance 
gap  fall  outside  plausible  ranges (80).  They 
show  negative  or  near-zero  values  for  several 
consecutive  years,  which  is  not  feasible  as  it 
implies  that  collected  VAT  exceeds  theoretical 
economic 
liability. 
structure, 
consumption 
accounts  for  less  than  40%  of  total  VAT  liability 
and  where  cross-border  purchases  by  non-
residents generate a large share of VAT revenues 
but  are  not  reflected  in  domestic  consumption, 
complicates  the  estimation.  Further  research  and 
discussions  with  the  national  authorities  will  aim 
to  reconcile  VAT  revenue  and  national  accounts 
data in Luxembourg in the future. 

particular 

the 

information  on 

Luxembourg’s tax administration is generally 
very  effective.  For  VAT,  Luxembourg  uses  a 
system  of  automatic 
information  exchange 
between  tax  administrations  and  other  national 
tax  administration 
bodies.  Since  2020, 
manages  VAT  arrears  through  an  IT  system  that 
consolidates 
from 
various  databases.  In  direct  taxation,  Luxembourg 
launched  a  contact  centre  in  2024,  allowing  for 
faster 
tax 
declaration  was  launched  in  2025  for  certain 
individuals.  Despite  these  efforts,  outstanding  tax 
arrears  saw  a  strong  increase  in  2023,  reaching 
17.4%  of  total  revenue  collected,  up  by  7.6 pps 
since  2022.  Although  it  is  the  ninth  largest  share 
among  EU  countries,  it  remains  below  the  EU 
average of 30.7%. 

responses,  and  a  pre-completed 

taxpayers 

Luxembourg’s  tax  administration 
is  also 
efficient.  The  cost-of-collection  ratio  stood  at 

(79)  European Commission, Directorate-General for Taxation and 

Customs Union, Mind the gap - 2025 report.  

(80)  See European Commission, Syntesia, Poniatowski, G., Bonch-
Osmolovsky, M., Śmietanka, A. et al., VAT gap in Europe – 
Report 2025, Publications Office of the European Union, 
Luxembourg, 2025.  

0.9%  in  2023  and  remained  stable  over  the 
preceding four years. This is slightly above the EU 
average  of  0.7%.  ICT  operating  costs  stood  at 
2.9%  of  total  operating  expenditure  in  2023  and 
have  remained  stable  over  time.  The  e-filing  rate 
for VAT returns stood at 99.8% in 2023, above the 
EU average of 99.2% and up 4.7 pps since 2018. 

Graph A3.3: FDI income paid to/received from zero- 
and low-tax jurisdictions, 2024 

Refers to total net FDI income paid to, or received from, 
Guernsey, Jersey, Bermuda, Bahamas, Barbados, British Virgin 
Islands, Cayman Islands, Bahrain, and United Arab Emirates. 
Source: European Commission based on bop_fdi6_inc 

Luxembourg’s  legal  tax  provisions  combined 
with  the  relevant  economic  indicators  (81) 
strongly suggest that the country is used as 
a  conduit  for  capital  flows  and  financial 
optimisation by multinational groups. In 2024, 
Luxembourg’s  net  inward  stock  of  foreign  direct 
investment (FDI) stood at EUR 2.696 billion, and its 
outward  stock  at  EUR 3.788  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  31 times  larger  than  the 
size  of  its  economy  (equivalent  to  3 128%  of  its 
GDP),  and  its  net  outward  stock  of  investment 
about  44 times 
its  economy 
(equivalent to 4 395% 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. 
Furthermore, around 60% of Luxembourg’s inward 
and  outward  stock  of  FDI  is  held  through  special 
purpose entities, compared to around 18% for the 
other EU-26. 

inward  FDI  stock 

larger 

than 

(81)  International Taxation and Luxembourg’s Economy", IMF 

Working Papers 2020, 
https://doi.org/10.5089/9781513560922.001  

44 

 
 
  
 
 
 
Luxembourg  is  also  a  major  conduit  for 
dividend  and  interest  flows  (see  Graph  A3.3). 
The  share  of  direct  investment  income  flowing  to 
the nine low- and zero- tax jurisdictions identified 
represents  20.5%  of  the  total,  compared  to  3.6% 
for the remaining EU 26. 

Luxembourg  has  notified  the  Commission  of  its 
transposition into national law. However, its impact 
on the issue of outbound payments is expected to 
be 
large 
companies  with  an  annual 
revenue  over 
EUR 750 million  and  is  subject  to  certain  sectoral 
exemptions. 

its  scope  covers  only 

limited,  as 

plan, 

resilience 

Luxembourg  is  a  major  financial  hub  in  the 
EU  and  globally,  but  the  scale  of  these 
figures  suggests  that  there  might  be  a  high 
risk  of  aggressive  tax  planning.  As  part  of  its 
recovery  and 
Luxembourg 
introduced  a  conditional  measure  of  non-
deductibility  of  interest  and  royalty  payments  in 
2021.  However,  the  scope  of  this  measure  is 
limited  to  jurisdictions  on  the  EU  list  of  third 
jurisdictions  for  tax  purposes,  which 
country 
includes those that failed to comply with the EU’s 
tax  good  governance  criteria  within  a  specific 
timeframe  or  refused  to  engage  with  the  EU (82), 
which  are  not  Luxembourg’s  main  economic 
partners.  Furthermore,  the  measure  does  not 
specifically target low- or zero-tax jurisdictions (83). 
Although  some  of 
jurisdictions  have 
these 
implemented  measures  related  to  Pillar  2,  their 
expected  economic impact  is  not yet clear.  At the 
same time, as most EU countries have introduced 
defensive measures targeting interest and royalty 
payments made to zero- and low-tax jurisdictions, 
this  increases  the  risk  of  Luxembourg  being  used 
as a conduit country. 

Available  figures  suggest  that  the  financial 
links  between  Luxembourg  and  low-  and 
zero-tax  jurisdictions  are  not  negligible.  7% 
of all net FDI income received by the EU-27 from 
the 9 identified zero- and low-tax jurisdictions and 
40%  of  all  net  FDI  income  paid  by  the  EU-27  to 
those  jurisdictions  go  to/come  from  Luxembourg. 
In 2024, Luxembourg received EUR 2.6 billion from 
low-  or  zero-  tax  jurisdictions,  while  it  paid 
EUR 23 billion  to 
jurisdictions. 
Luxembourg's measures have been mostly limited 
legislation  and  Council 
to 
conclusions.  The  EU  Pillar 2  Directive  on  global 
minimum effective corporate taxation has been in 
in  the  EU  since  1 January 2024,  and 
force 

implementing  EU 

low-  or  no-tax 

(82)  American Samoa, Anguilla, Guam, Palau, Panama, Russia, 
Turks and Caicos Islands, US Virgin Islands, Vanuatu, Viet 
Nam. 

(83)  Guernsey, Jersey, Bermuda, Bahamas, Barbados, British 
Virgin Islands, Cayman Islands, Bahrain, United Arab 
Emirates. 

45 

 
 
PRODUCTIVITY 
ANNEX 4: INNOVATION TO BUSINESS  

Despite a strong science base, weak business 
innovation  and  science-business 
linkages 
limit Luxembourg’s innovation-driven growth. 
The  2025  European  Innovation  Scoreboard  (EIS) 
(84)  ranks  Luxembourg  as  a  ‘strong  innovator’. 
However, Luxembourg has been unable to raise its 
research  and  development  (R&D)  intensity,  which 
has  been  on  a  downwards  trend  for  over  two 
decades  and  fell  below  1%  in  2024,  far  below 
other  strong  innovators  (85).  This  has  been  driven 
by  stagnant  public  R&D  intensity  (standing  at 
around 0.5% since 2011) and a sustained decline 
in  business  R&D  investments  (86).  The  2025 
country-specific 
(CSR) 
investment  policy  on 
recommended 
fostering  innovation  and  supporting  high  R&D 
intensive  activities.  Despite  ongoing  policy 
measures,  business  R&D 
intensity  has  not 
recovered,  and  science-business  linkages  remain 
underexploited. 
significant 
Luxembourg 
potential  to  strengthen  its  competitiveness  and 
further  diversify  its  economic  base  by  leveraging 
the 
its  scientific  excellence  and  deepening 
connections  between  its  research  community  and 
the  business  ecosystem.  Well-designed  public 
support  schemes  could  help  unlock  this  potential 
the 
and 
emergence of disruptive innovation in key sectors.  

recommendation 

favourable 

conditions 

focusing 

create 

has 

for 

Excellent science 

and 

the  proportion  of 

highly 
solid 
Luxembourg’s 
internationalised science base is a key asset. 
The quality of Luxembourgish research outputs, as 
measured  by 
scientific 
top  10%  most-cited 
the 
publications  within 
scientific  publications  worldwide  is  the  second-
highest 
research 
performers are very well connected internationally, 
the  high  proportion  of 
as  evidenced  by 
international  co-publications  among  the  country’s 

the  EU.  Luxembourg’s 

in 

(84)  2025  European  Innovation  Scoreboard  (EIS),  country  profile: 
Luxembourg.  The  EIS  provides  a  comparative  analysis  of 
innovation performance in EU countries, including the relative 
strengths  and  weaknesses  of  their  national  innovation 
systems. 

scientific publications (7.7% in 2024 vs 55.9% for 
the  EU  average,  the  highest  in  the  EU)  (87).  The 
robustness  of  Luxembourg's  research  system  and 
its integration into international research networks 
make it an attractive hub for foreign students and 
researchers.  Luxembourg  notably  performs  very 
well when it comes to attracting foreign doctorate 
students, as shown in the 2025 edition of the EIS. 
More  generally,  Luxembourg  ranked  particularly 
high  in  the  2025  Global  Talent  Competitiveness 
Index  (88)  and  re-entered  the  top  10  for  the  first 
time since 2021. 

very 

rapid 

research  and 

However,  public  R&D 
investment  has 
remained stagnant over the last decade, at a 
level well below the EU average, which risks 
undermining  its  scientific  excellence  in  the 
long  term.    Public  R&D  investment  stood  at 
0.54% of GDP in 2024 compared to 0.72% for the 
EU  average.  With  strong  international  competition 
and 
innovation 
developments, these low and  stagnating levels  of 
weaken 
public 
Luxembourg’s scientific position worldwide and its 
attractiveness vis-à-vis foreign talents. The revised 
national research strategy by the government and 
the forthcoming bill on the National Research Fund 
(89)  represent  important  steps  to  strengthen  the 
research  and  innovation  framework.  However,  to 
be  effective,  these  initiatives  must  be  backed  by 
sustained and adequate investments.  

investment 

could 

R&D 

Business innovation  

Business  R&D  intensity  has  been  declining 
over  the last  two decades  and is  among  the 
lowest  in  the  EU,  holding  back  innovation-
driven  growth.  Over  the  last  two  decades, 
business  R&D  intensity  has  been  on  a  downward 
trend and fell to 0.45% of GDP in 2024, 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 

(87)  2025 Eurostat. 

(88)  Global Talent Competitiveness Index 2025 | INSEAD. 

(85)  2025  Eurostat.  R&D  intensity  is  defined  as  gross  domestic 
expenditure on R&D as a percentage of GDP (see table A4.1) 

(89)  Address on the state of the nation 2025 by Luc Frieden - The 

Luxembourg Government. 

(86)  2025 Eurostat. 

46 

 
 
 
 
 
 
 
 
strong  R&I  performers  or 
according to the EIS. 

innovation 

leaders 

Graph A4.1: Business R&D expenditure as % of 
GDP, 2010-2024 

However,  public  support  for  business  R&D  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).  
Moving  forward,  it  will  be  essential  to  assess  the 
efficiency and impact of the Fit4 programmes and 
recent initiatives in the midterm, with further fine-
tuning  and  expanding  the  policy  mix  aimed  at 
stimulating business R&D and innovation.  

(1) EU average for the last available year or the year with the 
highest number of country data. * break in series (relevant 
numbers in the table need to be tagged, e.g. 8.8*) 
Source: Eurostat 

This  weak  business  R&D  intensity,  which  is 
partly  explained  by  the  country’s  economic 
structure  being  based  on  finances  and 
services,  keeps  hampering  productivity 
growth  (90).  This  is  reflected  in  the  number  of 
researchers  (FTEs)  employed  by  businesses  per 
thousand  active  population,  which  is  well  below 
the  EU  average  (3.20%,  2024)  (see  table  A.41) 
and very low if compared to other strong innovator 
countries  or  innovation  leaders.  Low  private  R&D 
investments  also  weigh 
Luxembourg’s 
innovation output as measured by patents. Patent 
applications  filed  under  PCT  per  billion  GDP  (in 
purchasing power standards, PPS EUR), which is at 
1.20 PPS EUR (2022), is well below the EU average 
(2.8). (see table A4.1). 

on 

innovation 
Public  support  for  business 
low,  despite  recent  efforts  to 
remains 
develop  and  expand 
relevant  support 
instruments. Small-scale schemes such as the Fit 
4’= programmes for SMEs are complemented with 
specific  schemes  for  digital,  sustainable  and 
health  tech  companies.  In  2024,  891  small  scale 
business  were  funded  under  FIT  4  and  67  under 
sustainability and digital (91). In 2025, a dedicated 
pilot  funding  instrument  (Fit  4  Scale  (92))  was 
launched  to  help  business  scale  and  accelerate. 

(90)  OECD Economic Surveys: Luxembourg 2025 | OECD  

(91)  Annual report 2024: Nearly 900 companies supported - 

Luxinnovation  

In 

the 

2024, 

sector 

linkages 

space  and 
the 

Despite  the  high  quality  of  Luxembourg’s 
public  research  system,  linkages  with  the 
remain  underexploited. 
business 
remain  weak,  as 
Science-business 
low  proportion  of  public 
evidenced  by 
expenditure  on  R&D  financed  by  businesses 
(0.02%  in  2023,  compared  to  an  EU  average  of 
0.05%).    To  tackle  this  challenge,  Luxembourg’s 
National  Research  Foundation  (FNR)  has  put  in 
place  several  schemes  since  2019  to  encourage 
public-private  cooperation  and  science  transfer  to 
commercialisation.  These 
include  schemes  to 
consolidate  public-private  partnerships  in  priority 
areas  such  as  health  tech,  high-performance 
lightweight 
computing,  defence, 
materials. 
invested 
approximately EUR 5.3 million in the BRIDGES and 
JUMP  programmes  (93),  strategically  fostering 
public-private  collaboration  and  the  translation  of 
and 
innovative 
research 
technologies.  Approximately  EUR  995  000  was 
committed  by the FNR for the KITS (knowledge & 
innovation 
to 
strengthen  knowledge  and  technology  transfer 
capacities  within  Luxembourg’s  public  research 
institutions 
the 
innovation  fund  provides  specific  incentives  for 
private  sector  companies  entering  public-private 
research and innovation partnerships.  While these 
initiatives  represented  important  steps  and  are 
fully operative now, a thorough evaluation of their 
effectiveness  over  time  will  be  needed  to  assess 
their  impact  on  consolidating  science-business 
linkages.  

transfer  support)  programme 

(94).  Furthermore, 

in  2024 

products 

FNR 

into 

(93) FNR JUMP and BRIDGES programmes support the translation 
of research into practical innovation. JUMP funds projects that 
advance proof-of-concept and technology readiness toward 
commercialisation or spin-offs, while BRIDGES fosters 
collaborative R&D between public research institutions and 
companies to promote innovation. 

(92)  Be part of the first Fit 4 Scale programme - Luxinnovation 

(94)  Annual Report 2024 - FNR 

47 

00.20.40.60.811.21.41.62010201520202021202220232024LuxembourgEU27 
        
 
 
In 

is 

The uptake of digital technologies by firms in 
increasing,  supported  by 
Luxembourg 
continued  policy  efforts.    As  of  2024,  70.27% 
of SMEs in Luxembourg had at least a basic level 
of  digital  intensity  (up  from  66.25%  in  2022), 
remaining  slightly  below  the  EU  average  of 
72.91%(95). The uptake of artificial intelligence by 
businesses  enterprises  increased  to  33.6%  in 
2025,  significantly  above  the  EU  average  of 
20.0%.  Cloud  computing  adoption  reached  43.7% 
of  businesses  in  2025,  below  the  EU  average  of 
46.7%.  Similarly,  38.2%  of  businesses  used  data 
analytics in 2025, slightly below the EU average of 
39.9%  (96). 
line  with  the  CSR  2025  on 
accelerating the digitalisation of businesses, in the 
uptake  of  advanced  digital  technologies  by  SMEs, 
Luxembourg  supports  further  digital  uptake  by 
continuing to implement and expand SME-focused 
measures. The Fit 4 Digital  – AI programme helps 
SMEs  identify  relevant  AI  use  cases,  conducting 
feasibility  studies  and  developing  implementation 
roadmaps.  The  SME  packages  covering  AI  and 
cybersecurity  provide  co-funding  for  concrete 
technology  investments.  In  parallel,  Luxembourg 
contributes to the IPCEI on Next-Generation Cloud 
Infrastructure  and  Services  (IPCEI-CIS),  including 
through 
open-source 
cybersecurity  tools  and  trusted  cloud  and  edge 
facilitate  secure  data 
services,  aiming 
processing and interoperability. Luxembourg's RRP 
also  includes  a  reform  aimed  at  fostering  a  new 
in 
ecosystem 
Luxembourg,  encouraging  the  participation  of 
private  companies  and  researchers,  as  well  as  an 
investment  to  develop  and  deploy  the  research 
infrastructure  needed  to  build  knowledge  and 
experience  in  this  field.  Luxembourg  has  moved 
above  the  EU  average  in  SME  basic  digital 
intensity  and  continues  to  perform  above  the  EU 
average  in  the  uptake  of  artificial  intelligence  by 
enterprises.  However,  cloud  computing  and  data 
analytics  adoption  remain  below  the  EU  average 
and  well  below  the  2030  Digital  Decade  targets 
(97)).  Furthermore,  digitalisation  of  SMEs  and  the 
uptake  of  technology  by  business,  as  a  critical 
enabler  of  innovation  and  productivity  remain  a 
key challenge.  

communication 

for  quantum 

development 

the 

of 

to 

Entrepreneurial dynamism 

the 

and 

commitment 

Luxembourg’s startup ecosystem is gradually 
maturing  and  diversifying,  supported  by  a 
strengthened 
policy 
strategic 
framework. Luxembourg has an evolving startup 
ecosystem,  with  over  810  active  startups  and 
than  690  of  which  are 
scaleups,  more 
domestically  based.  In  2025,  58  new  startups 
emerged,  approximately half of them active in  AI, 
to 
country's 
underscoring 
digitalisation  and  technological  innovation  (98). 
Luxembourg's initiatives to support startups aim to 
improve  framework  conditions  for  innovation.  The 
2024  'From  Seed  to  Scale'  roadmap  sets  a  clear 
direction  for  growth  across  sectors  such  as  AI, 
fintech  and  space.  It  was  complemented  by  the 
10-point  action  plan  for  startups  and  the  Fit  4 
Scale,  which  provide  non-financial  support  like 
incubators  and  a  new  tax  credit  for  business 
angels  to  encourage  investments  in  start-ups 
(2026).  These  efforts  build  on  the  success  of  the 
Fit  4  Start  programme,  which  supported  891 
companies  and  launched  48  startups  in  2024, 
strengthening Luxembourg's position in healthtech 
and  biotech  innovation.  While  these  initiatives 
represent  key  steps  towards  a  more  supportive 
environment  for  startups  and  scaleups,  achieving 
its  full  effect  will  require  to  ensure  effective, 
timely  and  adequate  funding,  as  well  as  and 
rigorous monitoring.  

EUR 1.8 

Despite  rising  investment  activity,  access  to 
finance  –  particularly  venture  capital  – 
remains a bottleneck hindering the growth of 
Luxembourgish  startups.  Investment  activity 
has  increased  in  recent  years,  with  nearly  1 000 
funding  rounds  amounting  to  EUR 7.8  billion, 
including 
domestically 
billion 
headquartered  companies.  In  2025,  total  funding 
reached  EUR 407  million,  a  52% 
increase 
compared to 2024, with an average round size of 
EUR 5.4  million,  pointing  to  stronger  investor 
confidence  and  greater  availability  of  later-stage 
illustrate 
funding. 
larger 
the  ecosystem's 
funding 
(99). 
capacity 
Nevertheless,  venture  capital  investment  as  a 

Investment  patterns 
rounds  highlighting 
to  support  scaling  companies 

for 

(95)  2025 Digital Decade country report. 

(96)  Luxembourg 2025 Digital Decade Country Report | Shaping 

(98)  Annual Report 2024 - Luxinnovation 

Europe’s digital future. 

(99)  Startups and scaleups ecosystem - Facts & Figures - 

(97)  Luxembourg 2025 Digital Decade Country Report. 

Luxinnovation 

48 

 
 
 
several 

through 

these  have  not  been  evaluated.  Students  in 
upper  secondary  schools  learn  entrepreneurship 
either as a stand-alone subject or as a component 
of  other  courses.  Since  the  2016–17  school  year, 
15 000  high  school  students  across  18  schools 
have  been  supported  under  the  national  project 
Sustainable Entrepreneurial Schools, which aims to 
promote  entrepreneurship as a career choice  (103). 
The  University  of  Luxembourg  supports  youth 
entrepreneurship 
initiatives, 
including its entrepreneurship programme (open to 
all  students  and  staff),  ideation  camp,  startup 
bootcamp,  and  an  entrepreneurial  summer  school 
programme.  The  university  also  offers  incubation 
and  acceleration  services.  Other  private  and  non-
governmental  organisations  are  also  active  in  the 
area  of  youth  entrepreneurship,  such  as  Jonk 
Entrepreneuren  Luxembourg, 
the  Luxembourg 
Federation of Young Business Leaders (Fédération 
jeunes  dirigeants),  and  Junior  Chamber 
des 
(JCEL),  a  platform 
International  Luxembourg 
enhancing  leadership  skills.  Although  Luxembourg 
has many interesting initiatives in this area, there 
are  no  evaluations  or  studies  demonstrating  their 
effectiveness. 

percentage  of  GDP  (0.10%  in  2024  –  see  table 
A4.1), while well above EU average, remains lower 
than  the  best  performers  (100)  (see  Annex  6).  As 
part of the 10-point action plan, efforts are being 
undertaken  to  consolidate  public  risk  financing.  In 
particular,  the  Société  Nationale  de  Crédit  et 
d’Investissement (SNCI) will dedicate an additional 
EUR  300  million  over  the  next  five  years  to 
complement  its  funding  deployed  through  the 
Luxembourg Future Fund 1 and 2 (101). While these 
measures are important steps to strengthen public 
the  mobilisation  of  private  and 
support, 
limited, 
institutional  venture  capital 
pointing to scope for further measures to crowd in 
private investment, particularly for scaleups with a 
high R&D intensity. 

remains 

In 

innovation. 

Skills  shortages  are  a  key  challenge  for 
Luxembourg,  whose  research  and  innovation 
performance  relies  heavily  on  the  country’s 
ability to attract foreign talents.  Luxembourg 
has  the  lowest  proportion  of  new  science  and 
engineering  graduates  in  the  EU  (per  thousand 
population  aged  25-34),  and  thus  a  very  limited 
‘domestic’  pool  of  human  resources  for  research 
and 
the  field  of  computing 
specifically,  Luxembourg  has  the  second-lowest 
proportion  of  graduates  per  thousand  population 
aged  25-34.  The  country  has  various  schemes  in 
place to attract and retain outstanding researchers 
(102)  like  the  ‘national  talent  desk’  set  up  in  2026 
and  a  single  contact  point  for  foreign  talents 
wishing  to 
join  a  Luxembourgish  startup  or 
scaleup.  These  initiatives  are  urgent  to  secure 
critical  mass,  which  is  essential  for  strengthening 
Luxembourg's  most 
the 
important asset, and ensuring effective transfer to 
the  market.  To  achieve  these  goals,  it  is  crucial 
that  these  initiatives  are  adequately  funded  and 
they 
monitored 
effectively  contribute  to  the  country's  long-term 
innovative and economic growth (see Annex 13). 

impact,  ensuring 

scientific 

system, 

that 

for 

entrepreneurship 
Luxembourg 
education  through  various  initiatives,  but 

supports 

(100) OECD Economic Surveys: Luxembourg 2025 | OECD 

(101) EUR 300 million and action plan for Luxembourg startups - 

Luxinnovation. 

(102) European Commission / EACEA / Eurydice, 2025, 

Entrepreneurship education at school in Europe – 2025. 
Eurydice Report. 

(103)European Commission / EACEA / Eurydice, 2025, 

Entrepreneurship education at school in Europe – 2025. 
Eurydice Report. 

49 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table A4.1:  Key innovation indicators 

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

50 

R&D intensity (gross domestic expenditure on R&D as % of GDP)1.421.251.11.071.060.99:2.243.44Public expenditure on R&D as % of GDP0.480.590.550.550.560.54:0.720.64Scientific publications of the country within the top 10% most-cited publications worldwide as % of total publications of the country 12.914.0913.0513.1:::9.4412.31Researchers (FTEs) employed by public sector (Gov+HEI) per thousand active population55.76.46.87.17.1:4.3:International co-publications as % of total number of publications71.5275.6677.4179.0677.9177.89:57.24:Business enterprise expenditure on R&D (BERD) as % of GDP0.940.660.550.520.490.45:1.492.69Business enterprise expenditure on R&D (BERD) performed by SMEs as % of GDP:0.13::0.13::0.470.30Researchers employed by business per thousand active population6.43.83.63.73.53.2:5.9:Patent applications filed under the Patent Cooperation Treaty per billion GDP (in PPS €)1.271.41.661.2:::2.812.20Employment share of high-growth enterprises measured in employment (%):::1.281.24*::0.87:SMEs with at least a basic level of digital intensity% SMEs (EU Digital Decade target by 2030: 90%)::::57.85:76.6871.39:Data analytics adoption% enterprises (EU Digital Decade target by 2030: 75%)::::32.41:38.2439.85:Cloud adoption% enterprises (EU Digital Decade target by 2030: 75%)::::32.63:43.7146.69:Artificial intelligence adoption % enterprises (EU Digital Decade target by 2030: 75%)::::14.4523.7333.6119.95:Public-private scientific co-publications as % of total number of publications9.569.3210.9513.3913.5512.89:7.62:Public expenditure on R&D financed by business enterprises (national) as % of GDP0.0100.010.010.02::0.060.02Total public sector support for BERD as % of GDP0000:::0.21:R&D tax incentives: foregone revenues as % of GDP0000.00.00.0:0.10:BERD financed by the public sector (national and abroad) as % of GDP :::::::0.11:Venture capital (market statistics) as % of GDP (calculated as a 3-year moving average)0.030.010.030.130.120.10:0.06:Seed stage funding share (% of GDP)0.000.000.000.000.000.00:0.01:Start-up stage funding share (% of GDP)0.000.010.030.120.100.08:0.03:Later stage funding share (as % of GDP)0.030.000.000.010.020.02:0.03:New graduates in science & engineering per thousand population aged 25-34:1.932.483.063.122.99:16.8:Graduates in the field of computing per thousand population aged 25-34:1.131.241.852.081.85:3.8:Innovative talentR&D investment & researchers employed in businessesInnovation outputsDigitalisation of businessesAcademia-business collaboration Public support for business innovationFinancing innovationScience and innovative ecosystemsLUXEMBOURG2010201520202022202320242025EU average (1)USHeadline indicator 
 
 
 
 
  
 
ANNEX 5: SINGLE MARKET AND INDUSTRY 

business 

professional 

in  particular 

Luxembourg  offers  an  attractive  business 
environment,  yet  further  improvements  into 
support  for  firms’  investment,  innovative 
potential  and  scale-up,  together  with  a 
reduction  in  certain  regulatory  barriers  to 
the  Single  Market,  could  boost  productivity 
and  growth.  Country-specific  Recommendation 
(CSR)  2025.3  called  on  Luxembourg  to  foster 
innovation,  to  boost  competitiveness  including  by 
promoting  diversification 
in  the 
financial  sector,  accelerating  digitalisation  and 
enabling  business  scale-up  and  productivity 
growth,  and  to  reduce  barriers  to  competition  in 
regulated 
services. 
Luxembourg’s economy is characterised by a large 
financial  sector whose competitiveness is eroding. 
Business investment is very low, especially in R&D, 
harming  innovation  and  productivity  growth.  The 
main  obstacles  to  investment  include  availability 
of  skilled  staff  and  the  high  cost  of  labour.  Late 
payments  also  represent  a  significant  challenge 
for  small  to  medium-sized  enterprises  (SMEs):  in 
2025, Luxembourg was among the Member States 
with  the  highest  share  of  SMEs  experiencing  late 
payments.  While  the  administrative  burden  is 
moderate,  there  is  still  room  for  improvement. 
Barriers  for 
regulated  professions  are  high. 
Although EU trade integration is the highest of all 
Member  States,  barriers  to  cross-border  services 
provision  hinder  the  efficient  functioning  of  the 
Single  Market.  Entrepreneurship  is  insufficiently 
taking  some 
developed,  but  Luxembourg 
measures  to  support  start-up  and  scale-ups. 
Luxembourg 
to  boost 
competitiveness and productivity growth. 

taking  steps 

is  also 

is 

Business dynamics 

in  Luxembourg 

is 
Business  dynamism 
relatively 
insolvency 
low,  but  the  new 
framework  has  potential  to  enhance  it.  In 
2023, both the enterprise birth rate and the death 
rate were lower than the EU average, resulting in a 
business  churn  of  16.8%  against  19%  in  the  EU 
(104).  This  was  stable  compared  with  the  previous 
year,  but  it  represented  an  increase  from  15.4% 
on  2021.  The  sectors  with  the  highest  birth  rates 
were 
communication 
technologies  (ICT)  and  (ii)  professional,  scientific 

information 

and 

(i) 

(104) Eurostat, bd_size. 

51 

and  technical  activities.  By  contrast,  construction 
and  housing  market  activities  had  the  lowest 
enterprise birth rates, and slightly more firms have 
been  dissolved  than  created  in  such  sectors.  The 
2023  insolvency  framework  reform  sought  to 
improve  reallocation  of  resources  to  productive 
firms  by  enabling  non-viable  firms  to  exit  the 
market  and  viable  ones  to  restructure.  It  also 
encourages  entrepreneurship  by  giving  a  second 
chance to failed entrepreneurs (105) (106). According 
to the OECD (107), the reform has addressed many 
of  the  problems  of  the  old  framework,  yet  areas 
such  as  the  treatment  of  failed  entrepreneurs 
could benefit from further enhancements. 

Entrepreneurship  is  insufficiently  developed, 
but  Luxembourg  has  taken  some  measures, 
including  for  scale-ups.  For  total  early-stage 
entrepreneurial  activity,  Luxembourg  ranks  just 
16th out  of the 25 upper-income countries (108). In 
2023,  the  enterprise  birth  rate  was  below  the  EU 
average  (8.9%  vs  10.5%)  (109).  In  2025,  the 
government  introduced  a  10-point  action  plan 
aimed  at  strengthening  its  start-up  ecosystem 
(see  Annex  4).  In  December  2025,  Luxembourg 
approved  Draft  Law  No 8526 (110)  introducing  a 
new  tax  credit,  effective  from  the  2026  tax  year, 
to  encourage 
investments  by  Luxembourg 
residents  (or  assimilated)  individuals  in  start-ups 
(see Annex 3). The government is also planning to 
introduce  a  new  tax  system  for  stock  options  of 
employees  of  start-ups.  Targeted  support  for  the 
is  more 
scale-up  phase 
the 
government  has 
introduced  the  Fit  4  Scale 
programme  to  support  scale-ups (111).  However, 
this  programme  will  support  only  up  to  five 
companies  in  2026  (112).  A  key  reason  for  the 
difficulty  experienced  by 
in  securing 
investment  for  scale-ups  is  that  they  rely  mostly 
on  bank  financing.  Alternative  sources  such  as 

limited,  but 

firms 

(105) Global Entrepreneurship Monitor 2025/2026, p.29. 

(106) Loi  du  7  août  2023  relative  à 

la  préservation  des        

entreprises et portant modernisation du droit de la faillite. 

(107) OECD, Economic surveys: Luxembourg 2025, 04/2025. 

(108) Global Entrepreneurship Monitor 2024/2025, pp. 152-153. 

(109) Eurostat, bd_size. 

(110) Projet de loi no. 8526 

(111) CSR  2025(3)  on  boosting  competitiveness,  including  by… 

enabling scale up. 

(112) Luxembourg, Luxinnovation 

 
 
 
 
 
 
venture  capital  are  growing,  but  they  remain 
limited (see Annex 4 and Annex 6). 

SMEs 
in  Luxembourg  have  experienced 
weaker  growth  than  in  the  rest  of  the  EU. 
SMEs  in  the  non-financial  business  sector  in 
Luxembourg  represent  64%  of  value  added  and 
66.2% of employment, against the EU average of 
53.6% and 65.1%, respectively (113). In 2024, SMEs 
in Luxembourg declined on both indicators. Despite 
the  employment  growth  rate  for  micro  firms  of 
0.7%,  the  declines  for  small  and  medium-sized 
enterprises negatively affected the SME aggregate 
(-0.2%  vs  1.1%  in  the  EU).  SME  real  value  added 
declined by 3.5% (against  -0.2% in the EU).  Since 
2022, the decline in real value added has reached 
9.2%. In 2025, SME employment and value added 
are  expected  to  grow  by  0.7%  and  1.8%, 
respectively.  The  highest  growth  is  expected  for 
professional,  scientific  and  technical  activities, 
while  manufacturing  is  predicted  to  decline  more 
severely than other sectors. 

activities also play 

A quarter of Luxembourg’s economy is made 
up  by  the  financial  services  sector,  but 
productivity in this sector has been declining. 
Luxembourg’s  economy  is  characterised  by  the 
large  share  of 
the  financial  sector,  which 
represents  around  25%  of  total  value  added, 
against 5% on average in the EU. Professional and 
administrative 
a  major 
role, with 15% of the value added (against 12% in 
the  EU).  By  contrast,  industry  only represents 6% 
of  the  value  added  (against  20%  in  the  EU). 
However, labour productivity in the financial sector 
has been declining in the last decade (114). Another 
sector  where  the  productivity  decline  has  been 
particularly steep is the construction sector, posing 
significant  challenges  (see  below  and  Annex  16). 
Conversely,  productivity  growth  has  been  in  line 
with  the  EU  average  in  the  manufacturing  sector, 
and  even  higher  for  transportation  and  storage 
(115). 

Luxembourg  is  taking  some  measures  to 
diversify  its  economy.  Given  the  declining 
productivity  of  the  financial  sector  and  the 
increasing competition it faces, there is a need to 

diversify  the  economy  (CSR  2025.3)  (116).  The 
government has taken some steps in this direction 
by introducing economic activity zones for sectors 
such  as  defence  and  space.  The  latter  represents 
4%  of  GDP  (117).  Moreover,  the  information  and 
(ICT)  sector  has 
communication 
experienced  rapid  growth.  As  part  of  its  recovery 
and resilience plan (RRP) (118), Luxembourg has put 
in  place  a  reform  and  investment  in  relation  to 
quantum communication technologies with a view 
to  fostering  the  creation  of  a  new  innovation 
ecosystem. 

technology 

low,  harming 

While  public  investment  in  Luxembourg  is 
above  the  EU  average,  business  investment 
is  very 
innovation  and 
productivity  growth.  Public  investment  as  a 
share  of  Luxembourg’s  GDP  is  above  its  pre-
pandemic  level.  It  amounted  to  4.5%  in  2024, 
above  the  EU  average  of  3.6%.  By  contrast, 
business investment stood at just 7.1% of GDP in 
2024  (vs  10%  in  2019),  representing  the  lowest 
value in the European Union, where the average is 
12.6%.  Investment  in  equipment  fell  by  11.1%  in 
2024  and  is  projected  to  decrease  by  3.4%  in 
2025, against the EU’s respective decline of 1.4% 
and  expected  increase  of  1.1%  (119).  Furthermore, 
business 
and 
development has been decreasing since 2018 and 
its  share  of  GDP  was  only  one  third  of  the  EU 
average  in  2024  (120).  The  low  level  of  business 
investment,  especially  in  research  and  innovation, 
is  partly  explained  by  the  sectoral  structure  of 
Luxembourg’s 
largely 
economy,  which 
specialised  in  financial  services.  The  very  limited 
research  and 
for  business 
public  support 
development also plays a role (121) (see Annex 4). 

expenditure 

research 

on 

is 

Lack of skilled staff and the high labour cost 
are highlighted by firms as main investment 
obstacles.  Despite  the  high  number  of  cross-
border  workers  (47%  of  the  workforce),  the 
availability  of  skilled  staff  was  the  obstacle  to 

(116) CSR  2025(3)  on  boosting  competitiveness,  including  by 
promoting diversification, in particular in the financial sector. 

(117) OECD, Economic surveys: Luxembourg 2025, 04/2025. 

(118) Luxembourg’s recovery and resilience plan. 

(113) European  Commission,  Annual  report  on  European  SMEs, 

(119) European  Commission,  Autumn  forecasts  statistical  annex, 

Luxembourg, 05/2025. 

p. 195, 11/2025. 

(114) European  Commission,  DG  ECFIN  productivity 

fiche, 

(120) Eurostat, rd_e_gerdtot 

Luxembourg. 

(115) OECD, Economic surveys: Luxembourg 2025, 04/2025. 

(121) European  Commission, 
Luxembourg, 07/2025. 

Innovation 

scoreboard  2025, 

52 

 
 
 
investment  most  cited  by  firms  in  Luxembourg  in 
2025  (84%  vs  79%  in  the  EU),  according  to  the 
EIB  Investment  Survey  (122).  It  has  eased  only 
slightly  since  2024  (91%).  The  figure  is  even 
higher  for  the  construction  sector,  rising  to  86%. 
The other main challenge for Luxembourgish firms 
is  the  cost  of  labour  (123).  In  2024,  hourly  labour 
costs  in  the  EU  (average  of  EUR 33.5)  were  the 
highest  in  Luxembourg  (EUR 55.2)  (124).  If  not 
matched  by  an  increase in  labour  productivity,  an 
increase  in  the  cost  of  labour  could  harm  firms’ 
competitiveness. 

is 

taking  steps 

(GDP  per  hour  worked, 

Luxembourg 
to  boost 
competitiveness  and  productivity  growth. 
Labour  productivity  in  Luxembourg  is  the  second 
highest in the EU and in 2024 it stood at 169% of 
the  EU  average 
in 
purchasing  power  standards).  However,  labour 
productivity  and  total  factor  productivity  (TFP) 
growth have been declining. To address the 2025 
CSR  on  competitiveness  and  productivity  growth 
(125),  the  government  has  recently  introduced  a 
series  of  new  SME packages  aimed  at  raising  the 
uptake  of  digital  technologies  by  SMEs,  including 
an  artificial 
(AI)  package  and  a 
cybersecurity  package.  Since  2024,  a  new  tax 
credit  system  has  been  in  place,  allowing  small 
businesses  to  benefit  from  a  tax  credit  of  up  to 
18% 
to  digital 
transformation  or  green  projects.  Moreover,  in 
2025,  Luxembourg  reformed  its  aid  scheme  for 
research  and  innovation  to  stimulate  greater 
innovation  and  include  areas  such  as  AI  (CSR 
2025.3 (126) (see Annex 4). 

expenditures 

intelligence 

related 

for 

(122) European  Investment  Bank,  EIB  Investment  Survey  2025, 

p. 30. 

(123) Luxembourgish  Chamber  of  Commerce,  baromètre  de 

l’économie 2eme semestre 2025. 

(124) Eurostat. 

(125) CSR  2025(3)  on  boosting  competitiveness,  including  by… 
accelerating  digitalisation,  in  particular  in  the  uptake  of 
advanced 
and 
technologies 
enabling…productivity growth. 

digital 

SMEs, 

by 

(126) CSR  2025(3)  on  fostering  innovation  and  supporting  high 

Business environment 

procedures 

establishment 

Business 
in 
Luxembourg  are  cumbersome  (127).  Currently, 
three  different  administrations  need 
to  be 
consulted  to  open  a  business.  Before  they  can 
operate,  companies  need  to  obtain  a  business 
permit  from  the  Ministry  of  Economy,  their  ADE 
number  (128)  and  their  social  security  registration 
(129). Business organisations also regard opening a 
bank account as burdensome. 60% of the business 
registration  procedures  are  currently  carried  out 
online.  The  government  aims  to  further  enhance 
digitalisation and reduce the time needed to start 
a business to six days (see Annex 7). 

The regulatory and administrative burden for 
businesses  is  moderate,  but  there  is  still 
room for improvement. In 2025, the proportion 
of  firms  that  cite  business  regulations  as  an 
obstacle  to  investment  was  significantly  lower  in 
Luxembourg compared with the EU (46% vs 69%) 
(130). Moreover, 15% of firms deem them a major 
obstacle,  well  below  the  EU  mean  of  34%.  By 
contrast,  as  many  firms  in  Luxembourg  as  in  the 
EU  overall  find  labour market  regulation to  be  an 
issue  (65%).  The  share  of  firms  employing  more 
than  10%  of 
regulatory 
to  meet 
requirements 
is  around  14%,  above  the  EU 
average  (11%)  (131).  Compared  with  other  OECD 
regulatory  and  administrative 
countries, 
burden is higher in Luxembourg than the average 
(2.13  vs  1.74)  (132).  The  main  reasons  for  this 
include  the  fact  that  there  is  no  requirement  for 
impact assessments to be conducted on how new 
laws  and  regulations  affect  competition  and 
businesses’  ability  to  innovate  (133).  In  addition, 
business  organisations  consider  the  regulations 

staff 

the 

(127) Part  of  the  barriers  highlighted  in  the  2025  Single  Market 

Strategy (‘Terrible 10’), COM(2025) 500, 21/05/2025. 

(128) Administration  de 

l’enregistrement 

[Registration  Duties 

Authority]. 

(129) Meeting  between  European  Commission’s  services  and 

business associations, 27/11/2025. 

(130) European  Investment  Bank,  EIB  Investment  Survey  data 

dashboard. 

(131) European 

Investment  Bank,  EIB 

Investment  Survey, 

Luxembourg, 12/2025. 

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

indicator: administrative and regulatory burden. 

R&D intensive activities. 

(133) OECD, Economic surveys: Luxembourg 2025, 04/2025. 

53 

 
 
 
for 

regarding  operating  permits 
classified 
establishments  to  be  overly  restrictive  (134).  They 
also  see  new  regulatory  barriers  arising  from  the 
lack  of  harmonisation  of  electronic 
invoicing 
across  the  EU,  which  complicates  cross-border 
transactions. The implementation of the once-only 
principle is still in progress. 

(VHCN) 

regard 

to  19% 

increasingly 

infrastructure  as  an  obstacle 

Firms 
transport 
infrastructure  as  on  obstacle  to  investment, 
while  Luxembourg  performs  well  on  digital 
infrastructure.  The  share  of  firms  seeing 
to 
transport 
investment  increased  from  26%  in  2024  to  39% 
in  2025,  against  44%  in  the  EU  (135).  The  firms 
reporting  it  as  a  major  obstacle  increased  from 
(EU  15%).  Regarding  digital 
5% 
infrastructure,  only  one  third  of  Luxembourgish 
firms  considered  it  an  obstacle  to  investment, 
against 44% in the EU. In 2024, very high-capacity 
reached  95.2%, 
coverage 
network 
significantly  above the  EU  average  of  82.5%, 
and remains on  track  towards  the  2030  target  of 
100%.  Fibre-to-the-premises 
(FTTP)  coverage 
increased to 81.8%, also above the EU average of 
69.2%, although the annual growth rate remained 
below the EU average. Overall 5G coverage stood 
at  99.6%  (EU  94.3%),  approaching  saturation 
levels. Coverage  in  the  3.4-3.8  GHz band  reached 
70.6%, slightly above the EU average. Luxembourg 
continued to  implement  its  national  ultra-high-
strategy (2021-2025) and 
speed 
monitors  deployment 
the  national 
regulatory  authority.  The  copper  network  phase-
out  and  transition  to  fibre  are  ongoing,  with  full 
migration  expected  by  2030.  No  major  new 
were 
connectivity 
introduced recently but 
and 
monitoring frameworks remain in place. 

measures 
existing 

broadband 

through 

rollout 

Access  to  finance  constraints  have  eased. 
The  share  of  finance-constrained  firms  decreased 
from 10% in 2023 and 11% in 2024 to only 3.4% 
in  2025,  below  the  EU  average  of  6.1%  (136).  The 
firms facing such constraints are all micro or small 
firms.  Moreover,  44%  of  firms  see  the  non-
availability  of  finance  as  a  long-term  barrier  to 
investment, which is line with the EU average and 

to 

previous  years.  According 
the  European 
Investment  Fund  (EIF)  loan  index,  in  2024  SMEs’ 
ease  of  access  to  loans  was  greater  than  the  EU 
average  (0.50  vs  0.43).  Conversely,  Luxembourg 
slipped in the rankings of the EIF equity index due 
to  a  decline  in  equity  financing  activity,  notably 
venture  capital  and  initial  public  offering  activity 
(see Annex 6). 

firms, 

Late  payments  (137)  represent  a  significant 
challenge 
in 
for  Luxembourgish 
particular  SMEs.  Overall,  in  2024,  only  42%  of 
invoices  were  settled  by  their  due  date,  which  is 
14  percentage  points  less  than  in  2023.  This 
reverses a positive trend between 2021 and 2023, 
and it makes Luxembourg the sixth worst country 
in the EU in terms of payment performance (138). In 
2025, Luxembourg was among the Member States 
with  the  highest  share  of  SMEs  experiencing  late 
payments:  around  one  third  of  firms  experienced 
late  payments  from  public  entities  (vs  15.9%  in 
the  EU),  and  81.5%  from  private  entities, 
significantly above the EU average of 47.1%  (139). 
According  to  the  Chamber  of  Trades,  42%  of 
businesses  in  the  craft  sector  are  reporting  an 
increase  in  business  payment  delays,  which  have 
been  rising  since  the  pandemic.  For  SMEs  in 
sectors  with  small  profit  margins,  late  payments 
are  a  leading  cause  of  business  failure.  By 
disrupting  firms’  cash  flows,  late  payments  may 
also 
impact  firms’  ability  to  undertake  new 
investments  or  recruit  staff,  thus  harming  their 
growth potential. 

Luxembourg  has  made  substantial  progress 
in the provision of digital public services (see 
Annex 7). As part of its RRP, Luxembourg is putting 
in  place  measures  to  expand  its  digital  offer  of 
services  to  individuals  and  business  through  the 
development  of  the  MyGuichet  platform  and  the 
digitisation  of  the  public  employment  agency’s 
(ADEM) services. Luxembourg’s RRP also includes a 
measure to support the development of a national 
platform to enable public administrations to create 
and manage public surveys.  

(134) Luxembourg, Guichet glossary. 

(135) European  Investment  Bank,  EIB  Investment  Survey  2025, 

p. 30. 

(137) Part of the barriers highlighted in the Single market strategy 
(“‘Terrible  10”’)  and  the  2026  Annual  Single  Market  and 
Competitiveness Report. 

(138) EU Payment Observatory, Annual Report 2025, p. 97.  

(136) European 

Investment  Bank,  EIB 

Investment  Survey, 

(139) European  Central  Bank  and  European  Commission,  SAFE 

Luxembourg, 12/2025. 

survey.  

54 

 
 
 
Single Market and barriers 

Luxembourg  is  a  small,  open  economy  with 
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  108.4% of its GDP in 2025 
(EU  average:  40.7%)  (see  Table  A5.1).  This  is 
mainly  explained  by  Luxembourg’s 
in 
services,  especially  financial  services:  in  2025, 
service  exports  and  imports  stood  at  83.3%  of 
GDP, far ahead of the EU average of 7.6%. Exports 
and  imports  of  goods  represented  25.2%  of  GDP, 
which was above the EU average (18.7%) (140). 

trade 

Nonetheless,  regulatory  and  administrative 
barriers  to  the  Single  Market  persist  in 
Luxembourg,  affecting  in  particular  freedom 
of  provision  of  services  and  freedom  of 
establishment.  Luxembourg’s  barriers  to  intra-
European  Economic  Area  (EEA)  services  trade  are 
the highest in the EU (141). They were the highest in 
the EU in 2025, as well as over the five last years. 
Looking  at  specific  sectors,  Luxembourg  had  the 
highest  barriers  to  intra-EEA  service  trade  among 
all  EU  Member  States  for  construction  and 
accounting.  The  OECD  (142)  points  out  that  certain 
rules regulating the entry of individuals seeking to 
provide  services  in  Luxembourg  on  a  temporary 
independent  services 
basis  as  contractual  or 
suppliers 
than 
remain  more 
international  best  practice.  Apart  from  limited 
exceptions,  regular  economic  activity  is  subject  to 
that 
and 
a 
involve 
obtaining/maintaining  that  permit  can 
requirements 
physical 
as 
establishment  in  Luxembourg  and  effective  and 
permanent day-to-day management with physical 
presence, which can increase compliance steps for 
firms seeking to establish or expand activities (143). 
Likewise, the framework for newly relocated staff 
is  complex.  The  OECD  calls  for  improved  market 

cumbersome 

business 

permit, 

fixed 

such 

prior 

a 

(140) Eurostat, bop_c6_a. 

(141) European  Commission  staff  calculation  based on  the  OECD, 

intra-EEA STRI database. 

(142) OECD,  Services 

Trade  Restrictiveness 

Index 

(STRI): 

Luxembourg, 2/2025. 

(143) OECD, STRI: Luxembourg, 2/2025 

55 

access conditions, more transparent licensing, and 
lower barriers to the movement of people (144).  

For several regulated professions, regulatory 
barriers  are  more  stringent  in  Luxembourg 
than  in  other  Member  States.  Some  214 
professions  are  regulated  in  Luxembourg  (145), 
which  is  more  than  the  EU  median  (200).  The 
OECD  Product  Market  Regulation  (PMR)  indicator 
shows  that  regulatory  barriers  to  competition  are 
high  compared  with  OECD  countries,  especially  in 
professional  services.  According  to  the  OECD  (146), 
regulatory restrictions are particularly rigorous for 
lawyers,  notaries,  architects,  civil  engineers,  and 
accountants  (147).  For  notaries,  the  restrictions  are 
among the strictest in the EU, in particular due to 
the  regulation  imposing  the  legal  form  of  their 
business,  and  the  regulation  on  entry  into  the 
profession.  Entry  regulations  for  lawyers  are  also 
particularly  restrictive.  Progress 
in  addressing 
barriers  in  the  field  of  business  services  has 
remained  limited.  In  response  to  a  survey  carried 
out  by 
the  European  Commission  between 
December  2025  and  February  2026,  Luxembourg 
reported  that  it  had  fully  implemented  one  and 
partially  implemented  6  out  of  10  of  the  2021 
Commission recommendations (148). To address the 
2025 CSR (149) Luxembourg is finalising legislation 
which  seeks  to  streamline  regulations  and  make 
entry requirements more flexible for architects and 
civil  engineers  (150). In the retail  sector, regulatory 
restrictiveness  is  greater  than  the  OECD  average 
(1.31 vs 1.04), but this has significantly improved 
since 2018. 

Luxembourg  performs  well  on  Single  Market 
enforcement indicators, except on the timely 
transposition  of  directives.  In  2025,  the  share 
of  Single  Market  directives  not  transposed  by 

(144) OECD, STRI: Luxembourg, 2/2026.  

(145) European Commission, Regulated Profession Database. 

(146) OECD, Product Market Regulation indicators, 2023. 

(147) OECD, Product Market Regulation indicators, 2023. 

(148) EC,  2021,  Communication  on  updating 

reform 
recommendations  for  regulation  in  professional  services, 
COM (2021)385. 9/7/2021, Eur-lex.europa.eu. 

the 

(149) CSR 2025(3) on reducing barriers to competition in regulated 

professional business services. 

(150) Projet de loi 7932 sur l'exercice des professions libérales des 
l'aménagement  du 

la  construction  et  de 

secteurs  de 
territoire. 

 
 
 
(the 

‘transposition  deficit’ 

(151)) 
Luxembourg 
increased to 1.8% (it was 1.2% in 2024 and 1% in 
2023). It is now higher than both the EU  average 
of 1.1% and the 1% target set by the EU  Council 
(152). The average delay in transposing directives is 
also  above  the  EU  average  (10.8  months  vs  9.7 
months).  All  other 
indicators  show  a  good 
performance.  In  2025,  Luxembourg  transposed 
only  0.7%  of 
the  Single  Market  directives 
incorrectly  (153),  better  than  the  EU  average  of 
1.1%.  It  had  only  12  open  infringements,  against 
an EU average of 25. In 2025, Luxembourg ranked 
third  among  Member  States  for  the  shortest 
average  duration 
solve  Single  Market 
infringement  proceedings  at  34.2  months,  well 
below  the  EU  average  of  44.5  months.  In 2025, 
Luxembourg  resolved  85.7%  of  the  SOLVIT  cases 
it  handled  as  lead  centre,  slightly above  the  EU 
average of 84.6%.  

to 

Compliance  of  products circulating  in  the 
Single Market (154) is key to ensuring a level-
playing  field  for  law-abiding  companies  and 
the  safety  of  consumers. In Luxembourg,  the 
number  of  market  surveillance  investigations  has 
increased  compared  with  2019.  In  2025,  national 
authorities  reported  in  the  EU  system  for  market 
surveillance 
total 
of 671.6 investigations per one million inhabitants, 
which  is higher than  the  EU median  of  136.2.  The 
number 
in 
absolute  terms,  which  may  also  be  the  result  of 
insufficient  IT  national  interoperability  to  the 
ICSMS system.  

notifications remains limited 

(ICSMS) 

of 

a 

Without  sustained  support  from  Luxembourg 
for  standardisation  (155),  there  is  a  risk  for 
Luxembourg  to  fall  behind  in  strategically 
important 
technological  domains,  which 
could weaken both the integrity of the Single 
Market  and  the  EU’s  strategic  autonomy.  As 

(151) Part  of  the  barriers  highlighted  in  the  2025  Single  Market 

Strategy (‘Terrible 10’), COM(2025) 500, 21/05/2025. 

(152) European  Commission,  Single  Market  and  Competitiveness 

Scoreboard, 1/2026. 

(153) Part  of  the  barriers  highlighted  in  the  2025  Single  Market 

Strategy (‘Terrible 10’), COM(2025) 500, 21/05/2025. 

(154) Part  of  the  barriers  highlighted 

in  the Single  market 
strategy (‘Terrible Ten’)  and  the 2026  Annual  Single  Market 
and Competitiveness Report. 

(155) Rigid  and  outdated  standardisation  system  has  been 
identified  as  one  of  the  ‘Terrible  Ten’  barriers  in  the  2025 
Single Market Strategy, COM(2025) 500, 21/5/2025. 

for 

change 

Institute 

accelerates, 

technological 
the 
effectiveness  of  the  European  Standardisation 
System  increasingly  depends  on  the  ability  of 
National  Standardisation  Bodies  to  mobilise  a 
broad  and  highly  skilled  pool  of  experts.  For 
Standardization, 
Luxembourg’s 
Accreditation,  Safety  and  Quality  of  Products  and 
Services (“the Institute”), strengthening capacity is 
essential  to  ensure the  continued  and meaningful 
involvement  of  a  critical  mass  of  stakeholders  in 
standardisation  activities.  Emerging  technologies 
such  as  artificial 
intelligence  and  quantum 
computing require not only wider participation but 
also continuous upskilling and reskilling of experts 
to keep pace with the digital transition. Reinforcing 
the  Institute  will  enable  it  to  attract  specialised 
talent, maintain and develop expertise, and remain 
agile in responding to innovation. 

Luxembourg  is  an  average  performer  in 
public procurement. The percentage of contracts 
awarded based on a single bid was below the EU 
average  between  2019  and  2024,  but  it  reached 
31% in 2025, higher than the EU median of 27%. 
The  share  of  direct  awards  equalled  the  EU 
median  (6%)  (see  table  A5.1).  Regarding  the 
strategic  use  of  public  procurement, 
the 
government has set up a working group to support 
the  integration  of  sustainability  and  innovation 
criteria  in  public  procurement.  Moreover,  in  its 
medium-term  fiscal  structural  plan,  it  committed 
to carrying out an analysis of the effectiveness of 
the law on public procurement. 

Luxembourg’s  e-procurement  landscape  and 
data  quality  issues  highlight  the  need  for 
interoperable  systems,  common  standards, 
and  stronger  data  governance. Luxembourg’s 
centralised e-procurement service allows economic 
operators  to  use  a  single  system  to  access  all 
national  public  procurement  procedures.  However, 
concerning  cross-border  procurement,  barriers  to 
participation  for  firms  from  other  Member  States 
for 
remain. This 
the relatively  high rate  of 
foreign  economic 
operators  registered  in  the  country’s  eSubmission 
service  (156). This  fragmentation  underscores  the 
need  for introducing interoperability  and  common 
standards. The once-only principle is only partially 
implemented  at  national  level  (see  Annex  7),  and 
buyers  across  the  EU  still  lack  digital  access  to 

specifically 

relevant 

is 

(156) Between  2%  and  9.99%,  as  reported  in  the  e-procurement 

matrix. 

56 

 
 
 
consumers  in  Luxembourg  are  among  the  lowest 
in  the  EU  when  adjusting  for  purchasing  power 
parity (161). The overall electrification rate is lower 
than  the  EU  average  but  is  the  second  highest  in 
the  EU  when  it  comes  to  the  industry  sector 
(51.2%  vs  EU  average  of  32.7%  in  2023).  This 
reflects  the  government's  efforts  to  increase  the 
electrification  rate  of  energy-intensive  industry 
and  reduce  reliance  on  natural  gas.  To  support 
decarbonisation  of  industrial  processes,  in  2025 
Luxembourg  introduced  an  aid  scheme  worth 
EUR 500  million 
its  RRP, 
Luxembourg has in place a subsidy scheme for the 
construction  of  photovoltaic  power  generation 
units  in  business  premises.  The  government  also 
has an interest in the hydrogen sector, particularly 
in cross-border projects that could connect it with 
neighbouring countries (see Annex 9). 

(162).  As  part  of 

Graph A5.1: Manufacturing industry production: 
total and selected sector, index (2021=100), 
2015-2024 

relevant  evidence. Some  monitoring  exists  and 
Luxemburgish national authorities are establishing 
a  public  procurement  data  strategy  on  the 
objectives and management of public procurement 
processes.  Luxembourg  would  still  benefit  from 
having  a  dedicated  public  procurement  data 
collection 
the 
government to  support  data-driven  oversight  of 
the procurement lifecycle (157). 

service within 

analysis 

and 

Businesses’  views  on  corruption  risks  in 
public  procurement  are  below  the  EU 
average.  In  Luxembourg,  43%  of  companies  (EU 
average: 58%)  consider tailor-made  specifications 
for  particular  companies  in  public  procurement 
procedures  to  be  a  ‘very’  or  ‘fairly  widespread’ 
practice and 38% of companies (EU average: 51%) 
consider  involvement  of  bidders  in  the  design  of 
specifications  to  be  a  ‘very’  or  ‘fairly  widespread’ 
practice.  Among  companies  that  have  experience 
of  and  have  participated  in  a  public  procurement 
procedure,  18% 
that  corruption  has 
prevented them from winning a public tender or a 
public  procurement  contract 
(EU 
average:  25%)  (158).  77%  of  companies  perceive 
the 
the  public 
procurement review body (Administrative Court) to 
be ‘very’ or ‘fairly good’ when it is reviewing public 
procurement  cases  (159).  Public  procurement  is 
considered a sector at high risk of corruption, and 
corruption  cases  in  this  area  continue  to  be 
reported and prosecuted (160). 

independence  of 

in  practice 

level  of 

think 

Industry and economic security 

Luxembourg  attempts  to  decarbonise 
its 
energy-intensive  industries  mainly  through 
electrification.  Luxembourg’s  main  energy-
intensive  industries  include  steel,  cement  and 
for  non-household 
plastic.  Electricity  prices 

(157) European  Court  of  Auditors,  Special  Report  28/2023: Public 
Procurement  in  the  EU.  Less  competition  for  contracts 
awarded for works, goods and services in the 10 years up to 
2021,  2023, Special  report  28/2023:  Public  procurement  in 
the EU. 

(158) Flash Eurobarometer 557, p. 133. 

(159) Justice  Scoreboard  (2025),  p. 53;  Flash  Eurobarometer  555, 

p. 39. 

(160) Rule  of  Law Report- Country Chapter  Luxembourg (2025), 

p. 10. 

Source: Eurostat 

The  construction  sector  has  been  facing 
particular  challenges  (see  Annex  16).  Labour 
productivity in the sector has been declining by an 
average  of  1.5%  per  year  since  2010  (163).  Since 
2022,  6 000  houses  fewer  than  the  2016-2020 
average  have  been  built,  and  employment  in 
construction  has  fallen  by  8%  (164).  Moreover,  the 

(161) Eurostat, nrg_pc_205. 

(162) Loi du 3 juillet 2025 instituant un régime d’aides en faveur 
de la transition vers une économie à zéro émission nette. 

(163) OECD, Economic surveys: Luxembourg 2025, 04/2025. 

(164) Chambre  des  Métiers,  Avis  sur  le  projet  de  budget  2026, 

11/2025. 

57 

4555657585951051152015201620172018201920202021202220232024ManufacturingManufacture of wood and of products of wood and cork, except furniture; manufacture ofarticles of straw and plaiting materialsManufacture of paper and paper productsManufacture of chemicals and chemical productsManufacture of rubber and plastic productsManufacture of other non-metallic mineral productsManufacture of basic metals 
 
   
 
sector  is  suffering  from  labour  shortages.  The 
exacerbation  of  the  housing  shortage  undermines 
Luxembourg’s attractiveness. The government has 
recently  introduced  some  measures  to  speed  up 
permitting  procedures  for  construction.  However, 
business associations are also calling for national 
harmonisation  of  building 
regulations  and 
increased digitisation of procedures. 

22.4%)  (170).  Imports  from  some  countries  might 
be  affected  by  geopolitical  instability.  However, 
due to a relatively high diversification of countries 
of  origin,  Luxembourg’s  imports  of  raw  materials 
are slightly less concentrated than the rest of the 
EU  (O.21 vs 0.23)  (171). By contrast,  Luxembourg's 
circular  material  use  rate  was  below  the  EU 
average in 2024 (10.7% vs 12.2%) (172). 

(166). 

clean 

(NZIA). 

Industry 

Luxembourg’s 

While the net-zero manufacturing industry is 
underdeveloped,  Luxembourg  has  not  made 
significant progress in implementing the Net-
Net-zero 
Act 
Zero 
manufacturing  output  in  Luxembourg  remains 
limited.  The  country  has  a  small  production 
capacity  for  solar  photovoltaics,  amounting  to  50 
MW/y  (165),  which  is  a  negligible  share  of  EU 
capacity 
tech 
manufacturing capacity is supported only by a few 
relevant  policy  frameworks.  In  2025,  Luxembourg 
introduced  an  aid  scheme  for  investments  in 
production  in  strategic  sectors  such  as  batteries, 
heat  pumps,  wind  turbines  and  solar  panels  (167). 
The  lack  of  relevant  skills  for  the  transition  to  a 
net-zero  economy  is  also  limiting  production. 
Regarding 
the  NZIA, 
Luxembourg  has  designated  a  single  point  of 
contact,  which 
streamlining 
among 
communication 
stakeholders.  However,  it  has  not  designated  any 
net-zero  strategic  projects  (168),  nor  established a 
national contact point to administer applications. 

for 
coordination 

implementation  of 

is 
and 

crucial 

the 

Manufacturing depends heavily on imports of 
critical raw materials. With 27.3 tonnes of raw 
in  2024, 
material  consumption  per  capita 
Luxembourg  has 
third  highest  material 
footprint  in  the  EU  (169).  This  reflects  the  high 
demand  for  material  usage  of  Luxembourg’s 
economy. Reflecting the small size of the country, 
its  material  import  dependency  is  the  highest  in 
the EU (89.4% in 2024 against  an EU  average of 

the 

(165) European  Commission 
Monitoring Dashboard. 

-  Net-zero technologies 

(NZT) 

(166) European  Commission,  The  net-zero  manufacturing  industry 
landscape  across  the  Member  States.  Annex  2,  Country 
fiches, Luxembourg. 

(167) Loi du 3 juillet 2025 instituant un régime d’aides en faveur 
de la transition vers une économie à zéro émission nette. 

(168) European  Commission,  Overview  of  strategic  projects  under 

NZIA, 4/2026. 

(169) Eurostat, env_ac_rme. 

(170) Eurostat, env_ac_mid. 

(171) 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. 

(172) Eurostat, env_ac_cur. 

58 

 
 
 
Table A5.1:  Single Market and Industry 

Source: (1) Eurostat, (2) EIB Investment Survey, (3) EIF SME Access to Finance Index, (4) Intrum Payment Report, (5) SAFE survey, 
(6) OECD, (7) data up to 2024: Single Market and Competitiveness Scoreboard, 2025: Commission calculation based on TED data, 
accessible at the Public Procurement Data Space (PPDS) (*) the value represented here under EU average is the median, (8) Single 
Market and Competitiveness Scoreboard, (9) European Commission calculations. 

59 

POLICY AREA20212022202320242025EU-27 average176.8171.7172.0171.5168.4100.09.88.17.77.1-12.64.14.34.64.5-3.9Business environment and simplification12.310.714.513.315.034.00.890.700.390.50-0.430.480.370.410.05-0.19-----17.4-----13.6from private entities in the previous or current quarter---60.981.547.1from public entities in the previous or current quarter---25.432.615.9117.6124.4122.6108.2108.440.70.0670.0670.0670.0670.0670.050182325031276644661.81.511.21.810.80.80.50.30.71.176.92808310085.784.61312101112250.07630.12130.14880.11860.11460.146241.749.351.2--32.711.714.314.314.7-25.289.590.189.089.4-22.48.712.010.110.7-12.2Operational cleantech manufacturing capacity in 20259 - Solar PV (c: cell, w: wafer, M:module), GW0.05 (m) - Electrolyzer, GW- - Heat pump assembly - - Battery, GW-Energy-intensive industriesElectricity prices for non-household consumers1Electrification (electricity as a share of total energy consumption in industry)1Share of energy from renewable sources (renewable energy generation as a share of overall energy consumption)1Critical raw materialsMaterial import dependency, %1Circular material use rate1Industry and economic securitySingle Market IntegrationEU trade integration, average(intra-EU imports + intra EU exports)/GDP, %1EEA Services Trade Restrictiveness index6Public procurementSingle bids, % of total contractors7*Direct awards, % of negotiated procedures7*ComplianceTransposition deficit, % of all directives not transposed8Conformity deficit, % of all directives transposed incorrectly8SOLVIT, resolution rate per country, %8Number of pending infringement proceedings8Impact of regulation on long-term investment, % of firms reporting business regulation as a major obstacle2SME liquidityEIF Access to Finance for SMEs index - loans3EIF Access to Finance for SMEs index - equity3Late paymentsPayment gap - corporates B2B, difference in days between offered and actual payment4Payment gap - public sector, difference in days between offered and actual payment4Share of SMEs experiencing late payments, %5LuxembourgINDICATOR NAMEBusiness environment and investmentProductivity and investmentLabour productivity (GDP per hour worked in PPP terms), % of EU271Business investment (share of GDP)1Public investment (share of GDP)1 
 
  
 
ANNEX 6: SAVINGS, INVESTMENT AND ACCESS TO FINANCE 

Table A6.1:  Savings and Investments Union summary diagnostics 

Source: OECD (pensions), Eurostat (households' financial wealth), FISMA CMU dashboard (VC and PE), national sources (capital 
taxation). 

largely 

through 

Affluent 

Luxembourg’s economy is closely linked to its 
role as a globally integrated financial centre, 
which  provides  firms  with  broad  access  to 
international  capital  markets.  The  financial 
centre  is  anchored  by  Luxembourg’s  position as a 
leading  domicile  for  investment  funds  and  a  hub 
for  cross-border  banking,  insurance,  and  wealth 
management.  The  Luxembourg  Stock  Exchange  is 
a key global venue for the issuance and listing of 
international  debt  securities,  while  equity  market 
activity is comparatively limited and predominantly 
investment 
domestic.  Nevertheless,  corporate 
remains 
internal 
financed 
resources,  indicating  a  continued  preference  for 
favourable  market 
retained  earnings  despite 
conditions. 
households  maintain 
substantial  exposures  to  equities  and  investment 
funds,  alongside  high  cash  holdings.  The  banking 
sector  is  exceptionally  large  relative  to  GDP, 
international  orientation.  Banks 
reflecting 
liquid,  and 
remain  well  capitalised,  highly 
profitable,  with  asset  quality  generally  sound, 
although  vulnerabilities  persist  in  segments  of 
corporate  lending.  Institutional  investors  are  the 
principal drivers of capital market activity, and the 
insurance sector continues to expand. However, the 
contribution  of  domestic  institutional  investors  to 
limited.  While  the 
start-up  financing  remains 
the  EU 
venture  capital  market  outperforms 
average, 
financing  gaps  persist, 
particularly  in  the  scale-up  phase,  despite  the 
presence of public support schemes for innovative 
firms.  Luxembourg’s  actions  to  address  its  2025 
including  by 
CSR3  to 
promoting  diversification, 
in  the 
financial  sector’ include  implementing  the interest 

‘boost  competitiveness, 

in  particular 

structural 

its 

reform  (Bill  8590)  already  in  force  and  the 
Luxembourg  House  of  Financial  Technology 
(LHoFT),  which  is  aimed  at  integrating  innovation 
to move beyond traditional fund administration. 

Business landscape and company 
funding 

the  country’s 

Luxembourg’s  economy  is  characterised  by 
its  role  as  a  global  financial  centre  and  a 
non-financial  corporate  sector  dominated  by 
medium-sized companies. The financial sector is 
the backbone of the economy, accounting for 23% 
of 
total  value  added.  Many 
multinational  companies use Luxembourg as their 
central finance hub. Large firms often set up local 
subsidiaries to issue debt or take out loans to fund 
their global operations. However, in comparison to 
the  EU  average,  the  Luxembourgish  economy,  in 
terms  of  structure  and  size,  relies  more  on 
medium-sized  companies,  which 
represent  a 
critical  pillar  of  its  value  added.  As  at  end-2024, 
medium  enterprises  contributed  26.2%  of  value 
added (vs 16.9% in the EU) and provided 25.5% of 
labour  employment  (vs  15.5%  in  the  EU),  and 
large  enterprises  produced  36.0%  of  the  value 
added  (vs  46.4%  in  the  EU),  while  providing  work 
to  33.8%  of  the  employed  (vs  34.9%  in  the  EU) 
(see Annex 5). This ecosystem, dominated by high-
tailored 
productivity  medium 
financial instruments that move beyond traditional 
bank  lending  toward  more  sophisticated  capital 
market  instruments.  However,  a  significant  share 

requires 

firms, 

60 

LuxembourgMain featuresRelative EU positioningAssets at 35.7% of GDP (32.3% in the EU)10-year real return of 2.4 (1.4% in the EU)Above average-sized pension system yieldinga relatively high real returnEUR 186,795 per capita (EUR 85,098 in the EU)o/w 9.6% in listed shares and bonds (7.6% in the EU)o/w 13.1% in investment funds (11.0% in the EU)o/w 9.9% in life insurance (13.4% in the EU)o/w 2.9% in  pension claims (13.6% in the EU)Very high financial assets due to highest per capital wealth in the EU, moderately invested in financial products. No savings and investments accountVC at 0.109% of GDP (0.064% in the EU)PE at 0.292% of GDP (0.487% in the EU)Very high venture capital but very modest private equity investments.Gains on stocks and ETFs are tax-free after 6 months. Gains realized within 6 months are taxed at progressive income rates (up to 45.78%), with a €500 annual exemption. New for 2026: A 20% tax credit (up to €100,000) now applies for residents investing at least €10,000 in qualifying startups, provided the investment is held for three years.Most retail investors in Luxembourg pay 0% capital gains tax on stocks and ETFs held for longer than six months, making it one of the most attractive regimes in the EU. No savings and investments account.1-34-1011-1718-2425-27Colours indicate the country's relative ranking based on five groups, ranging from the three best to the three worst performers. The relative ranking as regards an SIU diagnostic topic derives from a consistent cross-country comparison, the starting point of which is the average of the underlying main features.TopicAssets-backed pension schemesHouseholds' financial assetsVenture capital (VC)Private equity (PE)Capital taxation 
 
 
 
   
 
 
of  corporate  activity  reflects  intragroup  financial 
operations  and  holding  structures,  with  assets 
highly  concentrated  in  a  limited  number  of  large 
entities,  including  traditional  holding  companies 
such as SOPARFIs. 

The 
international  role  of  Luxembourg’s 
financial  centre  is  reflected  in  how  non-
financial  corporations  (NFCs)  are  funded.  In 
2024,  unlisted  shares  and  other  equity  reached 
160.1%  of  GDP,  and  loans  stood  at  231.4%  of 
GDP.  These  figures  are  much  higher  than  the  EU 
averages  of  103.2%  for  equity  and  60.8%  for 
loans.  Corporate  bonds  reached  40.2%  of  GDP, 
nearly  four  times  the  EU  average,  although  listed 
shares are a smaller part of the mix  at 34.5% of 
GDP, compared with the EU average (42.5%). 

Even  with  easy  access  to  markets,  many 
firms  rely  on  internal  funding  sources  to 
finance  their  investments.  Most  investments 
are funded internally or through parent companies, 
mostly  because  of 
the  high  number  of 
multinationals.  While  most  businesses  feel  they 
invest  the  right  amount,  about  10%  (173)  (13%  in 
2024) say they face funding constraints. However, 
the  cost  of  borrowing  is  rarely  the  problem  as 
Luxembourg has some of the lowest interest rates 
in the euro area. 

Graph A6.1: Composition of non-financial 
corporations' funding 

Size and structure of the financial 
sector 

Luxembourg  is  a  leading  global  financial 
centre thanks to its role a as a fund domicile 
and  a  hub 
for  cross-border  banking, 
insurance  and  wealth  management.  Not  only 
has  Luxembourg  established  itself  as  a  globally 
leading domicile for investment funds, but also for 
multinational  companies  that  choose  Luxembourg 
as a financial centre for their internal finances. In 
2025,  investment  funds  domiciled  in  Luxembourg 
managed  assets  equivalent 
to  eight-times 
Luxembourg’s  GDP.  International  banks  play  a 
crucial  role  in  supporting  the  investment  fund 
industry 
through  services  such  as  custody, 
fiduciary, and post-trading services. Ten banks are 
headquartered 
On 
22 January 2026,  Luxembourg  formally  adopted 
its new carried interest regime, introducing a clear 
and  competitive  framework  that  distinguishes 
between  contractual  carried  interest,  taxed  as 
income  at  one  quarter  of  the 
extraordinary 
individual’s  overall  income  tax  rate;  and  equity-
linked  carried  interest,  which  is  subject  to  the 
capital gains tax regime. 

country. 

the 

in 

Graph A6.2: Capital markets and financial 
intermediaries 

Source: Eurostat and FISMA E2 calculations, end-2024. 

(173) EIB Investment Survey 2025: Luxembourg overview. 

Source: ECB, EOPIA, AMECO and FISMA E2 calculations, end-
2024 

Luxembourg’s Stock Exchange (LuxSE) is one 
of  the  world’s  leading  exchanges  for  listing 
international debt securities, while the equity 
market 
is  more  domestically  oriented. 
Luxembourg has positioned itself as the preferred 
listing  destination  for  bonds  issued  by  public 
international  bodies,  sovereigns,  and  public 

61 

0100200300400500600LUEU% of GDPLoansTrade credit and advancesBondsListed sharesUnlisted sharesOther equityNon-financial corporationsFinancial corporationsNon-financial corporationsMFIsInsurance  and pension fundsOther financialsGovernmentMFIsPension fundsInsurance corporationsInvestment funds010002000300040005000600070008000900010000   Listed equity               Bonds                        Assets by sector% of GDP 
   
 
   
agencies.  In  2024  new  debt  securities  raised 
EUR 1.5 trillion, giving LuxSE a 33% global market 
share  in  listed  international  bonds.  In  contrast, 
LuxSE  is  comparatively  smaller  for  equities,  with 
only  18  listed  companies,  ranking  as  the  eighth 
largest in the EU by market capitalisation and with 
total shares amounting to 215% of GDP by 2023. 
The  LuxSE (174)  exchange-regulated  multilateral 
trading facility (MTF) serves as an efficient venue 
for issuers seeking broad European listing visibility 
without  the  full  regulatory  burden  of  the  main 
regulated  market,  attracting  global  entities  like 
sovereigns  and  large  corporations.  In  September 
2016,  LuxSE  became  the  first  stock  exchange 
worldwide 
launch  a  platform  dedicated 
exclusively  to  green  financial  instruments  –  the 
Luxembourg  Green  Exchange  (LGX).  LGX  features 
issuers who allocate 100% of their raised funds to 
green investments and requires green securities to 
meet  strict  eligibility  criteria.  In  2024,  there  were 
over  2 100  green,  social  sustainability  and 
sustainability-linked  bonds  listed  on  LGX  worth 
EUR 1.2 trillion. 

to 

Households’ participation in capital 
markets 

their holdings in investment funds (19.1% of GDP), 
listed  shares  (8.8%),  and  other  equity  (23.9%) 
represent a significant portion of their wealth, with 
per  capita  values  for 
these  categories  far 
exceeding  those  of  their  EU  peers.  In  contrast  to 
the broader EU, there is less reliance on traditional 
insurance  and  pension  funds,  which  account  for 
only 21.1% of GDP in Luxembourg compared with 
an  EU  average  of  59%.  This  suggests  that 
households in the Grand Duchy prefer more direct 
or flexible forms of wealth accumulation. Financial 
resilience  is  notably  high;  nearly  half  of  the 
population  can  cover  unexpected  expenses  for 
over  six  months.  While  18%  of  residents  show 
high  financial  literacy,  the  government  continues 
to  promote  educational 
to  help 
households  manage  their  personal  finances  and 
their  high  debt-to-income  ratios.  In  December 
2025,  the  Ministry  of  Education,  Children  and 
Youth launched a 10-point plan to embed financial 
education  into  all  Luxembourgish  schools,  with  a 
main  rollout  starting  in  2026  and  international 
benchmarking set for 2029.  

initiatives 

Graph A6.3: Composition of HH financial assets per 
capita and as % of GDP 

investing 

Luxembourg’s  affluent  households  have  an 
affinity  for 
in  equities  and 
investment funds but also holding large cash 
buffers.  Luxembourgish  households  are  among 
the  wealthiest 
in  the  European  Union,  with 
financial  assets  of  c.  EUR  186 800  per  capita  in 
2024.  While  their  total  assets  as  a  percentage  of 
GDP  (145.7%)  appear  lower  than  the  EU  average 
due  to  Luxembourg's  outsized  GDP,  the  absolute 
wealth  per  person  is  nearly  triple  the  European 
mean.  Households  maintain  a  sophisticated 
balance  between  liquidity  and  investment,  though 
they  carry  higher  debt 
levels,  averaging  c. 
EUR 79 000  per  capita,  primarily  as  mortgages. 
these  assets  shows  a 
The  composition  of 
preference 
and  market-based 
instruments.  Currency  and  deposits  remain  the 
largest  single  component  at  63.7%  of  GDP 
(EUR 81 700  per  capita),  which  is  slightly  below 
the  EU  average  of  67%. However,  Luxembourgish 
households  show  a  strong  appetite  for  capital 
markets  and  alternative  investments.  Combined, 

liquid 

for 

(174) in the meaning of Mifid II. 

62 

Source: Eurostat and FISMA E2 calculations, end 2024. 

Luxembourg  currently  lacks  a  retail-focused 
savings  and  investment  account.  While  the 
existing  tax  framework  on  capital  gains  for  retail 
investment  is  generally  attractive  —  as  capital 
gains  on  private  assets  held  for  more  than  six 
months  are  exempt  from  taxation,  and  dividends 
are  taxed  at  a  relatively  low  rate  of  15%  —  its 
complexity  may  nonetheless  act  as  a  practical 
disincentive,  particularly  for  smaller investors  and 
cross-border  providers.  Developing  a  simple, 
standardised savings and investment account (SIA) 
could  add  value  in  the  Luxembourg  context  by 
retail 
streamlining 

treatment  of 

the 

tax 

050100150200250050100150200LUEULUEUper capita (000 EUR) (lhs)% of GDP (rhs)Currency and depositsInsurance and pension fundsInvestment fundsBondsListed sharesUnlisted sharesOther equityHH Debt (liability) 
 
   
investments.  Such  an  instrument  could  increase 
transparency  and  ease  of  use  for  households, 
while  also  facilitating  tax  compliance,  including 
features like pre-filled reporting. 

The banking sector: resilience and 
financing of the economy 

sector 

Luxembourg’s 
is 
banking 
characterised  by  its  exceptionally  large  size 
relative to GDP, consistent with its role as a 
major  international  financial  centre.  Total 
assets  of  the  Luxembourg’s  banks  amount  to 
about  11-times  domestic  GDP.  Luxembourg’s  role 
as  a  hub  for  investment  funds  allows  them  to 
derive a large share of their income from fees and 
commissions (35% of total income, compared with 
an  EU  average  of  27%)  --  and  rely  less  on  net 
interest  income.  Banks  also  play  a  major  role  as 
employers in the country. According to the Central 
Bank of Luxembourg (BCL), 26 394 people worked 
for credit institutions at the end of June 2025, that 
is 3 891 bank employees per 100 000 inhabitants, 
well above the EU average of 421.2. Employment 
peaked at 27 269 in 2008 before declining during 
the  global  financial  crisis and  has  since  remained 
broadly  stable.  While  banking  remains  the  largest 
employer  in  absolute  terms  (35.9%  of  total 
financial  sector  employment  in  2024),  its  share 
has  declined  significantly  over  the  decade,  from 
nearly  48% 
reflecting  broader 
consolidation trends across the EU.  

in  2014, 

Luxembourg’s  banks  are  not  constrained  in 
their role of funding the economy as they are 
well capitalised, hold abundant liquidity, and 
their  profitability  has  caught  up  with  their 
European peers. The average common equity tier 
1 (CET1) ratio stood at 18.4% in September 2025, 
above  the  EU  average  of  16.8%.  Including  Tier  1 
and  Tier  2  capital  instruments,  the  total  capital 
adequacy ratio stood at 19.7%, just below the EU 
average  of  20.2%  (175).  Profitability  has  improved 
in 
remains  moderate 
though 
compared  with  the  EU  average.  Return  on  equity 
improved from 5.2% in 2022 to  8.6% in the year 
to September 2025 (slightly below the EU average 
of  9.6%),  while  return  on  assets  rose  to  0.8%, 

recent  years, 

(175) Data refer to all banks in Luxembourg, including foreign-

owned subsidiaries and branches. 

63 

exceeding  the  EU  average  of  0.6%  (see  Table 
A6.2)  Luxembourg’s  banks  benefit  from  abundant 
funding  thanks  to  a  large  deposit  base  from 
international clients, which is reflected in the loan-
to-deposit  ratio  of  57.8%  in  2025,  significantly 
below the EU average of 93.9%. A large proportion 
of  deposits  originates  from  the  financial  sector 
itself:  credit 
institutions  and  other  financial 
intermediaries account for 75.3% of total deposits 
in  November  2025.  The  net  stable  funding  ratio 
(NSFR)  remains  high  at  127%,  slightly  below  the 
EU  average.  Banks  significantly  exceed  minimum 
liquidity  requirements.  The  banks’  aggregate  level 
of Own Funds and Eligible Liabilities (MREL) stood 
at  38.4%  of  risk-weighted  assets  (RWA)  in  June 
2025  –  3.8  percentage  points  above  the  EU 
average  and  significantly  above  the  binding 
requirement 
the 
25.8%. 
countercyclical  capital  buffer  (CCyB)  continues  to 
be  set  at  0.5%  to  further  strengthen  resilience 
against emerging cyclical risks. 

parallel, 

of 

In 

the 

in  Luxembourg  focus  on 

Luxembourg’s 
international 
role  as  an 
financial  centre  is  reflected  in  the  banks’ 
lending portfolio with solid asset quality but 
some  weaknesses  in  segments  of  corporate 
lending. Only a few of the 115 banks (end-2024) 
local 
present 
economy. Most international banks serve the fund 
industry  by  providing  services  like  custody  and 
fiduciary  management.  Of  the  total  outstanding 
loans of EUR 808 billion in June 2025, 76.2% was 
extended  to  credit  institutions  and  other  financial 
intermediaries. Just 12.2% of all loans were given 
to  NFCs,  and  of  these,  only  23%,  amounting  to 
EUR  23.5 billion,  went  to  domestic  companies, 
highlighting 
international  orientation  of 
Luxembourg’s  banks.  Despite  abundant  liquidity, 
and  strong  capitalisation  of  domestic  banks, 
vulnerabilities  persist  among  NFCs  in  the  real 
estate  development  sector.  Household 
loans 
amounted to EUR 77.8 billion, or 9.6% of the total. 
Summarising,  only  8.8%  of  all  outstanding  bank 
loans  were  directed  towards  the  non-financial, 
domestic,  private  sector.  The  aggregate  non-
performing  loans  (NPL)  ratio  at  just  0.9%  in 
September 2025, stood well below the EU average 
of  1.9%.  NPL  ratios  for  loans  to  NFCs  and 
households  stood  at  3.3%  and  2.3%  respectively, 
roughly  in  line  with  EU  averages.  Asset  quality 
deteriorated  in  2024  due  to  defaults  in  the 
commercial  real  estate  sector  with  the  NPL  ratio 
for  these  specific  exposures  peaking  at  6.9%  at 

the 

 
 
the  end  of  2024,  but  they  have  improved  since 
and  dropped  to  5.8%  in  December  2025  (176). 
However,  the  banks’  asset  quality  outlook  is 
subject to increased uncertainty due to the current 
conflict  in  the  Middle  East  and  its  impact  on 
energy prices and economic growth. 

Role of non-bank financial 
intermediaries 

growth, 

bolstered 

Luxembourg’s 

Institutional  investors  are  the  primary  force 
behind 
capital  market 
development.  Assets  under  management  show 
strong 
consistent 
international  performance.  The  investment  fund 
sector remains a global leader, further reflected in 
the country's external financial position; by the end 
of  2024,  when  external  financial  assets  reached 
by 
overwhelmingly 
EUR 13.1 trillion, 
portfolio 
by 
rose 
which 
EUR 303 billion in a single quarter. 

driven 
investments 

by 

centred 

Collective 

investment  strategy 

Luxembourg  functions  primarily  as  the  EU’s 
main cross-border insurance distribution hub, 
with the bulk of premiums coming from clients in 
other  Member  States,  rather  than  from  domestic 
asset  accumulation.  As  at  December  2025,  the 
sector  demonstrated 
Luxembourg 
insurance 
reaching 
significant  scale,  with 
total  assets 
is 
EUR 350.3 billion.  The 
heavily 
Investment 
on 
Undertakings  (CIC  4),  which  represent  the  largest 
asset  class  at  EUR 138.6 billion,  reflecting  the 
sector's predominantly unit-linked business model, 
in  which  policyholders  direct  their  premiums  into 
fund  structures,  rather  than  an  active  portfolio 
allocation  by  insurers  themselves.  The  remainder 
of  the  portfolio  includes  further  allocations  in 
corporate 
equity 
(EUR 39.0 bn),  government  bonds  (EUR 22.8 bn) 
and  cash  positions  (EUR 20.9 bn) (177).  On  the 
balance  sheet, 
these  assets  primarily  cover 
EUR 296.4 billion in technical provisions, reflecting 
the scale of the sector's policyholder liabilities, the 
majority  of  which  are  unit-linked  and  therefore 
market-value driven. 

(EUR 52.3 bn), 

bonds 

fund 

real  estate 

Luxembourg's 
sector 
pension 
experienced  a  consolidation  in  size  and  a 
significant  shift  in  asset  allocation  between 
recent  years.  Luxembourg’s  public  pension  fund 
reserves  of 
(Fonds  de  Compensation)  had 
EUR 29.3 billion  at  end-2024,  representing  4.39 
times the amount of annual pension benefits. This 
fund was created in 2004 for pensions to benefit 
from  the  growth  in  financial  markets  and  invests 
in a mix  of equities, fixed income, and alternative 
investments.  In  2024  alone,  the  fund’s  SICAV 
generated  a  return  on 
investment  of  12% 
(approximately  EUR 2.91 bn),  primarily  driven  by 
equity valuation gains. The fund’s asset allocation 
at year-end was diversified across equities (48%), 
fixed  income  (45%),  money  market  instruments 
(3.4%).  Projections 
(3.6%)  and 
nonetheless  suggest  that  absent  policy  reform, 
these  reserves  may  be  insufficient  to  sustain  the 
system  beyond  2050.  Public  pensions  are 
run  occupational 
complemented  by  privately 
pension  schemes  that  invest  mainly in  bonds  and 
mutual funds. These schemes are relatively limited 
in scale. The total  number of funds dropped from 
a  peak  of  16  in  early  2023  to  10  funds  by 
September  2025  while  total  assets  contracted 
from  a  high  of  EUR 2 462 million  in  late  2021  to 
EUR 1 892 million. Overall, only a small number of 
employees 
in  Luxembourg  benefit  from  an 
occupational  pension  and  active  membership  in 
these schemes has steadily declined from 20 617 
in  2020  to  16 357  in  2024.  Moreover,  new 
member inflows have been volatile, with a peak of 
2 413  in  2022,  followed by  a  decline to  1 282 in 
2024,  suggesting  a  slowdown 
in  scheme 
participation.  The  investment  strategy  of  private 
pension  funds  saw  a  notable  decline  in  equities 
and  investment  fund  shares,  which  dropped  from 
EUR 1 126 million  in  the  middle  of  2021  to 
EUR 509 million  in  September  2025.  Meanwhile, 
largest  single 
remaining  assets  became  the 
category  at  EUR 781 million, 
suggesting  a 
diversification  into  alternative  or  less  traditional 
asset  classes.  To  encourage  broader  private 
participation  and  address  the  gap  left  by  low 
occupational  pillar  development,  the  government 
has increased the annual tax deduction ceiling for 
private  pension  schemes  from  EUR 3 200  to 
EUR 4 500 per taxpayer effective from 2026. 

(176) EBA Risk Dashboard, Q4 2025 

(177) EIOPA Insurance Statistics 

Despite  hosting  one  of  Europe’s  largest 
financial  centres,  Luxembourg  channels  only 
a  limited  share  of  institutional  investment 
towards  domestic  start-ups  and  SMEs.  Local 
in 
institutional  investors  play  a  modest  role 

64 

 
 
stage funds are rare, start-ups ready to scale  are 
often  forced  to  look  toward  foreign  VC  (primarily 
from the US or France) or move their headquarters 
to larger markets to secure the necessary capital. 

to 

incentivise 

Luxembourg  offers  some  attractive  start-up 
support  programmes  for  young  innovative 
businesses.  The  state  budget  2026  introduced  a 
20% tax credit (capped at EUR 100 000/year) that 
is  available  for  individual  investors  who  invest 
equity  into  start-ups  less  than  five  years  old, 
aiming 
local  high-net-worth 
individuals  to  fund  early-stage  innovation.  The 
Luxembourg  Future  Fund  2  was  established  in 
2023  with  a  volume  of  EUR 200 million  and 
focuses  on  co-investments  to  encourage  venture 
capital firms to deploy capital into companies with 
a  clear  substance  and  economic 
to 
Luxembourg.  It  was  set  up  by  the  European 
Investment  Fund  (EIF)  and  the  SNCI  (Société 
Nationale  de  Crédit  et  d'Investissement),  building 
on  experience  with  the  Future  Fund  1.  In  addition 
to  the  Future  Fund,  the  SNCI  will  dedicate  an 
additional  EUR 300 million  over  the  next  five 
years.,  targeting  companies  in  strategic  sectors 
such  as  cybersecurity,  deeptech,  sustainable 
technologies,  healthtech,  space,  and  fintech.  In 
2026, the government introduced a revised carried 
interest  regime,  enhancing  and  clarifying  the  tax 
treatment of carried interest to attract alternative 
investment 
to  Luxembourg, 
including venture capital funds.    

fund  managers 

link 

funding start-ups, reflecting the small scale of the 
domestic  market,  the  prevalence  of  family-run 
SMEs  that  traditionally  rely  on  bank  credit  rather 
than equity financing, and the strong international 
orientation  of  the  financial  centre.  To  encourage 
more  long-term  investment,  policy  efforts  have 
focused  on  the  European  Long-term  Investment 
Fund  (ELTIF)  2.0  framework,  where  Luxembourg 
holds  a  leading  position,  accounting  for  around 
64%  of  ELTIFs  by  number  in  2025.  As  of  July 
2025,  the  ESMA  register  lists  211  ELTIFs  across 
the EU, of which 124 are domiciled in Luxembourg, 
close to 60% of the total. While these vehicles are 
intended to broaden access to private markets and 
support  long-term  financing,  most  operate  on  a 
cross-border basis, which, again, limits their direct 
impact on domestic start-up and SME financing. 

Venture capital ecosystem 

investments 

to  2024,  PE 

Luxembourg’s  venture  capital  (VC)  performs 
better than the EU on average but financing 
gaps  remain,  especially 
in  the  scale-up 
phase. Despite Luxembourg’s role as a global hub 
for fund administration, only a small share of that 
capital  is  typically  deployed  in  local  start-ups,  as 
the 
in  private  market  are  not 
meaningfully larger than in the EU on average. In 
the  decade 
(private  equity) 
investments  amounted  to  0.58%  of  GDP,  slightly 
exceeding  the  EU  average  of  0.46%,  while  VC 
investments  stood  at  0.01%  of  GDP,  well  below 
the  EU  average  (178).  As 
in  other  European 
countries,  VC  deals  dropped  in  2023  after  two 
quite  buoyant  years.  Start-ups  often  cite  a  lower 
risk appetite among local investors compared with 
those  in  the  US  or  larger  EU  hubs,  noting  that 
high-net-worth  individuals  in  Luxembourg  often 
prefer more traditional investments like real estate 
over  early-stage  tech.  As 
in  other  European 
countries, the most critical deficiency identified by 
both  founders  and  the  government  is  the  growth 
phase, also known as the ‘scale-up gap’. Although 
Luxembourg  is  relatively  successful  at  providing 
seed  funding  and  incubation  support,  there  is  a 
significant  gap  in  the  funding  for  companies 
seeking 
rounds  between  EUR 25 million  and 
EUR 200 million.  Since  local  specialised  growth-

(178) https://finance.ec.europa.eu/document/download/1ea4a733-
cc31-4096-9953-10a1823b4afc_en?filename=250903-
capital-markets-union-indicators_en.pdf&prefLang=de 

65 

 
 
Table A6.2:  Financial sector indicators 

(1) Annualized data. 
Credit growth and the ECB pension funds EU data refer to the euro area average. 
Private equity and Venture capital, % of GDP is calculated 3 year moving average. 
Pension assets consist of pension providers’ assets and public pension reserve funds’ assets (OECD data). 
Source: ECB, ESTAT, OECD, EIOPA, DG FISMA CMU Dashboard, AMECO 

66 

20182019202020212022202320242025-Q3EUTotal assets of MFIs, % of GDP1785.61862.31936.41895.91789.91784.21820.01797.2246.1Common equity Tier 1 ratio20.318.819.518.317.618.017.918.416.8Total capital adequacy ratio21.419.721.720.518.819.519.219.720.2Overall NPL ratio, % of all loans0.80.60.70.60.70.80.90.91.9NPL ratio, loans to NFCs2.31.72.41.92.22.73.43.33.5NPL ratio, loans to HHs1.91.41.51.41.32.12.22.32.1Return on equity ratio15.55.24.45.55.28.38.98.69.6Loans to NFCs, % of GDP43.745.043.838.436.631.425.523.329.3Loans to HHs, % of GDP58.560.763.660.960.956.353.953.143.6NFC credit growth rate, %8.26.51.0-1.2-0.3-8.2-14.9-9.12.5HH credit growth rate, %7.07.48.38.55.1-1.20.42.12.6Stock market capitalisation, % of GDP231.3236.0278.6288.2188.6208.4247.8277.369.9Initial public offerings, % of GDP5.761.522.7020.470.260.110.27-0.06Market funding ratio81.079.779.979.278.478.381.1-49.7Private equity, % of GDP0.9090.3380.3190.2600.3270.2700.292-0.487Venture capital, % of GDP0.0140.0220.0320.0390.1240.1190.109-0.064Financial literacy, composite index-----49.0--45.5Bonds, % of HHs' financial assets3.83.92.92.53.03.73.6-2.8Listed shares, % of HHs' financial assets4.64.95.36.15.35.66.0-4.8Investment funds, % of HHs' financial assets10.911.912.714.512.712.513.1-11.0Insurance/pension funds, % of HHs' financial assets15.115.615.115.113.614.414.5-27.8Total assets of insurers, % of GDP370.4442.0446.0424.9372.7366.8381.9385.953.9Pension assets, bn EUR---28.324.728.530.8-5813.8Pension assets, % of GDP---38.732.134.835.7-32.310y real return average of pension assets, %-----2.62.4-1.4Pension funds assets, ECB (% of GDP)-3.63.63.42.72.42.32.123.01-34-1011-1718-2425-27Colours indicate performance ranking among the 27 EU Member States.Banking sectorNon-banking sector 
 
  
 
ANNEX 7: EFFECTIVE INSTITUTIONAL FRAMEWORK 

institutional  framework 

An  effective 
is 
essential  for  competitiveness.  This  requires 
public 
integrity,  high-quality 
legislation,  regulatory  simplification  and  efficient 
services for people and for businesses.  

trust  built  on 

Public trust 

Graph A7.1: Trust in the justice system, regional / 
local authorities and in government 

(1)  EU-27 since 2019; EU-28 before 
Source: European Commission, Standard Eurobarometer 
surveys 

People  maintain  high  overall  trust  in  public 
institutions  (Graph  A7.1).  Trust  in  government 
(71%)  is  well  above  the  EU  average  (33%).  This 
has  remained  relatively  consistent  in  the  past 
three  years.  Trust  in  the  legal  system  and  in 
regional and local authorities is also above the EU 
average.  People  have  confidence  in  the  ability  of 
public administration to handle their data securely 
and  responsibly.  Businesses  agree  that  the  public 
administration  handles  their  data  securely  and 
responsibly  and  is  transparent  about  how  it  uses 
the  data  (179).  These  are  metrics  that  may 
contribute  to  the  high  sense  of  trust  as  the 
relationship  between  governments  and  the  public 
becomes ever more digital.  

Quality of lawmaking 

for 

rules 

Luxembourg's 
lawmaking 
demonstrate  limited  alignment  with  best 
practice  in  reducing  the  regulatory  burden 
and ensuring effective implementation (Table 
A7.1).  For  example,  the  proportion  of  impact 
assessments  carried  out  for  all  primary  laws 
during  the  legislative  development  process  is 
relatively low compared to other EU countries. The 
identify  and 
is  not  required  to 
government 
quantify  the  benefits  of  new  primary  laws,  with 
the impact analysis primarily focusing on the cost 
of the legislation.  A number of factors undermine 
the  ability  to  monitor  the  implementation  of 
legislation.  When  the  government  is  developing 
new  primary 
is  no  formal 
legislation  there 
requirement 
i)  draw  up  procedures  for 
measuring  progress  towards  achieving  a  primary 
law's objectives, ii) assess the level of compliance, 
potential 
and 
and 
enforcement  mechanisms. 
the 
oversight of better regulation tools is  hindered by 
the  lack  of  an  external  body  responsible  for 
reviewing 
Impact 
Assessments and ex post evaluations. 

the  quality  of  Regulatory 

Additionally, 

evaluate 

identify 

iii) 

to 

than 

larger  ones 

Limited  focus  on  proportionality,  impact  on 
small  business  and  different  social  groups 
leads  to  overly  restrictive  regulations  (180). 
Regulatory  costs  affect  small  companies  much 
(181).  Stakeholder 
more 
engagement  for  developing  primary  laws  and 
is  confined  to  formal 
secondary  regulations 
consultation  with  professional  groups  and  open 
consultation via two websites. It has been reported 
that  such  consultations  are  working  well 
in 
regulators  are  under  no 
practice.  However, 
obligation  to  take 
into  account  consultation 
comments or the impact of assessments on small 
businesses, social groups and regional areas.  

Ex  post  evaluations  of  existing  regulations 
have  not  been  carried  out  in  the  past  three 
years  (182).  Ex  post  evaluations  are  below  the  EU 

(180) Missions - Ministry of the Economy - The Luxembourg 

Government. 

(181) Survey on the cost of regulation and its impact on the 

Luxembourg financial centre | EY Luxembourg. 

(179) European Commission, 2026, Flash Eurobarometer surveys 
567 and 568 on satisfaction with administrative services. 

(182) OECD, 2025, Luxembourg: Better Regulation Practices across 

the European Union 2025. 

67 

00.10.20.30.40.50.60.70.80.9AutumnSpringAutumnSpringSpringAutumnWinterSummerWinterSpringWinterSummerAutumnSpringAutumnSpringAutumnSpring202520242023202220212020201920182017Justice,  legal system EU-27Justice,  legal system LURegional or local public authorities EU-27Regional or local public authorities LUGovernment  EU-27Government  LU 
 
       
 
 
 
 
Table A7.1:  Luxembourg. Selected indicators on better regulation practices for primary legislation 

Source: OECD, 2025, Regulatory Policy Outlook 2025 [https://doi.org/10.1787/56b60e39-en] and Better Regulation across the 
European Union 2025   

number of people describing the administration as 
fast and effective has decreased by 5 percentage 
points  since  2023.  The  most  time-consuming 
aspect  of  obtaining  a  service  for  people  is 
collecting  and  preparing  documents 
(33%) 
followed  by  understanding 
the  applicable 
legislation  (32%).  In  the  case  of  businesses  it  is 
completing  and  submitting  application  forms 
(27%)  (Graph  A7.2).  One  of  the  main  challenges 
for 
visibility, 
the 
centralisation  and  access  to  information  for  the 
public  administration.  Strategic  use  of  digital 
technologies could overcome these challenges.  

companies 

lack  of 

is 

Graph A7.2: Most time-consuming aspects of 
service delivery 

for  primary 

laws  and  subordinate 
average 
legislation  for  methodology,  oversight  and  the 
systematic adoption of quality control and close to 
the EU average for transparency (183). 

Public service delivery and 
digitalisation 

and 

user-friendly 

Luxembourg  continues  to  lead  the  way  in 
digital 
public-
administration  services.  75%  of  people  are 
satisfied  with  the  public  administration,  the 
highest proportion in the EU (184). However, 65% of 
people  found  that  to  obtain  a  service  more 
correspondence  was  required  than  they  had 
expected.  There  is  scope  to  increase  the  reuse  of 
data  and  provide  pre-filled  forms  for  services  as 
people  would  want  more  pre-filled  documents 
(75%)  and  reminders  for  important  deadlines 
(72%),  since  67%  of  people  report  that  the 
administration  repeatedly  asks  for  the  same 
personal data.  

A  large  proportion  of  people  would  like  a  single 
point of contact when making requests and clearer 
information  about  procedures  and  services.  The 

Source: European Commission, 2026, Flash Eurobarometer 
surveys 567 and 568 on satisfaction with administrative 
services. 

(183) European Commission, forthcoming, Simplification of key life 

events.  

(184) European Commission, 2026, Flash Eurobarometer surveys 
567 and 568 on satisfaction with administrative services. 

The  availability of  digital  public  services  for 
people  is  very  high,  but  access  to  electronic 
records lags behind (Table A7.2). The proportion 

68 

0%10%20%30%40%50%DocumentspreparationLegislationandobligationsTime forresponsesApplicationformsEnsuringcomplianceand reportingServiceidentificationPeopleBusinessesEUTools for smart legislation: Share of possible impacts assessed for all primary laws when developing legislation 0Regulators are required to identify and quantify the benefits of a new primary law0Regulators are required to identify and assess the impacts of alternative non-regulatory options1Tools for effective implementation: when developing laws, regulators are required to:Assess the level of compliance0Identify and assess potential enforcement mechanisms0Specify the methodology of measuring progress in achieving the law's goals0Oversight of better regulation: There is an external  body responsible for reviewing the quality of RIAs and of ex post evacuations 0There are publicly available assessments of the effectiveness of RIA in modifying regulatory proposals 0There are reports on the level of compliance by government department with the requirements of RIA1There are indicators on the percentage of ex post evaluations that comply with guidelines0The effectiveness of ex post evaluations in improving the regulatory stock has been assessed in the last five years0 
 
     
 
     
 
Table A7.2:  Digital Decade key performance indicators: availability of digital public services 

(1) Digital Decade target by 2030: 100. (2) Publishing year, data was collected in the previous year 
Source: European Commission, State of the Digital Decade report 2025 

of  e-government  users  is  high  at  88%  (EU:  76%) 
(185).  67%  of  people  state  that  digital  public-
administration  services  save  time  and  effort  (186). 
Luxembourg  provides  access  to  a  central  and 
digital  portal  for  people  to  access  public  services. 
This  portal  is  designed  to  streamline  interactions 
by  providing  quick,  user-friendly  access 
to 
information.  The  national  digital  inclusion  action 
plan,  published  in  2021,  was  aimed  at  ensuring 
that  all  individuals,  irrespective  of  age,  income, 
education,  location,  disability  and  language,  can 
participate meaningfully in the digital society (187). 
Digital  services  would  be  more  attractive  with 
mobile access. Luxembourg used 27% of available 
funds from the Recovery and Resilience Facility to 
support  its  digital  objectives.  It  spent  EUR 13 
million  digitalising  public  administration  and 
simplifying  internal  and  front-facing  processes 
(188).  

All applicable public services are available to 
businesses online (Table A7.2). Whereas 88% of 
businesses  acknowledge 
that  digital  services 
reduce  time  and  effort  to  obtain  a  service,  15% 
rarely  use  digital  public  services. 
never  or 
Businesses  are 
their 
lifecycle  with  an  online  portal 
that  offers 
comprehensive  digital  services  (189).  Luxembourg 
structures  information  around  key  business  life 
events  to  simplify  interactions  with  the  public 
administration and to promote clear, user-friendly 

throughout 

supported 

(185) European Commission, 2025, Digital Decade: eGovernment 

Benchmark. 

(186) European Commission, 2026, Flash Eurobarometer surveys 
567 and 568 on satisfaction with administrative services. 

approaches (190). The Ministry for Digitalisation has 
run  a  number  of  initiatives  in  recent  years  to 
incorporate  emerging  technologies  in  the  public 
sector  (191).  As  part  of  the  2023–2028  coalition 
agreement, 
the  government  has  made  a 
commitment  to  promoting  innovation  with  a  view 
to  placing  Luxembourg  at  the  forefront  of  new 
technologies, particularly in the digital sector (192). 

simplifying, 

Luxembourg  is  in  the  process  of  digitalising 
its permitting processes. The current focus is on 
accelerating, 
and 
securing  administrative  procedures  for  businesses 
and  residents.  Applications  for  business  permits 
(193)  with  an 
can  be 
authenticated  eID  but  can  also  be  printed  and 
posted.  

completed  online 

streamlining 

of 

data 

exchange 

Luxembourg  is  not  yet  ready  to  enable  the 
cross-border 
and 
documents  between  authorities  through  the 
EU  once-only  technical  system  (OOTS)(194). 
When services (195) become accessible, people and 
businesses will no longer have to search, download 
information  across  e-government 
and  upload 
portals  in  different  Member  States.  Luxembourg 
has  yet  to  identify  the  types  of  documents  and 
data  to  be  exchanged  through  the  system  and 

(190) European Commission, forthcoming, Simplification of key life 

events. 

(191) Projects supported by the Ministry for Digitalisation - Ministry 

for Digitalisation - The Luxembourg Government. 

(192) The strategic initiative "Accelerating digital sovereignty 
2030" - Ministry for Digitalisation - The Luxembourg 
Government. 

(193) Application for, or modification of, a business permit - 

(187) National action plan for digital inclusion - The Luxembourg 

Guichet.lu - Luxembourg. 

Government. 

(188) Luxembourg’s recovery and resilience plan - European 

Commission. 

(189) European Commission, 2025, IOPEU Monitoring Collection - 

Digital Public Administration Factsheets. 

(194) European Commission, Once-Only Technical System 

Acceleratormeter, Ec.europa.eu. 

(195) Procedure types under Annex II of the SDGR (2018/1724/EU) 
and directives 2005/36/EC, 2006/123/EC, 2014/24/EU and 
2014/25/EU.  

69 

EU-2720232024202520259595988297971008667767683Digital public services for citizens (0 to 100)Digital public services for businesses (0 to 100)Access to electronic health records (0 to 100)Luxembourg 
 
 
 
   
 
explore  ways  to  shift  from  the  submission  of 
documents  to  exchange  of  structured  data.  If 
enabled,  OOTS  would  aid  cross-border  exchanges 
and foster cooperation on EU-wide projects. 

Civil service 

Luxembourg  has  been  modernising  the  civil 
service  workforce  and  processes;  challenges 
remain  in  the  uptake  of  continuous  learning 
and  in  gender  parity.  Luxembourg  continues  to 
have  a  younger  civil  service  than  the  EU  average 
(196). However, the proportion of civil servants with 
higher  education  remains  below  the  EU  average 
(197).  The  proportion  of  civil  servants  over the  age 
of  50 
(EU  39.93%).  Despite  the 
availability  of  continuous  learning,  the  proportion 
of  civil  servants  participating  in  adult  learning  is 
below the EU average. (198).  

is  26.9% 

Luxembourg  introduced  a  new  reform  in  the 
civil service in December 2025. The reform will 
strengthen the mobility of civil servants and skill-
sharing  across  administrations.  It  provides  clear 
development  for  career  paths  (199).  Luxembourg’s 
gender parity in senior civil service positions - 70% 
men,  30%  women  in  2024  -  is  below  other  EU 
countries. 

Integrity  

corruption  as  widespread 

Fewer  companies  than  the  EU  average 
perceive 
in 
Luxembourg, but perceptions of corruption as 
a business obstacle and reported experiences 
are  in  line  with  the  EU  average.  Only  40%  of 

(196) European Commission, Eurostat, 2026, European Union 

Labour Force Survey, Employed persons by economic activity 
(NACE Rev. 2) (2008-2026). 

(197) European Commission, Eurostat, 2026, European Union 

Labour Force Survey, Employees by educational attainment 
level and NACE Rev. 2 activity (2008-2026). 

(198) European Commission, Eurostat, 2026, European Union 
Labour Force Survey, Participation rate of employees in 
education and training (last 4 weeks) by NACE Rev. 2 activity 
(2008-2026). 

(199) Reform of the change of administration in the civil service - 
Ministry of the Civil Service - The Luxembourg Government. 

companies  view  corruption  as  widespread  (EU: 
63%)  and  47%  cite  overly  close  links  between 
business  and  politics  as  a  cause  (EU:  76%). 
However  35%  still  say  corruption  is  a  problem 
when  doing  business  –  exactly  the  EU  average) 
(200).  This  suggests  that,  despite  relatively  low 
perceptions  of  systemic  corruption,  practical 
concerns  for  firms  remain  as  significant  as 
elsewhere  in  the  EU.  Public  procurement  and  the 
financial  sector  are  sectors  at  higher  risks  of 
corruption  (201)  (see  Annex  5).  Reported  requests 
for  gifts,  favours  or  extra  money  in  exchange  for 
permits,  services  or  procurement  are  in  line  with 
the EU average (Luxembourg 13% vs EU 10% (202), 
suggesting  that,  despite  comparable  exposure  to 
solicitation,  enforcement  is  perceived  as  a  more 
credible and effective deterrent.  

currently 

framework 

Luxembourg  is  considering  adopting  a  more 
coherent  framework  for  the  prevention  and 
detection  of  corruption.  There  is  no  such 
overarching 
in  place. 
However,  the  government  is  considering  adopting 
a 
the 
formal  anti-corruption  strategy,  and 
corruption  prevention  committee  is  looking  into 
drawing  up  an  anti-corruption  plan. 
the 
meantime, efforts have focused on sector-specific 
measures, including steps to increase transparency 
around lobbying activities (203). 

In 

Steps are being taken to address the drop in 
prosecution numbers in corruption cases and 
to  strengthen 
law-enforcement  entities. 
Reported  corruption  cases  fell  sharply  in  2024, 
from  31  cases  referred  to  the  State  Prosecutor’s 
Office in 2023 to 9 in 2024. The government and 
the 
are 
prevention 
examining  the  reasons  for  this  decline.  At  the 
same time,  additional  staff  are  being  recruited to 
strengthen  the  capacity  of  police  and  prosecution 
services  handling  economic  and  financial  crimes 
(204). 

committee 

corruption 

(200) European Commission, 2025, Flash Eurobarometer survey 
557 on Businesses' attitudes towards corruption in the EU. 

(201) European Commission, 2025 Rule of Law Report, p. 10. 

(202) European Commission, 2025, Flash Eurobarometer survey 
557 on Businesses' attitudes towards corruption in the EU. 

(203) European Commission, 2025 Rule of Law Report, P. 8 and 9. 

(204) European Commission, 2025 Rule of Law Report, P. 7 and 8. 

70 

 
 
 
Justice 

The justice system continues to perform well 
overall,  though  some  efficiency  challenges 
have emerged over time. According to the 2026 
EU  Justice  Scoreboard,  the  time  taken  to  reach  a 
decision  in  civil  and  commercial  cases  at  first-
instance courts continued to rise, from 221 days in 
2023 
in  2024.  Delays  are  more 
pronounced  at  higher  instances.  The  estimated 
time taken to resolve administrative cases in first-
instance courts increased from 479 days in  2023 
to 720 days in 2024, among the longest in the EU.  

to  251 

The  digitalisation  of  justice  continues  to 
progress slowly. Luxembourg lags well behind in 
digital solutions to initiate and follow proceedings 
in  civil/commercial  and  administrative  cases,  and 
in online access for the general public to published 
judgments.  At  the  same  time,  it  performs  well 
regarding  arrangements  for  producing  machine-
readable  judicial  decisions.  Taking  firm  steps 
towards digitalisation could improve the judiciary’s 
accessibility and efficiency (205). 

(205) For a more detailed analysis of the performance of the 

justice system in Luxembourg, see the upcoming 2026 EU 
Justice Scoreboard and the 2025 Rule of Law Report. 

71 

 
 
SUSTAINABILITY 
ANNEX 8: INDUSTRY DECARBONISATION, CIRCULARITY AND CLIMATE MITIGATION 

in 

faces 

though 

is  making  progress 

Luxembourg 
its 
transition to a low-carbon and more circular 
economy 
persistent 
it 
challenges  on  transport  emissions,  resource 
use  and  pollution.  Luxembourg  has  made 
progress  on  industrial  decarbonisation.  It  has 
halved its industrial emission intensity since 2019, 
increased  electrification  in  manufacturing  and  is 
developing  frameworks  for  hydrogen  and  carbon 
management.  It  is  projected  to  exceed  its  2030 
effort  sharing  target.  However,  transport  remains 
a  major  challenge,  generating  over  half  of  all 
effort  sharing  greenhouse  gas  emissions.  In  line 
with  the  2025  country-specific  recommendations 
on  the  challenges  in  decarbonising  transport, 
public  transport  infrastructure  and  cross-border 
networks,  Luxembourg  is  investing  more  in  rail, 
tram  and  cross-border  capacity  and  promoting 
electric transport. It is also making progress in the 
transition  to  a  circular  economy,  with  rising 
employment  in  green  sectors,  strong  resource 
productivity  and  relatively  high  recycling  rates. 
However,  it  has  one  of  the  highest  material 
footprints  and  waste  generation  rates  in  the  EU. 
Several  sectors  generate  air  and  water  pollution. 
Limited  economic 
incentives  have  hindered 
therefore 
progress 
continued action is needed to reduce pollution and 
improve environmental governance. 

resource  management, 

in 

Industry decarbonisation 

•  Greenhouse gas emissions from industry 

Luxembourg’s  manufacturing  emissions  are 
largely driven by energy use; they have been 
declining 
Industry  generates 
around 9% of Luxembourg’s total greenhouse gas 

recently (206). 

to 

(206)  This  Annex  discusses  the  transition  of  Luxembourg's 
manufacturing  industry,  specifically  its  energy-intensive 
industries, 
low-carbon  and  net-zero  modes  of 
production,  which  is  key  to  preserving  competitiveness  on 
the  path  towards  climate  neutrality  as  mandated  by  the 
European  Climate  Law.  A  broader  perspective  on  the 
current  competitiveness  challenges  facing  Luxembourg's 
manufacturing industry is provided in Annex 5. For a more 
detailed  description  of  greenhouse  gas  emissions  from 
industry,  see  European  Commission  (2025),  2025  Country 
Report - Luxembourg, Commission staff working document, 
SWD (2025) 205 final, Brussels, 4.6.2025, Annex A7. Clean 
industry and climate mitigation. 

72 

emissions (207).  In  2024,  manufacturing  emitted 
about 232 g CO₂eq/EUR gross value added (GVA). 
Since 2019, Luxembourg has reduced its industrial 
intensity  by  50%.  Energy-related 
emission 
emissions account for 69% of industrial emissions, 
while  process-related 
(non-energy)  emissions 
represent  about  31%.  Between  2018  and  2023, 
energy-related emission intensity declined by 40%. 
The  share  of  electricity  and  renewables 
in 
manufacturing energy consumption rose sharply to 
reach  56.1%  in  2024,  and  energy  efficiency 
improved  as  energy  use  per  GVA  fell  from  2.4  to 
2.0 GWh/EUR. 

•  Policies to promote industry decarbonisation 

is 

Luxembourg’s 
decarbonisation 
industrial 
strategy  combines  cooperation  agreements 
with structured support schemes. An important 
aspect of Luxembourg’s industrial decarbonisation 
long-standing  voluntary 
policy  mix 
the 
agreement  between 
the  government,  Klima-
Agence  and  the  industry  federation  FEDIL  on 
improving  energy  efficiency  and  decarbonising 
Luxembourg’s  industry (208).  This  agreement  has 
been in place since 1996 and is regularly updated. 
the  2024-2030 
Compared 
agreement  expands  beyond  energy  efficiency  to 
include  an  explicit  decarbonisation  objective.  In 
2024,  42  of  the  country's  largest  consumers  of 
the 
electricity  and  gas  became  party 
agreement (209). 
In  parallel,  Luxembourg  has 
developed 
the  Climate  Pact  for  Enterprises 
(Klimapakt fir Betriber) (210). Launched in 2022 and 

to  past  editions, 

to 

(207)  Data  on  the  manufacturing  sector  exclude  the  NACE 
division C19 – manufacture of coke and refined petroleum 
products,  for  better  match  of  the  sectoral  data  from 
Eurostat (gross value added) with those from the UNFCCC 
under  the  Common  Reporting  Format.  Also  see  further 
indicators  on  industry  decarbonisation,  as  well  as  the 
annotation for further information, in table A8.1 at the end 
of this Annex. 

(208)  For  more  information  on  the  agreement,  see  KLIMA 

Agence. 

(209) 

In recognition of the efforts made and the fulfilment of all 
the  above  requirements,  participating  companies  may 
access a range of benefits, including those allowed under 
European  Directive  2003/96/EC  on  the  taxation  of  energy 
products  and  electricity  during  the  first  phase,  and 
dedicated  support  from  Klima-Agence  under  a  working 
agreement with FEDIL. 

(210)  Further  information  on  this  initiative  is  available  on  a 

dedicated website. 

 
 
 
 
 
 
support 

navigate 

schemes, 

operated  by  Klima-Agence  and  Luxinnovation,  the 
Pact  provides  a  structured  framework  to  help 
SMEs 
identify 
standardised  decarbonisation  measures  and 
access  best-practice  examples.  Together,  these 
initiatives  provide  both  a  suite  of  'soft'  policy 
measures (guidance, coordination, monitoring) and 
a  platform  for  scaling  investment  uptake  across 
firms with very different capacities.  

potential 

efficiency 

(211),  with 

incremental 

increasingly  uses 

To  accelerate  the  transition  and  move 
beyond 
gains, 
targeted 
Luxembourg 
investment  support  and  risk  mitigation.  In 
addition  to  voluntary  and  advisory  instruments, 
Luxembourg  is  increasingly  providing  targeted 
State aid and de-risking to accelerate investments 
in  decarbonisation 
technologies.  A  national 
roadmap  for  decarbonising  the  manufacturing 
sector  was  developed  in  2021-2022  and  is  being 
the  explicit  purpose  of 
updated 
identifying 
sector-specific 
decarbonisation  and  the  support  required  to  turn 
potential into reality. The roadmap highlights a set 
of  strategic  measures  to  transform  industry.  An 
aid scheme to support the transition to a net-zero 
economy  (212)  (see  Annex  8)  has  been  set  up  to 
help  close  the  funding  gap  for  decarbonisation 
projects, reflecting a shift to more active industrial 
policy to promote net-zero investment. In addition, 
large  companies  are  required  to  conduct  energy 
audits  every  four  years  (213),  in  line  with  EU 
requirements,  helping  to  identify  cost-effective 
energy  savings  opportunities  and 
investment 
priorities,  and  providing  an  evidence  base  for 
project pipelines.  

for 

Luxembourg  is  developing  complementary 
policy  frameworks  for  renewable  hydrogen 
and  carbon  management  to  tackle  hard-to-
abate  emissions.  Hydrogen 
carbon 
management  policies  complement  action  on 
decarbonisation 
residual 
emissions that cannot be eliminated through direct 
electrification  alone.  Luxembourg’s  hydrogen 

targeting 

and 

the 

by 

(211)  Measure  no  510  of  the  final  national  energy  and  climate 

plan, link. 

(212)  Law of 3 July 2025 establishing an aid scheme to support 

strategy (214), which was published in 2021 and is 
being updated, positions renewable hydrogen as a 
limited  but  strategic  resource,  prioritised  for 
replacing  fossil  hydrogen  and  serving  hard-to-
electrify  industrial  processes,  consistent  with  the 
energy-efficiency-first approach. In October 2024, 
the  Ministry  of  Economy  launched  a  call  for 
projects  with  a  budget  of  EUR 110  million  to 
encourage  companies 
renewable 
to  produce 
in  Luxembourg.  Two  projects  were 
hydrogen 
selected:  LuxHyVal  (215)  (focusing  on  a  5 MW 
electrolyser in an industrial park) and ECHO-WAVE 
(216)“sq) 
(combining  electrolysis  with  on-site 
renewables and storage). According to the Ministry, 
these  projects  will  provide  alternatives 
to 
substitute  almost  all  fossil  hydrogen  currently 
used  in  Luxembourg.  Drawing  on  the  lessons 
learned  from  this  pilot  call  for  projects,  the 
Ministry plans to draw up a general framework to 
promote  calls  for  projects 
to  build  further 
electrolyser  capacity  in  Luxembourg.  In  parallel, 
the  Ministry 
prioritise 
infrastructure projects to import large quantities of 
hydrogen (217). 
In  March  2025,  Luxembourg 
approved  a  law  to  boost  the  development  of 
hydrogen 
the 
country (218).  

stakeholders 

transport 

networks 

across 

and 

On  carbon  management,  Luxembourg  has 
assessed  its  potential  for  carbon  capture, 
utilisation and storage (CCUS) to develop an 
enabling framework, with a specific focus on 
sectors  such  as  cement.  A  CCUS  and  carbon 
dioxide  removal  (CDR)  framework  was  adopted  in 
July 2025 (219), signalling recognition that reaching 
climate neutrality will require a portfolio approach 
combining  energy  sufficiency,  energy  efficiency, 
electrification 
electricity, 
renewable  hydrogen  and  carbon  management  for 

renewable 

using 

(214)  Government  of  the  Grand-Duchy  of  Luxembourg,  2021, 

Stratégie hydrogène du Luxembourg. 

(215)  A  project  that  has  been  also  awarded  co-funding  by  the 

Horizon Europe programme, link. 

(216)  A  project  that  has  been  awarded  co-funding  also  by  the 

European Innovation Fund, link. 

(217)  Ministry  of  Economy,  2025,  Résultats  de  l'appel  à  projets 
renouvelable  au 

la  production  d'hydrogène 

visant 
Luxembourg. 

the transition to a net-zero economy, link. 

(218)  Law of 31 March 2025 on the establishment of hydrogen 

(213)  Law  of  5 August 1993  on  the  rational  use  of  energy  as 
amended by the Law of 5 July 2016. The latter transposes 
Directive  2012/27/EU  on  energy  efficiency  which  requires 
an energy audit every four years for large companies. 

transport networks. 

(219)  Ministry  of  Economy,  2025,  Le  Luxembourg  adopte  un 
cadre  d'action  pour  les  technologies  de  captage  et 
d'élimination du dioxyde de carbone. 

73 

 
 
 
remaining  process  emissions (220).  A  CCUS  &  CDR 
taskforce  was  set  up  to  gather  feedback  and 
prepare the ground for discussions at national, EU 
and  international  levels.  It  first  met  in  December 
2025 (221). 

the  transport  sector,  along  with  agriculture  and 
forestry,  remain  within  the  set  limits.  By  contrast, 
in  the  energy  and  manufacturing 
emissions 
industries, 
and 
commercial  buildings,  waste  and  wastewater 
treatment sectors exceed the limits. 

construction, 

residential 

Reduction of effort sharing emissions 

•  Sustainable transport 

•  Compliance  with  effort  sharing  limits  through 

domestic measures 

Luxembourg  is  projected  to  overachieve  its 
effort  sharing  target for  2030  (222).  In  2024, 
greenhouse  gas  emissions  from  Luxembourg’s 
effort sharing sectors are expected to have  fallen 
by 33% below 2005 levels. By 2030, with current 
and  planned  policies  and  measures, 
these 
emissions are expected to fall by 55.6%, resulting 
in  the  country  exceeding  its  2030  target  (a  50% 
reduction) by 5.6 percentage points. Luxembourg is 
projected not to exceed its effort sharing emission 
limits  in  any  year  over  the  2021-2030  period.  Its 
provisional  2024  greenhouse  gas  emissions 
review (223)  indicates  that  it  has  achieved  the 
yearly  emission  limits  set  by  the  Grand-Ducal 
Regulation  of  22 June 2022 (224).  Emissions  from 

(220)  Government  of  the  Grand-Duchy  of  Luxembourg,  2025, 
Cadre d’action pour le déploiement des technologies CCUS 
& CDR au Luxembourg. 

(221)  For  further  information,  see  Luxembourg’s  Environment 

Portal. 

(222)  The  national  GHG  emission  reduction  target  is  set  out  in 
Regulation  (EU)  2018/842  (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).  The  emissions  from  effort 
sharing  sectors  for  2024  are  based  on  approximated 
inventory data. The final data will be established in 2027 
after  a  comprehensive  review.  Projections  about  the 
impact  of  current  policies (‘with  existing  measures’,  WEM) 
and  additional  policies  (‘with  additional  measures’,  WAM) 
as  per  Luxembourg‘s  2025  reporting  under  Article  17  of 
Regulation  (EU)  2018/1999  (the  Governance  Regulation). 
Also  see  European  Commission  (2025),  Climate  Action 
Progress Report 2025 – Technical Information, Commission 
staff  working  document,  Brussels,  Chapter  9  (pp. 111  ff.), 
and in particular Tables 25 and 26. 

(223)  Government  of  the  Grand-Duchy  of  Luxembourg,  2025, 
Bilan  provisoire des  émissions  de  gaz  à  effet  de  serre  de 
l’année 2024. 

(224)  Règlement  grand-ducal du 22  juin  2022    déterminant  les 
allocations  d’émissions  de  gaz  à  effet  de  serre  annuelles 
pour  la  période  allant  jusqu’au  31  décembre  2030  des 

in  decarbonising 

Road  transport  emissions  are  a  particular 
challenge  in  Luxembourg,  despite  the  strong 
reduction  achieved  since  2005.  In  2024,  road 
transport  generated  59%  of  Luxembourg’s  effort 
sharing  emissions  (225),  a  44%  reduction  from 
2005 levels. Luxembourg's 2025 CSRs highlighted 
challenges 
transport  and 
investment  in  public  transport  infrastructure  and 
cross-border  networks.  Luxembourg  has  taken 
steps 
identified. 
Progress  is  visible  in  the  continued  reduction  in 
road  transport  emissions,  the  accelerating  uptake 
of  zero-emission  vehicles,  and  the  expansion  of 
charging 
it  has 
committed  substantial  public  investment  in  rail, 
tram and bus infrastructure, including cross-border 
capacity  increases  and  network  modernisation. 
These measures are further detailed below. 

the  challenges 

infrastructure. 

In  parallel, 

to  address 

transport 

remain 
road 
Emissions  from 
persistently high, due to road transport being 
the dominant form of land transport. In 2023, 
the  modal  split  of  freight  transport  on  land 
expressed as tonne-kilometres was 86% for road, 
7.3% for rail  and 6.9% for inland waterways. The 
modal  split  of  passenger  transport  on  land  was 
81%  for  passenger  cars,  14.4%  for  public 
transport (tram, buses and coaches) and 4.9% for 
railways (226). The heavy reliance on private cars is 
also shown by the one of the highest numbers of 
cars per person in the EU (673 passenger cars per 
1000 inhabitants against the EU average  of 563) 

secteurs  visés  à  l’article  5  de  la  loi  modifiée  du  15 
décembre 2020 relative au climat. 

(225)  See Graph A8.1, and Table A8.1 at the end of this Annex. A 
specific feature of the transport sector is that the majority 
of  the  corresponding  emissions  attributed  to  Luxembourg 
are  generated  by  non-residents.  Two  thirds  of  fuel  sales 
are  made  to  international  transport  operators  or  private 
individuals in transit or residing in the border region. These 
sales  are  mainly  explained  by  lower  pump  prices  in 
Luxembourg  than 
(STATEC, 
Analyses No 3, 11/2023, page 17, link). 

in  neighbouring  countries 

(226)  European Commission (EC), 2025, EU Transport in figures, 

link. 

74 

 
 
 
 
(227) and high congestion rates (228). To decarbonise 
freight  and  passenger  transport,  it  is  essential  to 
increase  the  use  of  more  sustainable  modes  of 
transport: 
inland  waterways  and  public 
transport.  

rail, 

Graph A8.1: Greenhouse gas emissions in the 
effort sharing sectors, 2005, 2023, and 2024 

Source: European Environment Agency. 

Throughout  2025,  Luxembourg  made  major 
investments  in  sustainable  transport  and 
plans  further  projects  for  the  coming  years. 
This  includes  the  ongoing  delivery  of  new  train 
sets (2023–2026) (229) and key works linked to the 
line (230).  The 
new  Luxembourg–Bettembourg 
Chamber  of  Deputies  approved  the  financing  law 
to  redevelop  the  Bettembourg  station (231).  Cross-
border  transport  remains  a  central  focus.  The 
partners  of  the  Greater  Region  committed  to  a 
joint 
of 
infrastructure  and  services,  in  line  with  their 
respective  competencies  (232).  Cooperation  with 
France  targets  a  major  increase  in  peak  rail 
capacity  with  a  short-term  objective  to  provide 
13 500  seats  by  2026  (up  from  9 000  in  2025), 
alongside more park-and-ride facilities to promote 
intermodal  commuter  transport  (233).  Luxembourg 

development 

coordinated 

and 

(227)  European Commission (EC), 2025, EU Transport in figures, 

link. 

(228)  Joint Research Center (JRC) data based on TomTom, 2023. 

(229)  Ministry  of  Mobility  and  Public  Works,  2024,  Entrée  en 

service du premier train Coradia des CFL, link. 

(230)  Project co-funded by the EU, see here for more details. 

(231)  See  the  website  of  the  Chamber  of  Deputies  for  more 

information. 

(232)  Government  of  the  Grand-Duchy  of  Luxembourg,  2026, 
Réunion  de  travail  dans  le  domaine  de  la  mobilité 
ferroviaire à l’échelle transfrontalière, link. 

(233)  Ministry of Mobility and Public works, 2025, La coopération 
franco-luxembourgeoise au profit d'une meilleure mobilité 
transfrontalière de demain, link. 

75 

and  Belgium  stepped  up  cooperation  on  cross-
border  transport  (234)  and  aim  to  improve  rail 
connections  between  their  capitals  (235).  Based  on 
the  state  budget  for  2026,  over  the  next  four 
years  Luxembourg  will  spend  EUR 3.4 billion  on 
modernising  the  railways,  EUR 2.5 billion  on  bus 
transport,  and  will  continue  to  expand  the  tram 
network (236).  On 
in  public 
transport, which has been free country-wide since 
promote 
2020, 
sustainable transport through support schemes for 
people  to  purchase  zero-emission  vehicles  and 
install chargers for such vehicles (237).  

Luxembourg 

continued 

investing 

top  of 

to 

The  country  is  recording  increasing  sales  of 
zero-emission  vehicles.  The  share  of  newly 
registered  passenger  cars  has  risen  from  5.5%  in 
2020  to  22.5%  in  2023 to  reach  27.4%  in  2024. 
Similarly, the share of newly registered light goods 
vehicles  has  risen  from  1.4%  in  2020  to  8%  in 
2023 and 7.4% in 2024. With a total power output 
of 
infrastructure  of  142 887 kW, 
Luxembourg  has  exceeded  the  Alternative  Fuels 
Infrastructure  Regulation  target  of  65 947 kW 
(238),  ensuring  that  infrastructure  deployment  is 
aligned  with  vehicle  uptake.  A  CO₂  tax  on  fossil 
fuels  has  been 
in  place  since  2021  and 
progressively  increased  (239),  most  recently  on 
1 January 2026 (240). 

charging 

(234) 

In  September  2025,  the  two  countries  signed  a  letter  of 
intent  to  further  enhance  passenger  and  freight  rail 
cooperation,  reinforcing  long-term  coordination  of  cross-
border transport planning and investment, link. 

(235)  Government  of  the  Grand-Duchy  of  Luxembourg,  2026, 
la 

transfrontalière:  Un  nouvel  élan  pour 

Mobilité 
collaboration belgo-luxembourgeoise, link. 

(236)  Ministry  of  Finances,  2025,  Matenee  wuessen:  une 
croissance et une cohésion sociale qui vont de pair, Gilles 
Roth présente le budget de l'État pour 2026, link. 

(237)  The  Recovery  and  Resilience  Fund  supports  both  the 
purchase  of  zero-emission  vehicles  within  Luxembourg’s 
support  scheme  for  mobility  (Klimabonus  Mobiliteit),  as 
well as the expansion of the network of charging points for 
electric vehicles installed by businesses across the country. 
Furthermore,  the  recovery  and  resilience  plan  includes  a 
reform  targeted  at  the  electrification  of  the  fleet  of 
contracting authorities. 

(238)  Status  in  December  2025.  EC,  European  Alternative  Fuels 

Observatory, Target tracker. Link. 

(239)  The CO₂ tax, set at EUR 20 per tonne in 2021, has risen by 
EUR  5  per  tonne  annually  to  reach  EUR  45  per  tonne  in 
2026.  

(240)  Government  of  the  Grand-Duchy  of  Luxembourg,  2025, 

Nouveautés 2026. 

024681012200520232024MtCO2eDomestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
  
 
 
Luxembourg  supports  the  scaling  up  of 
sustainable aviation fuels, despite having no 
domestic  production.  Luxembourg  has  no 
domestic  aviation  fuel  production  but  is  eager  to 
develop  a  European  eSAF  (sustainable  aviation 
fuel)  ecosystem,  and  its  airports  and  aircraft 
operators  have 
in  eSAF  uptake. 
invested 
Luxembourg is encouraged to further deploy eSAF 
value  chains  across  Europe  to  support  passenger 
and freight transport departing from Luxembourg. 

circular  economy  sector  accounted  for  4.2%  of 
total employment in 2023 (up from 1.7% in 2014), 
above  the  EU  average  of  2%.  Luxembourg’s 
resource  productivity  was  the  second  highest  in 
the  EU  in  2024,  at  about  EUR 6.25/kg.  It  has 
increased  significantly,  at  a  faster  pace  than  the 
EU  average  (rising  by  40%  between  2019  and 
2024,  against  the  EU  average  of  37%)  (246), 
illustrating  the  ability  to  produce  (on  average) 
more value with each unit of resource. 

Luxembourg's 

However, 
raw  material 
consumption,  a  measure  of  its  material 
footprint,  is  one  of  the  highest  in  the  EU, 
reaching  27.305  tonnes/capita  in  2024  (247). 
This unique situation illustrates how, paradoxically, 
Luxembourg’s financial wealth can mask a level of 
resource  consumption  that  remains  physically 
significant  and  impactful  on  the  environment. 
Although waste generation is gradually decreasing, 
it  remains  high  at  712 kg/capita  of  municipal 
waste  generated  in  2023  (248),  as  does  the 
incineration  rate  (41%  in  2023).  The  use  of 
secondary materials was below the EU average in 
2024  (with  a  circular  material  rate  at  10.7% 
against the  EU  average  of  12.2%),  while material 
import  dependency  was  the  highest  in  the  EU 
(89%  vs  the  EU  average  of  22.4%  in  2023), 
primary 
underlying 
resources  and  scope  to  further  develop  circular 
economy solutions (249). 

persistent 

reliance 

on 

to 

further 

potential 

Luxembourg  currently  makes  limited  use  of 
fiscal tools to promote circular practices and 
has 
increase 
environmental  revenue  and  reduce  waste. 
Total environmental tax revenue in Luxembourg is 
the  lowest  in  the  EU  (at  1.3%  of  GDP  in  2023, 
against  the  EU  average  of  2%)  (250)(251).  Taxes  on 
resources  make  up  a  very  low  share  of  the  total 
tax  revenue  (0.83%  in  2023)  and  Luxembourg 

(246)  Eurostat, Resource productivity, 2025. Link. 

(247)  Eurostat, Material footprints, 2025. Link. 

(248)  Eurostat,  Municipal  Waste  by  waste  management 

operations, 2025. Link. 

(249)  Eurostat, Circular material use rate, 2025. Link. 

(250)  EC,  Directorate-General  for  Environment,  Camboni,  M., 
Markandya,  A.,  Tyrer,  D.,  Goonesekera,  S.  et  al.,  Greening 
the  European  Semester  –  Resource  and  pollution  taxes, 
Publications Office of the European Union, 2026. Link. 

(251)  EC, 

Environmental 

Implementation 
Luxembourg country report, 2025. Link. 

Review 

(EIR), 

Sustainable industry 

•  Circular economy industry 

implementation 

is  making  progress  on  the 
Luxembourg 
circular  economy,  but 
is 
uneven. In 2021, Luxembourg adopted a National 
Circular  Economy  Strategy  (NCES)  (241)  which 
includes targets covering products’ entire life cycle. 
In  2023,  Luxembourg  reached  a  recycling  rate  of 
56.5%  for  municipal  waste  (against  the  EU 
average of 48%) and a recovery rate of 94.4% for 
construction  and  demolition  waste  (242)  in  2022 
(above  the  EU  average  of  89%).  However, 
Luxembourg’s  recycling  rate  of  plastic  packaging, 
at 38.8% in 2023, is below the EU average of 42% 
(243). Luxembourg is making a small but consistent 
contribution  to  green 
innovation  with  a  few 
patents  related  to  recycling  and  secondary  raw 
materials  (244)  filed  every  year.  There  is  scope  to 
further develop the research and innovation sector 
in this field. 

Luxembourg’s  economy  is  benefiting  from 
the transition to the circular economy, but it 
is 
is  still 
reflected  most  notably  in  the  225%  increase  in 
people employed in the sector between 2014 and 
2023,  the  largest  increase  in  the  EU  (245).  The 

resource-dependent.  Progress 

(241)  Luxembourg’s  Ministry  of  Energy  and  Spatial  Planning, 
Stratégie  pour  une  économie  circulaire  Luxembourg  - 
Strategie Kreeslafwirtschaft Lëtzebuerg, 2021. Link. 

(242)  JRC,  Techno-economic  and  environmental  assessment  of 

CDW management, 2024. Link. 

(243)  Eurostat, Plastic packaging recycling rate, 2025. Link. 

(244)  Eurostat,  Patents  related  to  recycling  and  secondary  raw 

materials, 2025. Link. 

(245)  Eurostat,  Persons  employed  in  circular  economy  sectors, 

2025. Link. 

76 

 
 
 
does not currently levy pollution taxes. Bringing in 
resource 
taxes  on  pollution  and 
specific 
management,  especially  in  sectors  like  water 
quality,  material  efficiency  and  waste  reduction, 
would  give  the  country  the  potential  to  make 
improvements  and 
significant  environmental 
further align with the polluter pays principle. 

Luxembourg  has  significantly  improved  its 
rate  but  still  has  a  high 
landfilling 
incineration rate. Landfilling of municipal waste 
is below the EU average (22%) in 2023, continuing 
the  significant  downward  trend  since  2010  (from 
16%  in  2010  to  3%  in  2023).  However,  over  the 
same  period,  the  incineration  rate  increased  from 
38% to 41%, far above the EU average of 26% in 
2023  (252).  The  country  does  not  levy  taxes  on 
municipal waste landfilling or incineration. Overall, 
waste  management  revenues  differ  across  the 
country,  with  some  municipalities  implementing  a 
'pay  as  you  throw'  system,  tax  by  collection 
frequency  or  a  standard  levy.  Revenues  from  this 
system  pay  for  the  service  and  do  not  constitute 
an  environmental  tax  on  resource.  There  is  scope 
to  expand  voluntary  deposit  return  systems  and 
increase  the  capture  of  recyclable  waste,  as  it 
currently only applies to specific types of reusable 
packaging. 
producer 
responsibility schemes are in place in Luxembourg 
(253) to increase waste prevention, re-use, recycling 
and  other  recovery,  but  there  is  scope  to  develop 
schemes to cover more waste streams (254). 

extended 

Several 

its 

reach 

is  an  estimated 

Luxembourg  would  benefit 
from  more 
targeted  financing  for  the  circular  economy. 
investment  gap  of 
There 
EUR 125 million  per  year  needed  for  Luxembourg 
to 
circular  economy  objectives. 
EUR 30 million of this investment gap is for recent 
labelling, 
in  eco-design,  packaging, 
initiatives 
digital  tools,  critical  raw  material  recycling  and 
measures  proposed  under  the  amended  Waste 
Framework  Directive.  A  further  investment  of 
EUR 86 million  is  needed  to  unlock  Luxembourg’s 
circular economy potential. 

(252)  Eurostat,  Municipal  Waste  by  waste  management 

operations, 2025. Link. 

(253)  Government of the Grand-Duchy of Luxembourg, Loi du 9 
juin  2022  modifiant  la  loi  modifiée  du  21  mars  2012 
relative  aux  déchets  et  la  loi  modifiée  du  31  mai  1999 
portant  institution  d’un  fonds  pour  la  protection  de 
l’environnement. Link. 

•  Bioeconomy industry 

the  value  added  annually  by 

Luxembourg’s  bioeconomy  industry  remains 
underdeveloped,  representing  only  0.1%  of  the 
country’s GDP in 2023 (255)(256). Between 2018 and 
2023, 
the 
bioeconomy  industry  in  Luxembourg  increased  by 
an  average  of  1.9%,  driven  by  the  growth  of  the 
wood products and furniture sector, but still below 
the  annual  EU-27  average  growth  of  5.1%.  On 
average  annually,  over 
same  period, 
the 
employment 
in  the  bio-based  chemicals  and 
plastics  and  the  wood  products  and  furniture 
sectors, 
1.8% 
by 
respectively (257). Research and development (R&D) 
business  expenditure  in  bioeconomy  grew  at  the 
same level then overall R&D business expenditure 
(1.2%)  (258).  However,  labour  productivity  in  the 
bioeconomy  decreased  from  39.6%  to  35.8%  of 
the national average (259). 

increased 

4.3% 

and 

•  Zero-pollution industry 

Luxembourg has made significant progress in 
reducing key air pollutants, but industry still 
generates  substantial levels of  air  pollution. 
Several  air  pollutant  emissions  have  decreased 
since 2005, while GDP growth has continued  (260). 
Between 2010 and 2022, overall, air emissions of 
carbon  dioxide  (CO2),  nitrogen  oxides  (NOx),  Non-
Methane  Volatile  Organic  Compounds  (NMVOC), 
particulate  matters  (PM)  2.5  and  10,  and  sulfur 
oxides  (SOx)  have  decreased  (261).  However,  these 
global figures mask significant increases in recent 
years  of  industrial  air  emissions  of  NH3  (132% 
between  2016  and  2023),  PM10  (124%  between 
2019 and 2023), and NMVOC (10% between 2017 
and 2023), showing that the sector still generates 

(255)  Bioeconomy  sub-sectors:  food  and  beverages;  bio-based 
textiles; wood products and furniture; bio-based chemicals 
and plastics. 

(256)  JRC, Jobs and wealth in the EU bioeconomy, 2025. Link. 

(257)  Labour productivity is measured as value added per person 

employed. JRC, ibid. (footnote n°161). Link. 

(258)  JRC,  Business  expenditure  in  Research  and  Development 

(R&D) in the EU bioeconomy, 2025. Link,. 

(259)  JRC, Jobs and wealth in the EU bioeconomy, 2025. Link. 

(260)  EC, EIR – Luxembourg, 2025. Link. 

(254)  EC, EIR – Luxembourg, 2025. Link. 

(261)  Eurostat, Air emissions accounts, Link. 

77 

 
 
 
substantial  levels  of  air  pollution  (262).  The  main 
in 
industrial  emitters  of  air  pollutants 
Luxembourg are the metals sector, followed by the 
waste and energy sector for dioxins, as well as the 
metals, energy and mineral sectors for mercury. 

(263) 

lost 

improvements,  pollution 

inhabitants  are  attributable 

Despite  some 
is 
extremely  costly  to  Luxembourg’s  public 
health and economy. An estimated 197 years of 
inhabitants 
(YLL)  per  100 000 
life  are 
attributable 
to  PM2.5 
to  air  pollution  due 
concentrations  that  exceed  the  World  Health 
Organization’s  air  quality  guidelines.  A  further  85 
YLL/100 000 
to 
nitrogen  dioxide  (NO2)  and  130  YLL/100 000 
inhabitants  to  ozone  pollution  (264).  Overall,  the 
cost  of  air  pollution  from  the  main  pollutants 
is 
(ammonia,  NMVOC,  SO2,  NOx  and  PM2.5) 
year 
EUR 2 billion 
estimated 
in 
Luxembourg (265), 
significant 
showing 
economic  impact  of  transport-related  pollution, 
with  NOx  pollution  generating  half  of  all  costs.  In 
addition,  damage  to  health  and  environment  due 
to 
industrial  air  pollutants  cost 
Luxembourg  around  EUR 103.9 million  in  2021 
(266).  These  figures  underscore  the  importance  of 
continued  action 
tackle  major  pollutant 
emissions from all sources. 

the  main 

a 
the 

at 

to 

Luxembourg  does  not  levy  environmental 
taxes  on  major  air  pollutants  such  as  NOx, 
sulfur oxides, or PM, despite the potential these 
economic  incentives  have  in  encouraging  cleaner 
production,  especially 
the  energy  and 
construction  sectors.  Considering  Luxembourg’s 
dense  traffic  and persistent  air  quality  challenges 
in urban areas, a targeted emission-based levy on 
large  stationary  sources  or  heavy-duty  vehicles 
could  potentially  complement  existing  measures 

in 

and  deliver 
climate policy (267).    

local  co-benefits  for  health  and 

carbon 

total  organic 

While  significant  improvements  have  been 
tackle  water  pollution  from 
made 
to 
these 
sources,  maintaining 
industrial 
improvements  remains  a  critical  challenge. 
The ferrous metal processing industry (particularly 
the processing of heavy metals) places the largest 
burden  on  the  environment  in  terms  of  industrial 
emissions to water (268). Between 2010 and 2022, 
the  data  reported  under  the  Industrial  Emissions 
Directive  demonstrated  a  significant  reduction  in 
heavy  metal  (cadmium, mercury,  nickel  and  lead), 
nitrogen, 
(TOC),  and 
phosphorus  emissions  from  industrial  releases. 
However,  2023  data  show  that  emissions  have 
increased since 2022 (although they remain below 
2010  levels).  Specifically,  Luxembourg  reported 
increases  of  299%  of  heavy  metal,  130%  of 
nitrogen, 108% of TOC, and 119% of phosphorus 
industrial  releases  into  water  (269).  This  highlights 
the  need  to  not  only  maintain  efforts  but  also  to 
step  up  measures  to  tackle  water  pollution  over 
the  long  term.  As  highlighted  in  the  annex  on 
climate 
and 
environment,  Luxembourg 
the  most 
significant  challenges  in  the  EU  on  water  quality, 
as  100%  of  surface  water  bodies  still  fail  to 
achieve good chemical status, due notably to uPBT 
substances and airborne deposits of mercury from 
releases 
combustion  processes,  heavy  metal 
(mainly Cadmium) and pesticides (270). 

preparedness 

adaptation, 

faces 

Despite  these  pressures  on  health,  the 
environment  and  the  economy,  investments 
to  tackle  pollution 
insufficient. 
Meeting  national  and  EU  targets  for  pollution 
prevention  and  control  requires  an  additional 
EUR 201 million  every  year  of  investment  (271). It 
would  require  targeted  funding  to  achieve  air 

remain 

(262)  EEA,  Industrial  Reporting  under  the  Industrial  Emissions 
Directive 2010/75/EU and European Pollutant Release and 
Transfer Register Regulation (EC) No 166/2006, 2026, Link. 

(267)  EC,  Greening  the  European  Semester,  op.cit.  (footnote 

n°155). Link. 

(263)  EC, EIR – Luxembourg, 2025. Link. 

(268)  EC, EIR – Luxembourg, 2025. Link. 

(264)  EEA,  2025, Harm  to  human  health  from  air  pollution  in 

Europe: burden of disease status, 2025, Link. 

(265)  EC,  Directorate-General  for  Environment, 

IEEP,  Green 
taxation  and  other  economic  instruments  –  Internalising 
environmental  costs  to  make  the  polluter  pay  (p. 32-33, 
Table 3), 2021, Link. 

(266)  EEA,  European 

Industrial 
pollution  intensity  indicators  –  EU  large  industry  water 
pollution intensity, 2024. Link. 

Industrial  Emissions  Portal, 

(269)  EEA, Water pollutant releases changes from 2010 to 2022 
for the EU Member States, 2024, Link, updated 2023 data 
from the EEA. 

(270)  EC, Staff working document accompanying the report from 
the  Commission  to  the  Council  and  the  European 
Parliament  on 
the  Water 
Framework  Directive  and  the  Floods  Directive  -  Member 
State: Luxembourg, February 2025, Link. 

implementation  of 

the 

(271)  EC, EIR – Luxembourg, 2025. Link. 

78 

 
 
 
Table A8.1:  Key clean industry and climate mitigation indicators: Luxembourg 

Source: Industry decarbonisation: All data are from Eurostat; data following the UNFCCC Common Reporting Format (CRF) are 
from the European Environment Agency (EEA), republished by Eurostat. (1) Sectors covered: all divisions of section C - 
Manufacturing - of the NACE Rev. 2 statistical classification of economic activities, except C19 (manufacture of coke and refined 
petroleum products). (2) GHG emissions as per UNFCCC Common Reporting Framework (CRF) categories 1.A.2 - fuel combustion in 
manufacturing in industries and construction (that broadly correspond to the broadly correspond to the NACE sections C - 
Manufacturing and E - Construction, excluding C-19),  and CRF2 - industrial processes and product use. The figures shows the 
emissions in the 1.A.2 category as a share of the sum of CRF1.A.2. and CRF2 emissions. (3) Sectors covered: CRF 1.A.2 as 
described above. Gross value added (GVA) data in the denominator aligned in sectoral coverage, in 2020 prices. (4) Sectors 
covered: NACE section C excluding C19. (5) Nominator: NACE divisions C17, 20, 23, 24; denominator: NACE section C excluding 
C19 (see above). (6) GVA (denominator) in 2020 prices. Reduction of effort sharing emissions: Data source: European Environment 
Agency, greenhouse gas data viewer; European Commission, Climate Action Progress Report, 2025. For details, see the footnote in 
the "Reduction of effort sharing emissions" section. Sustainable road transport: (7) Source: Eurostat; (8) Source: European 
Alternative Fuels Observatory; (9) Source: Eurostat. For all climate mitigation indicators, the trend arrows compare the latest 
available data (year t) with the data four years earlier (t-4). Sustainable industry: Bioeconomy value added, employment and 
productivity: JRC, Developments of Economic Growth and Employment in Bioeconomy Sectors across the EU. Bioeconomy R&D 
business expenditure: JRC, Business expenditure in Research and Development (R&D) in the EU bioeconomy. Damage cost for 
industrial pollution: EEA, The costs to health and the environment from industrial air pollution in Europe, 2024. Water industrial 
pollutants releases: EEA, Industrial releases of pollutants to water and economic activity in the EU-27, 2024. Water chemical 
status: WISE, Surface water bodies: Chemical status, 2024 and WISE Groundwater bodies: chemical status, 2024. Other indicators: 
Eurostat. For circular economy indicators, the trend arrows compare the latest available data (year t) with the data two years 
earlier (t-2). 

quality 
to 
support  sustainable  energy  and  transport,  and 

improvements,  notably  measures 

action to reduce ammonia emissions. 

79 

Climate mitigationTrendIndustry decarbonisation201820192020202120222023202420182023GHG emissions intensity of manufacturing production, g/€ (1)521468438430397266232330-Share of energy-related emissions in industrial GHG emissions (2)65.165.364.467.765.468.6-55.557.9Energy-related GHG emissions intensity of manufacturing and construction, g/€ (3)418.1378.3358.9360.4341.1251.6-203.9163.0Share of electricity and renewables in final energy consumption in manufacturing, % (4)44.542.344.243.951.652.956.142.843.9Energy intensity of manufacturing, GWh/€ (4)2.542.182.052.102.051.551.561.271.05Share of energy-intensive industries in manufacturing production, % in GVA (5)---------GHG emissions intensity of production in sector [...], g/€ (6)- paper and paper products (NACE C17) -------722             619            - chemicals and chemical products (NACE C20) 94            108          55                   74              59                    53             55               --- other non-metallic mineral products (NACE C23) -------2,495           2,352          - basic metals (NACE C24) -------2,842           3,099          Reduction of effort sharing emissions201820192020202120222023202420182023GHG emission reductions relative to base year, % -20.1-30.0-31.9-33.0- domestic road transport-16.7-14.5-36.0-31.8-41.6-43.7-44.5-1.4-5.6- buildings-1.5-1.8-3.1-1.1-14.5-15.5-18.3-20.3-33.520052021202220232024TargetWEMWAMEffort sharing: GHG emissions, Mt; target, gap, %10.18.17.16.96.8-50.0%-33.0%-55.6%Sustainable road transport2018201920202021202220232024202520182021New zero-emission vehicles, electricity motor, % (7)0.931.795.4710.4815.1822.4827.401.038.96Number of publicly accessible AC/DC charging points (8)--106510272358232226513238446956n/aShare of electrified railways, % of total (9)96.8096.8096.6896.6896.6896.6896.68-55.4756.49Sustainable industryTrendEU-27Circular economy transition20182019202020212022202320242018latest dataMaterial footprint, tonnes per person28.327.127.427.631.727.927.314.813.7Circular material use rate, %10.8          9.1           9.7                  8.7             12.0                  10.1           10.711.612.2Resource productivity, €/kg4.3            4.4           4.6                  4.7             5.0                    5.7             6.22.13.0Employees in circular economy1.5            1.51.7                  1.7             3.9                    4.2             -2.12.0Patents in circular economy2.272.8           4.4                  1.1             12.312.0Recycling rate            49.0           48.9                  52.8             55.3                   55.6            56.5 -46.4048.1Plastic recyling 32%33%35%40%40%39%-41%42%Construction and demolition waste (CDW) recovery 98-998889Bioeconomy industry 2018201920202021202220232024CAGR 2018-202320182023Value added, million EUR503499499507565561-1.9%642,438863,436Employment, total number of people employed10,40210,27210,91410,60910,66110,688-0.5%17,649,04017,085,642ProductivityValued added per worker, thousand EUR48.348.645.847.853.052.5-1.4%36.450.5Valued added per worker, % of national average39.639.836.835.038.335.8--62.270.7R&D business expenditureTotal bioeconomy (biomass producing and converting sectors)1617161819182.2%15,67223,335Total R&D business expenditure375401353382399402-1.2%196,587259,525Zero pollution industry201820192020202120222023202420182021Damage cost for industrial pollution0.50.50.50.5---414.9352.7Water industrial pollutants releases 2021change (2010)2021change (2010)2021change (2010)2021change (2010)69            -61%118,000          -70%192,000            -73%14,200        -54% Water chemical statusGood-                  Good (%)-                   Poor106.0Poor (%)100%EUTOCPhosporusLuxembourgLuxembourgCd, Hg, Ni, Pbnitrogen 
 
  
 
ANNEX 9: AFFORDABLE ENERGY TRANSITION 

This  annex  outlines  the  progress  made  and 
the  ongoing  challenges  faced  in  increasing 
energy  affordability,  while  advancing  the 
transition 
the 
implementation  of  past  energy-related  country-
specific recommendations. 

to  net  zero. 

reflects 

It 

EUR 0.2665/kWh. Likewise, household gas prices 
have  increased  slightly  since  2024  but  are  still 
below 
the  EU  average,  at  EUR 0.0929/kWh. 
Conversely,  retail  energy  industrial  prices  have 
decreased  since  2024  but  have  remained  above 
the EU average.  

final 

prices 

energy 

in 
Nevertheless, 
in  the  first  half  of  2025 
Luxembourg 
remained  unbalanced.  For  large  businesses, 
electricity  was  2.6  times  more  expensive 
than  gas  in  the  first  half  of  2025  even 
though  taxes  and  levies  (excluding  VAT) 
accounted  for  1%  of  electricity  bills  and 
10% of gas bills. Excluding taxes and levies, the 
electricity-to-gas price ratio would  have  increased 
to  2.9,  signalling  a  positive  balancing  effect  of 
Luxembourg’s  fiscal  measures.  For  household 
consumers, the  impact  of taxes  and  levies  on  the 
electricity-to-gas  price  ratio  was  even  more 
substantial,  with  the  ratio  increasing  from  2.9  to 
3.7 excluding taxes, showing the effect of negative 
taxes  on  the  overall  electricity  retail  price  for 
household consumers (272). 

The  2025  energy-related  country-specific 
recommendations  for  Luxembourg  highlight 
the  need  to  generally  reduce  reliance  on 
fossil  fuels by  investing  in  energy  efficiency 
in  both  the  residential  and  the  non-
residential  sector.  They  also  call  for  the  high-
voltage  grid  to  be  modernised  and  its  capacity 
increased,  for  cross-border  interconnections  to  be 
improved  and  for  permitting  procedures  for 
renewable energy deployment to be eased. Lastly, 
it  recommends  support  for  municipalities 
in 
deploying renewable energy. 

the 

Luxembourg  took  steps  to  increase  energy 
efficiency in residential buildings through the 
extension  of 
‘Klimabonus  Wunnen’ 
scheme beyond 2025 and is planning to align 
with  EU’s  minimum  energy  performance 
standards to improve energy savings in non-
residential  buildings.  Luxembourg  needs  to 
modernise its high-voltage grid for the near future, 
in  anticipation  of  growing  renewable  energy 
generation  and  electricity  demand,  despite  being 
sufficient  for 
its  current  needs.  Luxembourg 
continues  making  progress  in  renewable  energy 
expansion  through  the  adoption  of  51  concrete 
measures 
in  2025,  but  the  full  and  timely 
implementation  of  those  is  key  to  reach  its  2030 
renewables energy target of 37%.  

Energy prices and costs 

price 

Despite  government  measures  such  as 
the  projected  30% 
covering  half  of 
electricity 
2025, 
for 
Luxembourg’s  household  energy  prices  have 
risen since 2024, but remained below the EU 
average,  while  its  retail  energy  prices  have 
dropped yet remained above EU levels. 

increase 

In  the  first  half  of  2025,  household 
electricity  prices  in  Luxembourg  increased 
significantly (highest increase in the EU) but 
the  EU  average,  at 
remained  below 

(272) Analysis based on Eurostat data from the first half of 2025. 

80 

 
 
 
 
 
Graph A9.1: Electricity and gas prices for 
household and non-household consumers, first 
half of 2025 

solar power, Luxembourg remains vulnerable 
to  severe  price  spikes  during  peak-demand 
hours.  This  is  because  falling  solar  output  in  the 
evening and early morning, combined with limited 
non-fossil flexibility, has led to a significant ramp-
up  of  gas-fuelled  plants  to  cover  the  supply–
demand  gap.  As  a  result,  the  average  price 
spread (275)  in  Luxembourg  was  EUR 122/MWh  in 
2025, up 14% from 2024 and nearly matching the 
EU average of EUR 121/MWh. 

Graph A9.2: Low-carbon electricity generation vs. 
electricity wholesale prices, 2025 

(i) For household consumers, the consumption band is DC for 
electricity and D2 for gas. 
(ii) For non-household consumers, the consumption band is ID 
for electricity and I4 for gas. VAT and recoverable charges are 
not displayed for non-household consumers as these are 
typically recovered by businesses. This also applies to the ‘% 
of taxes and levies’, which is shown excluding VAT and 
recoverable charges for non-household consumers. 
(iii) ‘Without taxes and levies’ indicates the retail price 
excluding all taxes and levies. It always includes the 
energy/supply and network cost components, which are not 
disaggregated in Eurostat’s six-monthly price dataset. 
Source: Eurostat 

renewables 

in  the 
The  wholesale  electricity  prices 
Germany-Luxembourg bidding  zone  averaged 
EUR 90/MWh  in  2025,  above  the  EU  average 
of  EUR 85/MWh (273),  driven  largely  by  price 
dynamics in Germany, despite the high share 
of  59.2% 
in  Luxembourg’s 
electricity mix in 2025. Natural gas maintained 
its  structural  role  as  the  dominant,  and  costly, 
marginal  price-setting  technology.  As  a  result  of 
exposure to natural  gas and coal-fired generation 
units  in  Germany,  average  day-ahead  electricity 
prices  increased  by  15%  in  2025  amid  rising 
natural  gas  procurement  cost.  Short-run  marginal 
costs (274) of natural gas in the EU increased from 
EUR 96/MWh  in  2024  to  nearly  EUR 103/MWh  in 
2025.  

Although daytime prices have fallen in recent 
years  owing  to  the  growing  penetration  of 

(273) Ember. 

(274) Short-run marginal costs (SRMCs) are the sum of the variable 
costs associated with producing electricity using hard coal 
and fossil gas. These are fuel costs, carbon costs and 
variable operating and maintenance costs. Estimates are 
provided by Ember. 

Unavailable data for Cyprus and Malta. Wholesale price is 
given as average of day-ahead electricity prices over 2025. 
EU-27 average is calculated as consumption-weighted. EU 
low-carbon share is calculated out of total EU electricity 
generation. Low-carbon share by country is calculated out of 
total public electricity generation. Low-carbon includes 
renewables and nuclear. 
Source: Eurostat 

Flexibility and electricity grids 

Luxembourg 
is  making  some  progress 
towards  modernising  the  high-voltage  grid 
and increasing its capacity, improving cross-
border  interconnections.  But  those  upgrades 
are still in the planning phase. 

Luxembourg is highly interconnected, with an 
interconnection  rate  of  105%,  but  is  also 
highly  dependent  on  its  neighbours  to  meet 
its  energy  needs.  Its  electricity  grid  is  sufficient 
for its current needs. 

(275) ‘Spread’ refers to the difference between the highest and 
lowest hourly day-ahead electricity prices in a single day. 

81 

 
 
 
 
 
According to the electricity transmission grid 
development plan for 2024-2034, about 75% 
of  total  import  and  transmission  capacity  is 
already  used  during  peak  import (276).  The 
transmission system operator sees a need to both 
increase  and  modernise  electrical  energy  import 
transmission capacity. 

and 

grid 

In  anticipation  of  growing  renewable  energy 
generation  and  electricity  demand,  the  grid 
operator  is  planning  to  further  develop  the 
high-voltage 
improve 
interconnections, with Germany in particular, 
between  now  and  2040.  Luxembourg  plans  to 
commission the announced 380 kV interconnection 
line  between  Luxembourg  and  Germany  by 
2029 (277).  With  planned  network  expansion 
projects, 
interconnectivity  with 
Germany  may  reach  more  than  400%  by  2030. 
This  will  provide  sufficient  reserves  to  cope  with 
future  consumption  increases  in  all  areas.  Smart 
meters  are  being  rolled  out  to  98.8%  of  grid 
connection points (278). 

its  electricity 

Luxembourg is part of the North Seas Energy 
Cooperation  (NSEC).  In  line  with  the  other 
Member States, a specific chapter on this regional 
cooperation in the North Sea has been included in 
the  integrated  national  energy  and  climate  plan. 
The  chapter  includes  acknowledgement  of  the 
need  to  speed  up  permitting  procedures (279). 
Luxembourg  has  a  one-stop  shop  for  permitting 
(the  Facilitation  Unit  for  Urban  Planning  and  the 
Environment)  and  has  complied  with  most 
lack  of  clear,  binding 
requirements,  but  the 
the 
timelines  creates  uncertainty 
duration of permitting procedures (280). 

regarding 

(276) NDP_2024-2034_–_Electricity_Transmission_Grid.pdf. 

(277) NECP LU 2021-2030, updated by July 2024, Section 2.4.2 / 

p. 82. 

(278) NECP LU 2021-2030, updated by July 2024, Section 2.4.1 / 

p. 82 and Section 4.5.1 / p. 380, Table 60. 

Luxembourg  participates 
in  the  Hy4Link 
project  of  common  interest  included  in  the 
second  Union  PCI/PMI  list (281),  and  that  will 
allow 
to 
decarbonise  hard-to-electrify  sectors  and 
processes (282).  The  projected  demand 
for 
hydrogen by 2030 is 230 GWh (283). 

hydrogen 

delivery 

the 

of 

Renewable hydrogen (to be produced through 
electrolysers)  can  play  a  role 
in  the 
integration  of  energy  sectors.  Luxembourg  is 
pursuing  its  hydrogen  ambitions  by  means  of 
regional  cooperation,  including  via  the  NSEC  and 
the Pentalateral Energy Forum (PENTA) (284). 

Luxembourg 
issued  a  national  battery 
storage  strategy  in  July  2025  to  promote 
and develop battery storage.  Luxembourg has 
committed  to  taking  steps  to  develop  dynamic 
legal  framework  for 
electricity  prices  and  a 
aggregators,  as  required  by  the  EU  legislation.  In 
the retail market, suppliers with more than 15 000 
customers  can  now  offer  dynamic  tariffs.  For 
aggregators,  a  significant  step  was  taken  in 
January  2025,  when  access  to  all  balancing 
market  products  was  opened.  However,  pooling 
with 
to 
Luxembourg  only,  and  is  not  allowed  across  the 
Germany/Luxembourg bidding zone. 

these  markets 

restricted 

remains 

With 99% smart meter roll-out, Luxembourg 
has  the  infrastructure  in  place  for  informed 
consumers.  The  first  dynamic  contract  came  to 
the  market  in  2024,  but  market  uptake  has  been 
very  limited  so  far.  Switching  rates  increased 
threefold for private customers between 2023 and 
2024, but the rate is still only 1.0% in terms of the 
number  of  customers  and  2.4%  in  terms  of 
volume.  Luxembourg  has  33  cooperatives  and 
energy communities. 

The share of energy in the total expenditure 
of  a  Luxembourg  resident  is  among  the 
lowest  in the  EU.  But price  differences  between 

(281) Draft delegated act on the second PCI and PMI list C(2025) 

(279) NECP LU 2021-2030, updated by July 2024, Section 1.4.2 / 

8144. 

p. 26. 

(280) Study on national permit granting process applicable to 

energy transmission infrastructure projects with a focus on 
projects of common interest and projects of mutual interest 
under Chapter III of Regulation (EU) 2022/869 – Publications 
Office of the EU, pp. 46-47 and pp. 105-106 with an 
overview of the permit granting process in Luxembourg. 

(282) Stratégie hydrogène du Luxembourg – relever les défis de la 

décarbonation – Le gouvernement luxembourgeois. 

(283) NECP LU 2021-2030, updated by July 2024, 

Section 2.1.2.12 / pp. 52-53 and Section 3.1.2 / pp. 299-300. 

(284) energy.ec.europa.eu/topics/infrastructure/high-level-

groups/north-seas-energy-cooperation_en. 

82 

 
 
 
the 

suppliers’ products increased significantly in 2024. 
Nevertheless,  the  small  national  market,  along 
with 
to 
requirement 
accommodate  Luxembourg-specific 
regulatory, 
contractual  and  procedural  aspects,  limits  the 
appeal for foreign suppliers. 

supplier 

for  a 

In  2024,  electricity  accounted  for  18.3%  of 
Luxembourg’s  final  energy  consumption, 
below  the  EU  average  of  23.4%,  and  this 
share  has  increased  slightly  in  the  past 
decade (285).  When 
it  comes  to  households, 
electricity  accounts  for  17.1%  of  final  energy 
consumption, while in industry it represents 51.9% 
(see  also  Annex  8).  For  the  transport  sector,  this 
share  remains  negligible,  at  1.6%.  Accelerating 
electrification  across  sectors  would  support  cost-
effective  decarbonisation  and  make  affordable 
renewable energy more accessible to consumers. 

Renewables and long-term contracts 

Luxembourg  is  making  some  progress  in 
simplifying 
for 
renewable  energy  deployment  and  helping 
municipalities deploy renewable energy. 

procedures 

permitting 

for 

capacity 

renewables 

Installed 
in 
Luxembourg  represented  1,133  MW  in  2025, 
an increase of 27.6% compared to 2024 (888 
MW). Installed capacity for wind energy grew 
to 232 MW in 2025 (compared to 213 MW in 
2024,  +8.9%),  whilst  installed  capacity  for 
solar  grew  strongly  (+41.2%  compared  to 
2024),  reaching  774  MW.  Total  renewable 
electricity generation, including from sources other 
than  wind  and  solar,  increased  by  8.8%  from 
2024.  In  2025,  renewable  energy  sources  (RESs) 
accounted for 59.2% (286) of the electricity mix (vs 
an overall EU RES share of 44.8%). 

(285) CAGR (compound annual growth rate) of 2.14% between 
2015 and 2024 and minimum/maximum share of 14.5% and 
18.3% respectively (source: Eurostat). 
(286) Data based on the ENTSO-E transparency platform. 

Graph A9.3: Luxembourg’s installed renewable 
capacity vs electricity generation mix 

Electricity mix is given as net electricity generation (gross 
electricity production minus consumption of power stations’ 
auxiliary services). Electricity produced in pumped hydro 
plants is excluded from total net electricity production, as it 
was previously counted as electricity produced from another 
source. 
“Other” includes renewable municipal waste, solid biofuels, 
liquid biofuels, and biogas. 
Source: IRENA, Eurostat 

To  meet  its  energy  targets,  Luxembourg 
needs to increase deployment of renewables, 
especially  solar and  wind  power,  and  exploit 
the  potential  of  renewable  hydrogen  for 
long-term 
integration. 
According  to  Luxembourg’s  national  energy  and 
climate  plan  (NECP),  the  country  aims  to increase 
the share of renewable energy in its energy mix to 
37% by 2030 (287). 

energy 

sector 

energy 

sovereignty 

Luxembourg  advanced  its  renewable  energy 
transition  through  the  ‘Einfach  –  Séier  – 
Erneierbar’  national  consultation,  which  led 
to  the  adoption  of  51  concrete  measures 
presented  in  May  2025  to  accelerate  and 
simplify the deployment of renewables while 
strengthening 
and 
increasing  climate  resilience.  The  measures 
focus  on: 
faster  and  digitalised  permitting 
procedures;  better  land  use  for  wind  and  solar 
projects  (including  agri-PV  and 
infrastructure-
adjacent  sites);  stronger  public  and  municipal 
involvement;  enhanced  and  pre-financed  financial 
support  schemes;  and  reinforcement  of 
the 
electricity  grid  to  enable  electricity  sharing  and 
should 
storage. 
significantly  streamline  the  regulatory  framework, 
reduce  administrative  barriers  and  empower  the 
public,  businesses  and  municipalities  to  scale  up 

Together, 

actions 

these 

(287) Luxembourg: national energy and climate plan (NECP). 

83 

 
 
 
 
renewable  energy  production  with  minimal 
environmental and social impact. 

2025, 

launched 

Luxembourg 

In 
two 
competitive  tenders  to  support  company-led 
installations, 
photovoltaic 
large-scale 
offering  either  investment  aid  or  operating 
aid  via  15-year  market  premium  contracts. 
The  investment  aid  tender  is  backed  by  a  EUR 20 
million budget for installations  of between 30 kW 
and 3 MW, while the operating aid tender allocates 
a  total  capacity  of  45 MW  across  rooftops, 
innovative  building-integrated 
industrial  sites, 
systems  and  carports.  Both 
include 
tenders 
dedicated  sub-lots 
for  photovoltaic  systems 
combined with battery storage, aiming to increase 
improve  grid 
solar  electricity  production  and 
integration (288). 

schemes 

renovations, 

beyond 
financial  support 

Last  year,  Luxembourg  strengthened 
its 
renewable  energy  and  energy  transition 
policy  by  extending  and  adapting  the 
‘Klimabonus 
‘Klimabonus  Wunnen’  and 
2025, 
Mobilitéit’ 
maintaining  high 
for 
energy-efficient 
renewable 
heating  systems  (such  as  heat  pumps)  and 
reforms 
sustainable  new  buildings.  The 
integrate previous bonuses into base aid, introduce 
new  subsidies  for  ecological  insulation,  green 
facades,  home  energy  management  systems  and 
photovoltaic installations with pre-financing, while 
phasing  out  support  for  certain  fossil-related  or 
less  sustainable  technologies.  At  the  same  time, 
support  for  e-mobility  was  expanded  through 
enhanced  aid  for  smart  and  bidirectional  electric 
vehicle 
reinforcing 
Luxembourg’s shift towards renewable energy and 
low-carbon mobility (289) (see Annex 8). 

infrastructure, 

charging 

Energy efficiency 

Luxembourg  is  making  limited  progress  in 
reducing  overall  reliance  on  fossil  fuels  by 
investing  in  energy  efficiency  in  both  the 
residential  and  the  non-residential  sector. 
supportive  national 
Luxembourg  deploys  a 
financing  framework  mobilising  energy  efficiency 
investments  composed  mainly  of  grants,  tax 
rebates  and  financial  instruments.  Luxembourg 
also  implements  the  energy  efficiency  obligation 
scheme. 

in  2024,  Luxembourg  made 
However, 
significant  progress 
in  energy  efficiency 
overall.  In  that  year  final  energy  consumption 
(FEC)  decreased  slightly,  compared  to  2023,  to 
3.5 Mtoe,  continuing  the  sharply  declining  trend 
since 2019. Luxembourg’s FEC in 2024 was in line 
with  the  trajectory  to  its  expected  contribution  in 
2030. 

A  clear  decrease  in  FEC  can  be  observed  in 
all  three  sectors:  in  2024  industry  displayed 
a  15.7%;  services  a  13.5%;  and  transport  a 
24.3% reduction compared to 2019. 

For  the  non-residential  sector,  Luxembourg 
intends to introduce future requirements for 
non-residential  buildings  in  line  with  the 
minimum energy performance standards laid 
down  in  the  EU  Energy  Performance  of 
Buildings  Directive  (EPBD).  To  support  the 
decarbonisation of commercial buildings, the state 
offers  various 
including:  financial 
assistance for decarbonisation initiatives (currently 
under review); financial backing for the renovation 
and  decarbonisation  of  commercial  premises  (in 
development);  the  Climate  Pact,  which  primarily 
targets  small  and  medium-sized  enterprises;  and 
the energy efficiency obligation scheme (EEOS). 

incentives, 

Between 2019 and 2024, Luxembourg’s final 
energy consumption in the residential sector 
plateaued.  The  energy  saved  due  to  technical 
energy  savings  of  households  is  offset  by  the 
increased number of dwellings. Luxembourg needs 
to make further efforts to reach the objectives set 
in its 2020 long-term renovation strategy. 

Given that 25.1% of the energy consumed in 
Luxembourg is used in buildings, highlighting 
the  importance  of  the  sector  in  increasing 
energy  security,  Luxembourg  is  encouraged 
its  draft  national  building 
to  submit 

(288) Lancement de deux nouveaux appels d'offres auprès des 
entreprises pour stimuler la production d'électricité à partir 
de centrales photovoltaïques – Le gouvernement 
luxembourgeois. 

(289) Prolongation et adaptation partielle des régimes d’aides 

financières 'Klimabonus Wunnen' et 'Klimabonus Mobilitéit' – 
Le gouvernement luxembourgeois. 

84 

 
 
 
Luxembourg has not, as of today, introduced 
any  measures  beyond  releasing  a  limited 
quantity  of 
its  strategic  oil  reserves. 
Luxembourg  contributed  to  the  IEA  collective 
action to release 400 million barrels of emergency 
oil reserves.  

Fossil fuel subsidies 

In  2024,  environmentally  harmful (292)  fossil 
fuel  subsidies  without  a  planned  phaseout 
before  2030  represented  0.14% (293)  of 
Luxembourg’s 
Additionally, 
Luxembourg’s  2023  effective  carbon  rate (295) 
averaged  EUR 112.92  per  tonne  of  CO₂  –  above 
the EU weighted mean of EUR 84.80 (296). 

GDP (294). 

renovation  plan  (NBRP)  pursuant  to  the 
recast  EPBD  in  order  to  ensure  a  clear  and 
predictable  pathway  towards  an  energy-
efficient  and  decarbonised  building  stock. 
Heating  and  cooling  account  for  88%  of  the 
country’s  residential  final  energy  consumption, 
with  renewables  supplying  19%  of  the  total 
energy used for heating and cooling in all sectors. 
Around  5 000  heat  pumps  are  in  operation  in the 
residential sector according to the latest figures. 

Security of supply and diversification 

Despite making some progress in renewables, 
Luxembourg’s  overall  energy  mix  in  2024 
remained heavily reliant on fossil fuels, with 
oil accounting for 67.9% and natural gas for 
16.2%  of  gross  inland  consumption,  while 
biofuels) 
renewables 
accounted 
reliance 
underscores  the 
importance  of  Luxembourg’s 
ongoing efforts to diversify its energy sources and 
increase energy security. 

(together  with 
for  14.4% (290).  This 

is  planning  to  reduce 

As  indicated  in  its  final  updated  NECP (291), 
Luxembourg 
its 
dependence on oil products by decreasing oil 
consumption  through  carbon  pricing  and  by 
increasing  the  share  of  renewable  energy 
sources  and  offering  incentives  to  switch  to 
electric  cars  and  electric  heating  systems. 
Natural  gas  plays  a  relatively  marginal  role  in 
shares 
Luxembourg’s 
infrastructure and a common market area with its 
neighbouring  country  Belgium,  and 
is  also 
interconnected with Germany. Luxembourg intends 
to  reduce  its  dependence  on  gas  imports  by 
increasing  energy  efficiency  and  encouraging  all 
sectors of society to switch from gas to electricity, 
in particular in the heating and cooling sectors, as 
targets for renewable energy deployment become 
more ambitious. 

system. 

energy 

It 

In  response to  rising  energy prices  following 
in  the  Middle  East, 
the  regional  crisis 

(292) Explicit fossil fuel subsidies (e.g. direct transfers) and implicit 
fossil fuel subsidies (i.e. tax expenditures linked to forgone 
tax revenues that have an identifiable fiscal impact for the 
central budget) that support fossil fuel energy production, 
transmission and/or consumption.  

(293) European Commission calculation based on underlying data 
from the Study on energy subsidies and other government 
interventions in the EU – 2025 edition, Enerdata. 

(294) 2024 gross domestic product at market prices, Eurostat. 

(290) Source: Eurostat. Electricity and heat are excluded from gross 
inland consumption to avoid double counting. The focus is on 
primary energy sources. 

(295) 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. 

(291) Source: NECP LU 2021-2030, updated by July 2024. 

(296) OECD (2024), Pricing Greenhouse Gas Emissions 2024. 

85 

 
 
 
ANNEX 10: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT 

is 

to 

risks, 

critical 

climate 

progress 

infrastructure, 

Luxembourg 
in 
has  made 
strengthening  its  climate  adaptation  and 
environmental  policy  framework,  but 
it 
continues  to  face  significant  challenges 
ecosystem 
linked 
degradation,  and  high  investment  needs.  The 
country 
to  extreme 
increasingly  exposed 
weather  events,  including  floods,  heatwaves  and 
in  January  and 
droughts.  Flooding  recorded 
September  2025  caused  economic  losses  and 
exposed 
highlighting 
investment  needs  for  flood  protection.  Climate 
change  is  putting  pressure  on  forests  through 
droughts,  rising  temperatures  and  pest  outbreaks. 
Forest  health  has  deteriorated  markedly,  and 
forests  have  recently  shifted  from  acting  as  a 
carbon  sink  to  becoming  a  net  source  of  CO₂ 
emissions.  Water  resilience 
is  another  major 
concern.  Luxembourg  faces  the  most  significant 
water  quality  challenges  in  the  EU.  Nutrient  and 
quality 
pesticide 
deterioration  and  eutrophication,  impacting  public 
health,  ecosystems,  and  economic  activities. 
Despite  investments  in  water  infrastructure  and 
nature-based 
funding  gaps  and 
governance challenges remain. 

causes  water 

solutions, 

pollution 

Climate adaptation and preparedness 

Luxembourg  has  faced  growing  climate 
pressures 
in  recent  years,  marked  by 
recurring  floods,  heatwaves  and  droughts. 
Extreme events have occurred in the last 10 years, 
such  as  major  floods  in  2016,  2018,  and  2021, 
and  severe  droughts  in  2020  and  2022.  These 
highlighted  the  country’s  vulnerability  to  climate 
change  (297).  Climate-related  losses  accounted  for 
EUR 488  million  over  the  period  2016-2024  (298). 
Last  year  was  one  of  the  10  warmest  years 
recorded in Luxembourg since 1947, confirming a 
long-term  warming  trend,  but  it  also  featured 
record  rainfall  (299).  Abundant  precipitation,  partly 
in  the  form  of  snow,  combined  with  rapid 

(297)  European  Commission  (EC),  Commission  Staff  Working 
Document  (SWD)  2025  Country  report  -  Luxembourg, 
COM(2025), 216 final, page 81, 2025. Link. 

(298)  European  Environment  Agency  (EEA),  [EU  SDG  13_40] 

Climate-related economic losses, 2025. Link. 

(299)  MeteoLux,  2025  dans  le  top  10  des  années  les  plus 

chaudes, 2026. Link. 

(301),  acknowledges 

snowmelt following a rise in temperatures, caused 
flooding in the Alzette, Sûre and Moselle regions in 
January  2025.  Torrential  rainfall  caused  flooding 
again  in  September  2025  (300).  The  2025-2035 
national  adaptation  strategy,  adopted  in  April 
the  main  climatic 
2026 
vulnerabilities  of  the  country  and  identifies  over 
150 measures in 17 policy fields to address them 
(302).  Detailed budget allocations for the measures 
have not yet been publicly specified (303). A recent 
study (304) estimates that Luxembourg will need to 
invest  almost  EUR 133  million  per  year  on 
adaptation  up  to  2050  (0.12%  of  annual  GDP, 
below the EU average of 0.5%): first and foremost 
in  the  infrastructure  sector  (almost  two  thirds  of 
the  total),  followed  by  ecosystems  (16%  of  the 
total) and the food sector (12% of the total), while 
investments  in  the  health,  economy  and  finance 
sectors play a relatively smaller role (305). 

Luxembourg has recently renewed its climate 
adaptation  framework  following  the  end  of 
the  2018-2023  strategy,  with  a  temporary 
gap  before  the  adoption  of  the  new  2025-
2035  strategy  and  ongoing  challenges  in 

(300)  MeteoLux  et  al.,  Bulletin  météorologique  Année  2025, 

2026. Link. 

(301)  Government of the Grand Duchy of Luxembourg, Stratégie 
l'adaptation  aux  effets  du 
résilience  au 

et  plan  d'action  pour 
changement  climatique:  accroître 
Luxembourg, 2026. Link. 

la 

(302)  Government of the Grand Duchy of Luxembourg, Stratégie 
et  plan  d’action  pour 
l’adaptation  aux  effets  du 
changement  climatique  au  Luxembourg  (2025  –  2035), 
2026. Link. 

(303)  The climate adaptation strategy published online does not 

include a consolidated budget table. 

(304)  EC, Directorate-General for Climate Action, Monteleone, L., 
Roberti, G., Fossati, F., Davies, W. et al. (2026), Assessment 
of EU and Member States adaptation investment needs – 
Study  on  the  macroeconomic  impacts  of  the  climate 
transition,  Tables  8  and  25,  Link.  The  study  provides 
detailed estimates of adaptation investment needs at the 
level of the EU and individual Member States per type of 
measure.  It  relies on  a  common methodology  that  makes 
estimates  comparable  across  the  EU.  Four  accompanying 
methodological  reports  provide  a  detailed  description  of 
how 
full 
transparency. 

results  were  estimated 

to  ensure 

the 

(305)  Typical  investments  in  climate  adaptation  related  to  the 
infrastructure sector include measures for flood protection, 
prevention  and  disaster  response,  building  retrofitting  and 
reinforcement  of  energy  assets.  For  the  ecosystem  sector 
they  include  for  instance  adaptive  forest  management, 
restoration  of  terrestrial  ecosystems,  biodiversity  and 
species conservation. 

86 

 
 
 
 
 
Its 

local 

identified 

engagement 

is  no  administrative 

and 
coordination, 
is 
financing.  Adaptation  to  climate  change 
embedded 
in  Luxembourg’s  national  climate 
legislation (306), making the country one of the 13 
EU  Member  States  to  have  adopted  such  a  legal 
basis as of 2025. The Ministry of the Environment, 
Climate  and  Biodiversity  coordinates  the  national 
adaptation  strategy  in  cooperation  with  other 
relevant  ministries.  Given  Luxembourg’s  territorial 
organisation,  there 
level 
between  the  State  and municipalities;  as  a  result, 
the  national  adaptation  strategy  and  action  plan 
apply to the entire national territory. The previous 
national  adaptation  strategy  covered  the  period 
2018-2023. 
key 
evaluation 
(307).  Following  the  end  of  this 
weaknesses 
strategy,  Luxembourg  adopted  an  updated  2025-
2035 national adaptation strategy and action plan 
in April 2026, following a transitional gap between 
the  two  frameworks.  The  update  builds  on  the 
lessons  learned  from  the  2018-2023  strategy 
with  involvement  of  stakeholders  and  the  public 
(308).  The  new  strategy  aims  to  deliver  more 
targeted,  measurable  and  accountable  actions 
through  an  adaptive  and  iterative  governance 
approach.  Local  authorities  play  a  central  role  in 
implementing  adaptation  measures  and  are 
supported  through  national  instruments  such  as 
the  Climate  Pact  2.0  and  the  Nature  Pact  (309). 
However,  despite  strong  engagement  in  national 
programmes,  Luxembourg’s  municipalities  remain 
only  marginally  involved  in  the  EU  Covenant  of 
Mayors,  covering  around  3%  of  the  population 
between  2018  and  2024  (EU27:  34%  in  2024). 
Implementation  of  adaptation  objectives 
is 
supported by river basin management plans, flood 
flash 
risk  management  plans  and 
flood 
Coordination 
management 

programmes. 

(306)  The national climate law requires the government to put in 
place an adaptation strategy by 1 January 2029 and every 
10 years thereafter, with a planning horizon of at least 50 
years, and to update it every five years if needed. 

(307)  Overly broad measures, unclear responsibilities, 

coordination challenges, and the absence of measurable 
indicators. 

(308)  A series of workshops with public and private stakeholders 
and five public meetings were held in 2025, and an online 
public consultation took place in December 2025 - January 
2026.  The  analysis  led  to  the  addition  and  strengthening 
of the draft measures presented in February 2025 and to 
a new focus on education and public awareness of climate 
risks  (Government  of  the  Grand  Duchy  of  Luxembourg, 
2026, Error! Hyperlink reference not valid.). 

mechanisms are in place to link climate adaptation 
and  disaster  risk  reduction,  with  designated  focal 
points  in  each  relevant  ministry.  The  adaptation 
strategy  is  intended  to  be  aligned  with  the 
forthcoming  national  water  resilience  strategy, 
with  the  aim  of  strengthening  coherence  across 
policy frameworks. 

Climate  risks  already  generate  substantial 
economic  losses  in  Luxembourg  and,  despite 
relatively  high  insurance  coverage,  rising 
climate  impacts  pose  increasing  challenges. 
Between  1980  and  2024,  Luxembourg  recorded 
around  EUR 1.4  billion  in  economic  losses  from 
weather-  and  climate-related  extreme  events, 
ranking second in the EU in per capita losses and 
third  in  losses  per  square  metre  (310).  These 
impacts  are  partly  offset  by  relatively  high 
insurance  coverage:  at  49%,  Luxembourg 
is 
among  the  best  covered  EU  countries  for  such 
events (EU27: 19%) (311). The estimated protection 
gap  score  for  2025  is  1.5  (low)  for  floods  and 
even  lower  for  other  extreme  events  (312),  even 
though 
legally 
coverage 
the  event  of  a  disaster, 
mandatory. 
compensation is provided on an ad hoc basis. The 
2025-2035  national  adaptation  strategy  includes 
a  measure  to  promote  insurance  coverage  in  the 
agricultural  sector,  with  the  aim  of  protecting 
farmers  against  climate-related  crop  losses.  No 
equivalent  measure  is  included  for  households. 
However,  the  strategy  notes  that  escalating 
climate  impacts  may  raise  insurance  premiums, 
widen  protection  gaps,  increase  economic  losses, 
and  heighten  vulnerability  for  low-income  groups. 
It also highlights that rising flood risks can affect 
real  estate  assets  and  mortgage  portfolios,  with 
implications  for  property  values  and  financial 
stability. 

insurance 
In 

is  not 

and 

energy 

Luxembourg’s 
transport 
infrastructure  faces  growing  climate  risks, 
calling for further investments to strengthen 
adaptation  preparedness  and  resilience.  The 
Commission  encouraged  Luxembourg  to  use  the 
update of its national climate adaptation strategy 
vulnerability 
to 

comprehensive 

conduct 

a 

(310)  EEA,  Economic  losses  from  weather-  and  climate-related 

extremes in Europe, 2024. Link. 

(311)  EEA, Ibid. Link. 

(309)  EC, Commission SWD 2025 Country report - Luxembourg, 

(312)  EIOPA,  Dashboard  on  insurance  protection  for  natural 

COM(2025), 216 final, page 82, 2025. Link. 

catastrophes, 2025. Link. 

87 

 
 
 
the 

assessment  of 
energy  network  and 
infrastructure  under  different  climate  scenarios 
(313).  Instead,  the  2025-2035  national  adaptation 
strategy  provides  a  qualitative  discussion  of 
climate risks to energy security and infrastructure 
and refers to existing risk preparedness work. The 
strategy  notes  that  Luxembourg’s  energy  system 
is  increasingly  exposed  to  climate-related  risks, 
even though energy is not among the country’s top 
three  climate  adaptation  priority  sectors  (314).  The 
adaptation  strategy  stresses  the  importance  of 
regional cooperation for electricity and gas supply, 
as  well  as  diversifying  energy  sources.  The 
strategy  also  underlines  the  need  to  reduce 
dependence  on  imported  energy  by  improving 
energy efficiency and expanding renewable energy 
production,  supporting  a  more  sustainable  and 
resilient  energy  system.  The  document  further 
identifies  the  transport  sector  as  increasingly 
vulnerable 
of 
Luxembourg’s adaptation objectives is therefore to 
strengthen  the  continuity,  safety  and  reliability  of 
transport 
climate 
conditions. These challenges are also reflected on 
a study on the TEN-T network, according to which 
Luxembourg is positioned at the lower end of the 
scale  for  general  adaptation  preparedness  based 
on  the  Transport  Vulnerability  Index  (315).  This 
study  estimates  that  Luxembourg  would  need  to 
invest  around  EUR 20  million  by  2030  to  address 
flood risks (316). This is relevant for EuroCap Rail, a 
key 
to 
cross-border  TEN-T  project  aimed 
modernise  the  Brussels–Luxembourg–Strasbourg 
corridor (317). 

services  under 

change.  One 

changing 

climate 

to 

renaturation, to support climate resilience. In 
recent years Luxembourg implemented some river 
renaturation  measures  to  restore  natural  river 
dynamics,  enhance  biodiversity  and  reduce  flood 
risk  by  removing  barriers.  The  country  secured  a 
EUR 9  million  loan  under  the  Natural  Capital 
Financing Facility (part of the EU LIFE programme) 
to support the ecological restoration of the Alzette 
River  and  its  tributary,  the  Pétrusse  (318).  In 
November  2025  Luxembourg  launched  a  new 
(319) 
initiative 
(‘Renaturéierungsdësch’).  The  2025-2035  national 
adaptation  strategy  also  includes  an  action  on 
river renaturation. 

renaturation 

river 

on 

Water resilience 

Luxembourg’s  economy  heavily  relies  on 
freshwater,  posing  sustainability  challenges. 
In  2023,  Luxembourg  achieved  the  highest  EU 
water productivity at EUR 1 213/m2 (320). However, 
the  national  water  exploitation  index  plus  (WEI+) 
(321),  rose  from  0.4  in  2016  to  1.88  in  2023, 
indicating 
resource  use.  47%  of 
abstracted water came from fresh surface waters. 
Groundwater  remains  in  good  quantity  but  risks 
deterioration  by  2027.  Climate  change  heightens 
seasonal  water  shortage  risks  (322),  affecting 
crucial activities like water supply, agriculture, and 
increasing  risks  of 
energy  cooling 

(323),  and 

increased 

Luxembourg  is  gradually  expanding  the  use 
of  nature-based  solutions,  particularly  river 

(313)  EC,  SWD  accompanying  the  EU-wide  assessment  of  the 
final updated national energy and climate plans Delivering 
the  Union’s  2030  energy  and  climate  objectives,  NECP 
assessment COM (2025/274 final), page 147. Link. 

(314)  The  sectors  that  Luxembourg  identifies  as  the  most 
affected  by  climate  change  are  agriculture  and  food, 
forestry,  and  water  management,  based  on  Luxembourg’s 
reporting  under  Article 19  of  the  Regulation  on  the 
Governance  of  the  Energy  Union  and  Climate  Action 
(2018/1999). Link. 

(315)  EC, Directorate-General for Mobility and Transport, Support 
the  climate  adaptation  and  cross-border 
study  on 
investment  needs 
the  TEN-T  network, 
realise 
Publications Office of the European Union, 2024, page 69, 
Link. 

to 

(316)  EC, Ibid., page 121, Link. 

(317)  EC, Ibid., page 273. Link. 

(318)  European  Investment  Bank,  Luxembourg:  Biodiversity  and 
climate  change  adaptation  -  EU  finances  ecological 
restoration of Alzette river network, 2023. Link. 

(319)  Government  of  the  Grand  Duchy  of  Luxembourg,  Premier 
‘‘Renaturéierungsdësch’’:  Serge  Wilmes  mise  sur  la  nature 
pour renforcer la résilience climatique, 2025. Link. 

(320)  Water  productivity  measures  efficiency  in  water  use, 
indicating  the  average  economic  value  a  country  creates 
for each unit of water it takes from nature. 

(321)  Eurostat, Water Exploitation Index plus, 2025. Link. 

(322)  EC,  SWD  on  the  implementation  of  the  third  River  Basin 
Management Plans (RBMP), second Flood Hazard and Risk 
Maps  (FHRM)  and  second  Flood  Risk  Management  Plans 
(FRMP) (Member State: Luxembourg), 2025. Link. 

(323)  Energy  production  is  the  most  water-dependent  sector, 
representing 69% of freshwater abstraction in 2023. EEA, 
Water  abstraction  by  economic  sector  2000-2023,  2025. 
Link. 

88 

 
 
 
pollution,  eutrophication,  algae  blooming,  and 
flash floods (324). 

Luxembourg faces the most significant water 
quality  challenges  in  the  EU,  as  0%  of  its 
surface  water  bodies  are  reported  to  be  in  good 
ecological or chemical status (325) whereas the EU 
average  is  37.7%  and  30%  respectively.  79%  of 
groundwater  areas  are  also  in  poor  chemical 
status.  Conditions  have  worsened  due 
to 
significant  nutrient  and  pesticide  pollution, 
impeding  access  to  high-quality  water  for  human 
consumption  and  economic  activities  Nutrient 
pollution  has  led  to  cyanobacteria  contamination 
at  several  bathing  sites,  posing  health  risks. 
Freshwater  bodies  are  heavily  modified  due  to 
dams,  construction,  and  urban  development.  14% 
of  surface  water  bodies  lack  sufficient  flow, 
threatening aquatic life (326). 

Water  pollution  challenges  Luxembourg’s 
long-term  drinking  water  availability.  The 
country  reported  that  two  groundwater  bodies 
failed  to  pass  the  drinking  water  protected  area 
test  due  to  pesticides.  Addressing  water  pollution 
and  meeting  EU  environmental  objectives  for 
surface and ground water quality remain essential 
to ensure drinking water sustainability. 

Luxembourg’s  urban  wastewater  treatment 
network  meets  EU 
requirements,  but 
waterbodies  remain  affected  by  discharges. 
Wastewater  discharges  significantly  contribute  to 
less  than  good  water  quality  in  76.9%  of  rivers, 
50%  of  lakes,  and  31.5%  of  groundwater  bodies, 
while discharges of storm water overflows impact 
98.1%  of  river  water  bodies  and  100%  of  lakes, 
the  highest  percentage  in  the  EU  for  these  types 
of pressure (327). 

in 

in 

investments 

investments 

Luxembourg’s 
water 
management  are  insufficient.  The  country 
needs  EUR  464  million  annually  to  achieve  water 
protection  objectives  for  the  2021-2027  period 
but only invests EUR 339 million annually (328). On 
the 
this  amount,  annual 
wastewater  network  represent  EUR  123/person 
(329),  above  the  EU  average  (EUR  49/person). 
Despite this, an investment gap remains each year, 
estimated  at  EUR  13  million  for  wastewater 
measures,  EUR  18  million  for  drinking  water,  and 
EUR  94  million  for  other  aspects  of  the  Water 
Framework  Directive  (WFD).  Given  the  absence  of 
environmental  taxes  on  pollution  (330)  and  the 
limited  number  of  taxes  on  resources,  there  is 
potential  for  the  country  to  better  implement  the 
‘polluter  pays’  principle,  increasing  contributions 
from polluters to help address existing gaps. 

Nature restoration 

Luxembourg’s  economy  is  exposed  to  nature 
loss  with  a  significant  dependency  on 
ecosystem services (331). 44% of its gross value 
added  relies  directly  on  healthy  fresh  and 
terrestrial ecosystems, particularly for sectors such 
as  agriculture  and  food,  construction,  water 
utilities, healthcare, and tourism. 

Despite  a  significant  share  of  protected 
areas  at  38.6%  of  Luxembourg’s  territory 
(332),  habitat  degradation  is  widespread,  with  
freshwater  being 
wetlands,  grasslands  and 
particularly affected (333). Healthy habitats provide 
vital  ecosystem  services  and  their  protection 
through 
hydro-
morphological  pressures  is  key  for  the  country’s 
economic sustainability. 

pollution 

reducing 

and 

(324)  Luxembourg’s  current  assessment  of  the  quantitative 
status of the ground water bodies does not yet include, as 
required  by  the  law,  the  water  needs  of  aquatic  and 
terrestrial  dependent  ecosystems.  This  may  lead  to  an 
assessment  that 
is  an  overestimation  of  the  good 
quantitative status. 

(325)  EC, SWD on the implementation of the third RBMP, second 
FHRM  and  second  FRMP  (Member  State:  Luxembourg), 
2025. Link. 

(326) 

Ibid. Link. 

(327)  EEA,  WISE  Freshwater,  Country  profiles  on  urban  waste 

(328)  EC,  Environmental 

Implementation  Review 

(EIR)  – 

Luxembourg, 2025. Link. 

(329)  EEA,  WISE  Freshwater,  Country  profiles  on  urban  waste 

water treatment (Luxembourg). Link. 

(330)  See  also  the  Annex  8  on 

Industry  decarbonisation, 

circularity, and climate mitigation. 

(331)  EC, Joint Research Centre (JRC), Hirschbuehl et al.,  The EU 

economy`s dependency on nature, 2025. Link. 

(332)  Eurostat, Protected Areas Indicator, 2025. Link. 

water treatment (Luxembourg). Link. 

(333)  EC, EIR – Luxembourg, 2025. Link. 

89 

 
 
 
pollution 

reduction,  and 

In  line  with  the  EU  biodiversity  strategy, 
some  river  renaturation  projects  have  been 
implemented  in  Luxembourg  (334),  supporting 
freshwater ecosystems and rivers’ natural function 
flood 
restoration, 
mitigations.  Free-flowing  rivers  generate  broader 
socio-economic  benefits,  including  enhanced  rural 
landscape  quality,  new  recreation  and  tourism 
opportunities, strengthened local job creation,  and 
improved  water  quality.  Luxembourg’s  rivers  are 
mostly  up-stream  where  renaturation  projects 
face  fewer  obstacles,  and  benefit  a  broader  area, 
leaving  room  for  more  green  infrastructures, 
although  some  difficulties  remain.  A  recognised 
to 
obstacle 
environmental 
hinders 
governance 
harmonised  strategies  for  water  renaturation.  As 
the  distance  to  reach  good  status  is  significantly 
longer  and  more  costly  for  Luxembourg’s  water 
bodies 
to  address  pollution, 
enhance cooperation and governance, and provide 
targeted  financing  may  play  important  roles  in 
achieving environmental objectives. 

fragmented  approach 

(335),  measures 

that 

the 

is 

Nature  degradation  is  further  amplified  by 
invasive  alien  species,  with  22  recorded  in 
Luxembourg  in  2024  (336),  inflicting  estimated 
damages  of  EUR 80  million  up  to  2020,  primarily 
affecting agriculture and public health (337).  

Sustainable agriculture and land use 

Luxembourg’s carbon removal policy may not 
have  the  level  of  ambition  needed  to  fully 
meet  its  2030  target  for  land  use,  land-use 
change  and  forestry 
in 
particular  to  the  deteriorating  condition  of 
forests.  Luxembourg’s  forests  emitted  more 
carbon  than  they  absorbed  between  2010  and 
2023,  becoming  a  net  source  of  CO₂  emissions 
due  to  climate-related  damage  and  bark  beetle 

(LULUCF),  due 

(334)  Government  of 

the  Grand  Duchy  of  Luxembourg, 
Réaménagement  écologique  de  la  vallée  de  la  Pétrusse, 
2025. Link. 

(335)  EC,  Directorate-General  for  Environment,  EMRC,  Logika 
Group  and  RPA  Europe,  Update  of  the  costs  of  not 
implementing EU environmental law, 2025. Link.  

(336)  EC, EIR – Luxembourg, 2025. Link. 

(337)  Neobiota,  Economic  cost  of  invasive  alien  species  across 

Europe, 2021. Link. 

forests 

condition  of 

infestations  (338).  As  a  result  of  these  challenges, 
is 
the  phytosanitary 
deteriorating  dramatically: 
the  proportion  of 
healthy  trees  fell  from  79%  in  1984  to  15%  in 
2024  (339).  To  meet  its  2030  LULUCF  target, 
additional  carbon  removals  of  0.03 million  tonnes 
of  CO2  equivalent  (CO2-eq)  are  needed (340).  The 
latest  available  projections  show  a  slight  gap  to 
target  of  0.05 MtCO2-eq  for  2030 (341).  Thus, 
additional actions are needed in the LULUCF sector 
to  ensure  the  country  reaches  its  2030  target.  In 
addition  to 
increasing  LULUCF  net  removals, 
further  investments  in  healthy  forests  and  soils 
are  key  to  building  resilient  bio-based  product 
value  chains  and  enabling  a  growing,  competitive 
EU  bioeconomy.  Continued  improvements  in  the 
monitoring  system  of  net  removal  data  and 
projections will be crucial in supporting timely and 
effective action in the sector. 

In 

pressures. 

framework 

Luxembourg is seeking to reinforce its forest 
to  address  growing 
policy 
climate-related 
2023, 
Luxembourg  adopted  a  new  Forest  Code  (Law  of 
23 August  2023),  which  lays  down  the  principles 
of sustainable forest management for both public 
and  private  forests.  A  specific  aid  scheme 
(‘Klimabonus  Bësch’)  was  introduced  in  2021  to 
help  private  forest  owners  implement  climate 
action measures  (342).  This  scheme  was  revised in 
2025,  when  the  minimum  eligible  surface  was 
reduced  from  0.5 ha  to  0.3 ha.  Building  on  the 
success  of  these  subsidies,  the  Grand-Ducal 
Regulation  of  6 March  2025  introduced  a  new 
premium  (‘Klimabonus  Mouer  a  Wiss’)  aimed  at 
encouraging  the  conservation,  restoration  and 
enhancement  of  species-rich  sensitive  wetlands 
and grasslands (343). Looking ahead, Luxembourg is 
in 
finalising 

its  national  forest  programme 

(338)  Government  of 

the  Grand  Duchy  of  Luxembourg, 
Présentation du troisième Inventaire forestier national: des 
forêts  luxembourgeoises  face  au  défi  climatique,  2025. 
Link. 

(339)  STATEC, Biodiversity in figures, page 10, 2025. Link. 

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

Regulation (EU) 2023/839, Link. 

(341)  Climate action progress report 2025, Link. 

(342)  Government  of 

the  Grand  Duchy  of  Luxembourg, 

Klimabonus Bësch, 2025. Link. 

(343)  Government  of 

the  Grand  Duchy  of  Luxembourg, 
‘Klimabonus Mouer a Wiss’ - Un nouveau soutien financier 
pour les propriétaires privés engagés dans la préservation 
des écosystèmes, 2025. Link. 

90 

 
 
 
consultation  with  all 
relevant  stakeholders, 
drawing  on  the  findings  of  the  third  National 
Forest  Inventory,  which  highlighted  the  increasing 
challenges posed by climate change (344). 

in  Natura  2000  sites,  resulting 

Luxembourg  is  particularly  affected  by  land 
take and artificialisation,  leading to soil and 
ecosystems  degradation.  Between  2012  and 
2018, land take in Luxembourg increased artificial 
surfaces  the  most  among  the  Member  States, 
including 
in 
biodiversity  losses  and  ecosystem  fragmentation 
(345).  Ongoing  soil  sealing  results  in  less  resilient 
ecosystems  and  decreased  carbon  sequestration 
and  flood  protection.  Between  2006  and  2012, 
Luxembourg  has  experienced  one  of  the  biggest 
losses  (346)  of  areas  providing  a  flood  control 
ecosystem  service,  with  a  52%  decrease  due  to 
soil sealing, far above the EU average decrease of 
29%  (347).  Net  land  take  affected  mostly  arable 
lands  (49.4%)  and  pastures  (38.9%),  converted 
into  mine,  dump,  and  construction  sites,  or  into 
industrial  and  commercial  areas  (348),  thereby 
threatening sustainable agriculture objectives. 

Pesticide  and  nutrient  contamination  remain  the 
main  pressures  on  surface  and  ground  water 
quality,  compromising  long-term  sustainability  of 
its  availability  for  human 
the  resource  and 
activities,  including  water  supply,  agriculture  and 
ecosystem  services.  Luxembourg  reported  that 
60% of groundwater monitoring stations recorded 
average  nitrate  concentrations  exceeding  25 mg/l 
(including  20%  above  50 mg/l,  the  EU  threshold 
for  safe  drinking  water)  between  2016  and  2019 
(349).  Livestock  density,  at  1.18  livestock  units  per 

(344)  Government  of 

the  Grand  Duchy  of  Luxembourg, 
Présentation du troisième Inventaire forestier national: des 
forêts  luxembourgeoises  face  au  défi  climatique,  2025. 
Link. 

(345)  While  land  take  in  Luxembourg  increased  significantly  in 
core cities, Luxembourg is one of the member states where 
Natura  2000  sites  were  the  most  affected  by  land-take 
(EEA,  Land  take  and land  degradation  in  functional  urban 
areas, 2022. Link). 

(346)  EC,  INCA  Platform  (Integrated  system  for  Natural  Capital 
Accounting),  Accounting for ecosystems and their services 
in the European Union, 2021. Link. 

(347)  EU-28  average,  including  the  figures  for  the  EU  and  the 

United Kingdom. 

(348)  EEA,  Net  land  take  in  cities  and  commuting  zones  in 

Europe, Land take flow, 2025. Link. 

(349)  EEA, Nitrate in groundwater in Europe, 2025. Link. 

by 

and 

integrity, 

ecosystem 

atmospheric 

hectare  in  2023  (350),  is  higher  than  the  EU 
average of 0.75 in 2020, contributing to systemic 
agricultural  pressures.  The  share  of  agriculture 
area  under  organic  farming  has  increased  from 
3.39% in 2013 to 7.19% (351) in 2024 but remains 
below  the  2030  national  target  of  15%  (352), 
leaving  room  for  more  sustainable  agriculture 
practices.  Eutrophication  poses  a  major  threat  to 
biodiversity 
as 
Luxembourg has the highest accumulated nitrogen 
exceedance  in  the  EU.  Contrary  to  the  declining 
trend  in  the  EU  (353),  all  areas  in  Luxembourg 
nitrogen 
affected 
remain 
deposition,  primarily  due 
(NH3) 
emissions  from  agriculture,  representing  96%  of 
national  total  emissions  in  2023,  despite  a  12% 
reduction  between  2018  and  2023  (354).  Nitrate 
pollution  remains  among  the  highest  in  the  EU 
(39.6 kg/ha  in  2023,  far  above  the  19.1 kg/ha  EU 
average),  indicating  gaps  in  nutrient  management 
strategies.  NH3  air  pollution  costs  Luxembourg 
EUR 334  million  annually  (355),  and  a  11.81% 
reduction  in  emissions  is  needed  for  Luxembourg 
to reach its 2030 emission reduction commitment 
(356).  Water  pollution  imposes  direct  and  indirect 
costs  of  EUR  60  million  annually  in  Luxembourg 
(357);  half  of  it  can  be  attributed  to  agriculture, 
particularly  nitrogen  leaching  into  drinking  water. 
Some  areas  (358)  in  Luxembourg  also  presented  a 

to  ammonia 

(350)  Eurostat, Livestock density index, 2026. Link. 

(351)  Eurostat,  Share  of  organic  farming  in  utilised  agricultural 

area, 2026. Link. 

(352)  Government of the Grand Duchy of Luxembourg, PAN-Bio 
2030 - Plan d’action national pour la promotion de 
l’agriculture biologique 2026-2030, 2025. Link. 

(353)  EEA,  Eutrophication  caused  by  atmospheric  nitrogen 

deposition in Europe, 2025. Link. 

(354)  EEA,  Air  pollutant  emissions  data  viewer  (Gothenburg 

Protocol, Air Convention) 1990-2023, 2026. Link. 

(355)  EC, IEEP, Green taxation and other economic instruments – 
Internalising environmental costs to make the polluter pay 
(p. 32-33, Table 3), 2021, Link. 

(356)  EEA,  Air  pollution  in  Europe,  2025  reporting  status  under 
the  National  Emission  reduction  Commitments  Directive, 
2025. Link. 

(357)  EC, IEEP, Green taxation and other economic instruments – 
Internalising environmental costs to make the polluter pay 
(p. 35-36, Table 5), 2021. Link. 

(358)  While  only one  area  was  monitored  in  Luxembourg in  the 
EU-wide study (EC, JRC, Vieira et al., Pesticides residues in 
European agricultural soils - Results from LUCAS 2018 soil 
module, 2023. Link), Luxembourg’s ministry of environment 
reports  that  it  is  likely  that  levels  are  enhanced  above 
natural background in some soils for pesticides, based on a 

91 

 
 
 
 
higher  than  EU  average  contribution  regarding 
pesticide residues concentrations in soils. 

study  covering  several  collecting  sites  across  the  country 
(Government  of 
the  Grand  Duchy  of  Luxembourg, 
M.Kibblewhite,  M.Grego,  Towards a  Holistic  Soil  Protection 
for Luxembourg, 2021, Link).  

92 

 
 
Table A10.1:Key Adaptation Indicators 

(1)  EFFIS (European Forest Fire Information System). Link. 
(2) The climate protection gap refers to the share of non-insured economic losses caused by climate-related disasters, based on 
modelling of the risk from floods, wildfires, windstorms, and the insurance penetration rate. Scale: 0 (no protection gap) – 4 (very 
high gap). EIOPA, 2025, Dashboard on insurance protection gap for natural catastrophes. 
(3) 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. 
(4) 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). 
(5) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2025 
greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839 – Annex IIa. 
Source: Eurostat, EEA, JRC 

93 

Climate adaptation and preparedness:EU-27201920202021202220232024latest dataDrought impact on ecosystems17.0569.83070.540.12-2.76[area impacted by drought as % of total]Forest fires burned area (1)-          -          -          -          -          -           354.510      [burned area in ha. per year]Economic losses from extreme events172          22            200          -          -          25            40.452        [EUR million at constant 2022 prices]Insurance protection gap (2)---1              1              1               -[composite score between 0 and 4]Sub-national climate adaptation action4              3              3              3              3              3               34               [% of population covered by the EU Covenant of Mayors for Climate & Energy]Water resilience:EU-27201920202021202220232024latest dataWater Exploitation Index Plus, WEI+ (3)0.75         2.28         1.77         2.61         1.88         -4.53            [total water consumption as % of renewable freshwater resources]Water productivity1.062       1.091       1.210       1.196       1.213       -151[EUR per m3]Water abstractionWater abstraction by source (% from surface water)53.36%51.28%51.53%46.16%47.47%-Water abstraction by sectorAgricultureElectricity coolingManufactu-ringPublic water supplyMining and QuarryingConstru- ction 0.34%69.65%1.08%28.94%0.00%0.00%Status of water bodies (4)[% of water bodies in a good status]Surface water bodies (ecological)-----0%38%Groundwater bodies (quantitative)-----100%93%Nature restoration:EU-27201920202021202220232024latest dataEcosystem dependency---44%--44%[% of direct dependency]Protected area36.337.137.937.938.626.4[% of terrestrial protected areas]Invasive alien species (IAS)-----2229.2[number of IAS of Union concern]Damage cost of IAS----0.081.69[EUR billion]Eutrophication 787787295[AAE of area at risk of euthrophication]Sustainable agriculture and land use:EU-272012-20182018-2021latest dataYearly net land taken by country700          491          670            [ppm of total urban surface per country]Land conversion in functional urban area[% of total land taken from 2018-2021]Arable land49%Complex and mixed cultivation0%Forests7%Herbaceous vegetation associations3%Open spaces with little or no vegetation0%Pastures39%Permanent crops2%Water0%Wetlands0%201920202021202220232024latest dataLivestock density1.241.180.75[number of livestock units per hectare of utilised agricultural area]Ammonia emissions 95%96%96%95%96%-94%[% of total utilised agricultural area]Pesticide contamination in soil 100%57%[% of samples with a concentration over 0.5 mg/Kg⁻¹]Net greenhouse gas removals from LULUCF (5)-459.0-543.9-703.3-745.0-675.6--198.421 [ktCO₂-eq] 
 
  
 
FAIRNESS 
ANNEX 11: LABOUR MARKET 

Employment  growth 
in  Luxembourg  has 
eased  since  2022,  reflecting  weaker  activity 
and  structural  challenges.  Slow  economic 
growth, skills mismatches and labour shortages in 
some  sectors  have  weighed  upon  labour  market 
performance  and  competitiveness,  particularly 
affecting  older  workers,  those  with  low  levels  of 
qualification and migrant backgrounds. Significant 
wage disparities have contributed to high levels of 
in-work  poverty.  Medium-term  prospects  remain 
positive thanks to ongoing reforms. Luxembourg’s 
2030  employment  target  is  still  within  reach, 
supported by a comprehensive set of planned and 
ongoing  labour market,  pension  and  cost-of-living 
country-specific 
2025 
policies. 
recommendations highlighted the need to address 
skills mismatches in the context of the digital and 
green transitions and to increase the participation 
rates  of  older  people  by 
and  employment 
enhancing  their  employment  opportunities  and 
employability, in order to address the issue of the 
pension system’s long-term sustainability. 

The 

in 

In  2025, 

recent  years. 

Unemployment  has  increased,  while  growth 
in  employment  and  activity  rates  have 
stalled 
the 
unemployment  rate  (15-74)  increased  slightly  for 
the  third  year  in  a  row,  reaching  6.5%,  above  the 
EU  average  of  6.0%  (359),  after  Luxembourg’s 
unemployment  rate  exceeded  the  EU  average  for 
the  first  time  in  2024.  The  employment  rate 
(among  people  aged  20-64)  has  fallen  two  years 
in a row (from 74.8% in 2023 to 73.9%, below the 
to 
EU  average  of  76.2%,  which  continued 
increase).  In  addition,  employment  rates  in  rural 
areas are 10 pps lower than in urban areas. While 
the  activity  rate  (among  people  aged  15-64)  has 
it  has 
been  rising  since 
consistently  been  below the  EU  average,  standing 
at  74.3% 
(EU:  75.7%).  These 
developments  point  to  a  softening  of  demand 
across  the  labour  market,  as  economic  growth 
remains  subdued 
in  the  context  of  weaker 
investment  and  net  exports.  Labour  market  slack 
reached 12.5% in Q4-2025, up from 12.0% in Q2-
2024,  exceeding  the  EU  average  (11%).  In  the 
medium  term,  Luxembourg’s  2030  employment 

the  early  2010s, 

in  2025 

(359) Cross-border workers, who accounted for 47% of workers in 
Luxembourg in 2024, are excluded from the resident labour 
force and are not taken into account when calculating the 
employment rate, etc. 

rate  target  of  77.6%  is  still  within  reach,  though 
the recent slowdown makes it more challenging.  

Employment  fell  or  slowed  in  several  key 
sectors 
in  2025.  The  construction  sector, 
representing almost 10% of national employment, 
recorded  a  year-on-year  decline  of  1.2%  in  the 
number  of  employees  in  Q4  2025,  following  a 
sharp  decline  of  4.1%  in  the  previous  year  (360). 
Business  confidence  in  the  construction  industry 
continued  to  drop.  At  the  beginning  of  2025, 
around  60%  of  companies  in  the  sector  reported 
insufficient demand, compared to 10% at the start 
of  2022(361).  As  for  the  financial  and  insurance 
sector,  job  creation  remained  subdued  and  grew 
by  just  0.6%  in  the  year  to  Q4  2025.  Job 
vacancies in the financial sector fell from 2.2% in 
mid-2022  to  1.0%  at  the  end  of  2025.  As  from 
2026,  however,  the  financial  sector  is  forecast  to 
recover, benefitting from lower interest rates. The 
labour  market  in  ICT/IT-related  roles  significantly 
weakened  during  the  same  period,  with 
job 
vacancies  dropping  from  4.0%  in  mid-2022  to 
1.3%  by  the  end  of  2025.  The  vacancy  rate  in 
professional,  scientific  and  technical  activities, 
covering  sectors  such  as  accounting  and  legal 
services,  fell  from  over  6.0%  in  2022  to  2.4%  in 
Q4  2025.  Overall,  the  job  vacancy  rate  peaked  in 
mid-2022  across  all  sectors  and  positions,  had 
halved  by  the  end  of  2024  and  remained  low  in 
2025  (362),  indicating  continued  weakness  in  the 
demand for labour.  

Labour  shortages  remain  contained  overall 
but  persist  in  some  sectors.  The  job  vacancy 
rate  stood  at  1.4%  in  Q4-2025,  below  the  EU 
average  of  2.1%  and  slightly  below  its  pre-
pandemic  level  (1.7%  in  Q4-2019).  Shortages  – 
while having eased over time – are still highest in 
professional,  scientific  and  technical  activities 
(2.4%),  administrative  and 
service 
activities  (2.4%)  and  accommodation  and  food 
services  (2.2%).  Shortage  of  health  professionals 
is a persisting challenge (see Annex 15). In October 
2025,  the  share  of  employers  expecting  labour 
shortages to constrain their production was below 

support 

(360) See Eurostat [namq_10_a10_e]. 

(361)STATEC: 
https://statistiques.public.lu/en/actualites/2025/conjflash-02-
25.html. 

Conjoncture 

February 

Flash 

2025: 

(362) See Eurostat [jvs_q_nace2] 

94 

 
 
 
 
 
 
 
the EU average in industry (10.8% vs 17.5%), but 
above  the  EU  average  in  construction  (34.1%  vs 
27.5%). 

Labour  market  transformation  due  to  the 
green  transition  remains  slow,  though  green 
employment  is  relatively  high.  In  2023,  the 
share  of  employment  in  the  environmental  goods 
and  services  sector  in  Luxembourg  was  higher 
than  in  all  other  Member  States  (5.4%),  and 
substantially  higher  than  the  EU  average  (2.7%), 
reflecting  an  increase  of  1.5  pps  since  2018.  In 
2025,  occupational  shortages  linked  to  the  green 
transition  and  climate  adaptation  were  reported 
conditioning 
for 
and 
refrigeration  mechanics, 
and  mechanical 
engineering technicians. 

engineers,  air 

civil 

in 

EU 

2025 

steady 

average 

growth, 

Following 
youth 
unemployment  and  NEET  rates  fell  in  2025. 
Having  increased  by  4  pps  to  21.6%  between 
2022 and 2024, youth unemployment (15-24) fell 
back to 18.6% in 2025, though it remained above 
the 
(15.2%). 
The youth unemployment rate is particularly prone 
to volatility in Luxembourg, and the unemployment 
ratio  is  often  considered  more  informative (363). 
Luxembourg’s  youth  unemployment  ratio  also 
improved  in  2025,  following  increases  between 
2022  and  2024.    Among  15-29-year-olds,  the 
unemployment  rate  (11.9%  vs  EU:  11.6%)  was 
closer  to  the  EU  average  and  the  unemployment 
ratio (6.5%) was equal to the EU average in 2025. 
This  is  consistent  with  the  unemployment  rate 
among  25-29-year-olds  being  below  the  EU 
average for at least the past decade. The share of 
young  people  neither 
in 
education  and  training  (NEETs)  increased  overall 
between  2019  and  2024,  before  easing  in  2025. 
This  recent  improvement  reflects  partly  cyclical 
labour  market  developments,  while  structural 
factors  such  as  early  school  leaving  and  skills 
mismatches 
school-to-work 
transitions (see Annex 13). 

in  employment  nor 

affected 

have 

(363) Luxembourg has particularly high numbers of young people 
in secondary, vocational and post-secondary education. The 
labour force denominator being unusually small, a slight 
change in the number of unemployed residents aged 15-24 
can have a large impact on the youth unemployment rate. 
The unemployment ratio is often considered more 
informative, as it has as its denominator the total population 
in a given age group rather than the total number of people 
who make up the labour force. 

the 

the 

‘Initiation 

Measures  to  address  youth  unemployment 
improved  Youth  Guarantee 
include 
scheme.  The  scheme,  supported  by  the  European 
Social Fund Plus (ESF+), has yielded mixed results, 
working effectively for those whom it successfully 
engages,  which  is  achieved  through  instruments 
like 
to  Employment  Contract’ 
(Contrat d’Initiation à l’Emploi), whereby employers 
receive  financial  incentives  to  provide  paid  work 
placements to jobseekers under the age of 30. On 
the  other  hand,  29.1%  of  NEETs  aged  under  29 
were registered in the Youth Guarantee scheme at 
the  end  of  2024,  which  was  lower  than  in  2022 
(32.9%)  and  2023  (34.3%),  and  considerably 
below  the  EU  average  of  41.3%.  Other  youth 
employment  measures  include  the  ‘Start  Your 
Career/Business’  programmes  and  the  Interreg 
project  ‘atWork4NEETs’,  which  are  supported  by 
Luxembourg’s  public  employment  service  (ADEM). 
These  measures  aim  to  improve  the  prospects  of 
NEETs  by  exchanging  good  policy  practices.  There 
is  scope  for  improving  the  personalised  outreach, 
guidance  and  labour-market  relevance  of  the 
training  provided,  and 
for  organising  more 
internships  as  part  of  secondary  education,  to 
ensure  long-term  labour  market  integration.  This 
would  require  enhanced  coordination  and  data-
sharing between all actors in the Youth Guarantee 
ecosystem. 

vs 

(51% 

EU:  68.2%). 

Integrating  older  people  into  the  labour 
In  2025, 
remains  a  challenge. 
market 
Luxembourg  had  the  lowest  employment  rate 
among  workers  aged  55-64  in  the  EU  (49.5%,  a 
0.1  pps  increase  from  2024,  vs  EU:  66.2%);  the 
activity  rate  among  this  group  was  also  low  in 
2024 
Long-term 
unemployment  is  also  an  issue  among  older 
people: more than half of jobseekers aged 45 and 
over  have  been  registered  with  ADEM  for  more 
than  twelve  months (364),  and  they  struggle  to 
meet  the  rapidly  changing  market  demands  such 
as digital literacy skills. The level of older workers’ 
participation in adult learning is lagging behind the 
EU  average  (see  Annex 13),  and  the  levels  of 
demotivation  and  disconnection  from  the  labour 
market  of  older  residents  of  working  age  who 
remain  outside  the  workforce  are  the  highest 
among  all  age  groups (365). Health-  and disability-

(364) CSL Panorama social 2025, p. 77. 

(365) CSL 2025, p. 91. The youngest (15-24) and the oldest (50-
64) who are outside the workforce are most likely to not 

95 

 
 
 
 
related  barriers  are  also  key  challenges:  in  2024, 
almost  75%  of  long-term  unemployed  people 
aged  45  and  over  had  reduced  capacity  for  work 
or  a  disability (366).  The  participation  of  older 
people  in  the  labour  market  is  also  linked  to 
hitherto favourable early retirement schemes (the 
average  age  at  the  time  of  early  retirement  in 
2024  was  60.2  years,  vs  EU:  61.3),  which  are 
gradually being reformed. 

Luxembourg  is  taking  measures  to  increase 
the  employment  rate  of  older  people. 
Following  a  large-scale  consultation  in  2024-
2025,  a  pension  reform  entered  into  force  in 
January  2026,  aimed  at  safeguarding  the  fiscal 
sustainability  of 
the  pension  system  while 
rewarding  older  people  for  staying  active  on  the 
labour  market.  The  measures  include  an  increase 
in  contributions,  adjustments  allowing  workers  to 
meet  the  conditions  for  early  retirement,  and  a 
monthly  tax  deduction  of  up  to  EUR 750  to 
encourage  those  eligible  for  early  retirement  to 
continue  working.  The  employment  agency  ADEM 
proposes  several  measures 
targeting  older 
workers, including a hiring aid scheme (ACA – aide 
à 
l’embauche  des  chômeurs  âgés),  whereby 
employers who hire 45+-year-olds can claim back 
their  share  of  social  contributions,  and  the 
(CRE  – 
‘Reintegration  employment  contract’ 
Contrat de réinsertion-emploi), whereby jobseekers 
aged  45  and  over  can  gain  practical  and 
theoretical experience while the employer benefits 
from  reduced  salary  costs.  The  ‘Boost  your  skills’ 
project  (2024-2025),  cofinanced  by  the  ESF+, 
aims  to  increase  the  employability  of  jobseekers 
aged 45 and over, while the ‘Future skills’ initiative 
under  the  recovery  and  resilience  plan  set  a 
modest  (30%)  participation  target  for  this  age 
group.  

increasing 

Skills  mismatches  are 
in  the 
context  of  the  twin  transitions,  with  low-
qualified workers finding  it  harder to  secure 
work  in  the  country’s  specialised  economy. 
Macroeconomic skills mismatches across all levels 
rose to 34.4% in 2025, significantly above the EU 
(19.2%), 
average 
indicating  a  widening  gap 
low-  and  high-skilled  workers.  The 
between 
employment 
graduates 
increased by 0.3 pps to 85.0% in 2025, while the 

university 

rate 

of 

want to work (78% and 88% respectively) as compared with 
56% of 25-49-year-olds. 

(366) CSL, Panorama social 2025, p. 77. 

in 

for 

jobs 

those  with  only 

economic  model,  which 

rate 
lower  secondary 
qualification  fell  again  by  0.4  pps  to  42.9%. 
Luxembourg’s 
is 
specialised  and  largely  finance-oriented,  tends  to 
favour high-qualification, high-productivity sectors: 
in Q4-2023, the country had the highest share of 
high-wage,  high-productivity 
the  EU 
(27.6%) (367)  –  see  Annex 12.  The  gap  in  demand 
for  high-  and  low-qualified  workers  is  strong  and 
the  European  Centre  for  the  Development  of 
Vocational  Training  Cedefop (368)  forecasts  that 
this  trend  will  continue  up  until  2035:  most  job 
to  require  high-level 
openings  are  expected 
qualifications (70%, around 11 pps more than the 
EU-27 average), compared with 23% for low-level 
qualifications  (compared  with  a  share  of  slightly 
above  zero  for  the  EU-27  average).  In  2024, 
almost  40%  of  jobseekers  registered  with  the 
national employment agency (ADEM) had low-level 
qualifications,  equivalent  to  the  lower  cycle  of 
secondary  education,  compared  with  29%  for 
those  with  post-secondary  studies.  However,  even 
people  with  a  post-secondary  level  of  education 
are  finding 
to  find 
work (369).  Migrant  families  in  particular,  who  are 
over-represented  among 
the  working  poor 
compared  with the  native population, have low to 
medium  skill  levels  and  tend  to  work  either  in 
elementary  occupations  or  services.  The  need  to 
improve professional training is emphasised in the 
2025  CSL  Quality  of  Work  Index (370),  with  a 
record-low  general  score  of  53.4/100.  Regarding 
digital  skills,  while  Luxembourg  performs  very 
strongly  in  terms  of  ICT  specialists,  with  8.0%  of 
the  workforce  employed  in  ICT  roles  in  2024,  the 
share of individuals with at least basic digital skills 
reached  62.4%,  slightly  above  the  EU  average 
(60.4%)  but  was  below  the  2025  Digital  Decade 
national  target  of  71%  (see  Annex 13).  Despite  a 
digital 
strong 
employment,  the  development  of  basic  digital 
competences  across 
the  broader  population 
remains  comparatively  slower,  which  may  further 
exacerbate  existing  skills  mismatches  and  weigh 
on the inclusiveness of the digital transition. 

increasingly  difficult 

in  high-skilled 

performance 

it 

(367) European Commission: Labour market and wage 
developments in Europe – Annual review 2025. 

(368) European Centre for the Development of Professional 

Training, 2025: skills_forecast_-_luxembourg_2025.pdf. 

(369) CSL, Panorama social 2025, p. 73. 

(370) CSL, Quality of Work Index 2025. 

96 

 
 
 
while it decreased overall in the EU from 15.2% to 
14.7% during the same period (373). The growth in 
households’  purchasing  power  is  not  keeping  up 
with  the  overall  EU  average:  while  the  gross 
disposable  household  income  in  Luxembourg  has 
almost invariably been above the EU average since 
2008,  it  dipped  slightly  below  the  EU  average  in 
2024  and  over  the  previous  decade  it  has  grown 
more slowly (8.2% in total) than in the EU overall 
(16.4%), a trend which should be monitored. Wage 
disparities  and  other  factors  such  as  the  limited 
inequality-reducing  effect  of  taxes  and  transfers 
(see  Annexes 12  and  16),  led  to  a  high  share  of 
the population experiencing in-work poverty. While 
the in-work poverty rate decreased from 14.8% in 
2023  (well  above  the  EU  average  of  8.3%)  to 
13.4%  in  2024,  this  share  has  been  consistently 
higher  than  the  EU  average  since  2010  (then  at 
10.6% vs EU: 8.5%). In 2025, in-work poverty was 
recorded at 9.5% (EU: 8.3%), however this follows 
a  change  in  how  Luxembourg  collects  data  on 
income  and  living  conditions  (374).  In-work  poverty 
continues  to  particularly  affect  non-Luxembourg 
nationals,  low-qualified  people  as  well  as  single-
those  with 
parent 
dependent  children.  In  2025,  the  risk  of  in-work 
poverty  affected,  for  instance,  13.4%  of  people 
with  non-Luxembourgish  citizenship  against  only 
4.6%  of  the  Luxembourgish.  Furthermore,  the 
nominally  high 
in 
Luxembourg appears insufficient to lift people out 
of  poverty,  given  the  high  poverty  threshold  (see 
also Annex 12). Luxembourg is working with social 
partners to improve the implementation of the EU 
Directive  on  Adequate  Minimum  Wages,  which 
includes  raising  collective  bargaining  coverage  – 
which  reached  57.3%  in  2022 (375)  –  through 
continued  social  dialogue.  Collective  bargaining 
coverage  in  Luxembourg  is  consistent  with  the 
decline  in  unionisation,  as  union  density  among 
resident  workers  declined  from  41%  in  2010  to 
29.7% in 2020. 

social  minimum  wage 

households, 

especially 

Skills  gaps  are  partly  filled  by  cross-border 
workers.  In  2024,  for  instance,  cross-border 
workers  carried  out  almost  75%  of  interim  work, 
which is concentrated in lower- to medium-skilled 
segments  such  as  construction,  commerce  and 
administrative  support  services.  However,  high-
skilled  sectors,  such  as 
ICT  and 
specialised,  scientific  and  technical  activities,  are 
also  affected,  since  net  job  creation  has  been 
mainly  positive  for  non-resident  –  especially 
French  –  cross-border  workers  since  2009,  up  to 
and including 2024 (371) (see Annex 19). 

finance, 

Luxembourg has strengthened its capacity as 
regards  skills  intelligence  and  matching (372). 
Measures  to  address  skills  mismatches  include 
ADEM’s  ‘JobInsights.lu’,  which  provides  real-time 
data  on  job  openings,  skills  requirements  and 
labour  market  trends  for  jobseekers,  employers 
and  training  providers,  and 
‘Skills  Plang’,  a 
government  programme  launched  in  November 
2025  to  help  companies  forecast  and  finance 
future skills needs. Systematic language testing by 
ADEM helps to reduce linguistic mismatches at an 
early  stage  of  candidate  profiling.  However,  there 
is  scope  for  improving  cooperation  between  all 
national  actors 
in  quantitative  and 
qualitative  skills  data  intelligence  and  matching, 
from  education  and  training  providers  to  ADEM 
and  employers.  This  can  be  supported  by  easily 
accessible labour market intelligence (also for the 
mid-  and  longer-term),  employer  involvement  in 
curriculum  design  and  incentives  for  reskilling  in 
priority 
continuing 
professional development should be promoted for 
adults  of  all  ages,  both  in  and  outside  the 
workplace,  supported  by  personalised  guidance 
and  higher  uptake  of  individual  training  leave 
(congé individuel de formation). 

sectors.  More  generally, 

involved 

Wage  disparities  and  slow  growth 
in 
households’  purchasing  power  contribute  to 
high  rates  of  in-work  poverty.  Real  wages  in 
2025  remained  below  their  pre-pandemic  levels 
due  to  sluggish  economic  and  labour  productivity 
growth,  as  well  as  persistent  inflation,  felt  most 
acutely  by  low-income  households.  The  share  of 
low-wage  earners  increased  by  almost  3  pps 
between  2018  and  2022,  from  11.4%  to  14%, 

(371) CSL, Panorama social 2025, p. 77, pp. 106-8, p. 116. 

(373) European Commission, Labour market and wage 

developments in Europe 2025, pp. 50-53. 

(372) As recommended in the 2023 OECD Skills Strategy and in 

the proposed Council Recommendation on Human Capital in 
the EU. 

(374) See Annex 12 for further details. 

(375) OECD, 2025. 

97 

 
 
 
ANNEX 12: SOCIAL POLICIES 

issues, 

including 

Luxembourg  faces  challenges  linked  to  child 
poverty,  wage  disparities  and  the  cost  of 
living, though significant measures are being 
taken.  These  challenges  are  underpinned  by  a 
the 
number  of  structural 
composition  of  Luxembourg’s  labour  market  and 
high housing costs. Vulnerable groups, such as the 
non-EU-born,  the  low  skilled  and  single-parent 
households,  are  particularly  affected.  However,  a 
new,  wide-ranging,  multiannual  national  action 
plan  to  combat  poverty  is  expected  to  bolster 
Luxembourg’s  already 
social 
welfare system, helping to rectify the situation and 
boost inclusive growth and competitiveness. 

comprehensive 

lower-income 

Recorded  levels  of  poverty  were  lower  in 
2025 as data collection on income and living 
conditions  improved,  although  previous  data 
showed  levels  were  already  decreasing.  The 
at-risk-of-poverty or social exclusion (AROPE) rate 
had  fallen  from  slightly  above  the  EU  average  in 
2023 (21.4% vs 21.3%) to 1 percentage point (pp) 
below the EU average in 2024 (20.0% vs 21.1%), 
driven  primarily  by  a  slight  drop  in the  at-risk-of-
poverty (AROP) rate (18.8% to 18.1%) and an even 
smaller  drop  in  the  severe  material  or  social 
deprivation (SMSD) rate (2.5% to 2.3%). This may 
be  attributed  to  the  easing  of  inflation  over  the 
2023-2024 period as well as the support provided 
families:  minimum-wage 
to 
increases  and  automatic  wage 
indexation, 
increased cost-of-living and energy allowances, as 
well  as  easier  access  to  the  latter.  Luxembourg’s 
2025  data  on 
living  conditions 
income  and 
incorporates administrative data for the first time 
(376).  AROPE  now  stands  at  18.2%,  AROP  is 
significantly lower at 14.8% and SMSD is higher at 
3.4%,  as 
in 
is  the  share  of  people 
households  with  very  low  work  intensity  (5.5%). 
People living in rural areas are twice as likely to be 
at risk of poverty and social exclusion compared to 
those  in  cities.  This  is  due  to  numerous  factors, 
including labour market  dynamics  and the  limited 
absorption  of  social  transfers,  as  detailed  below. 
The  number  of people  at risk  of  poverty  or  social 
exclusion  is  4 000  higher  in  2025  than  in  2019 
and  now  stands  at  123 000.  Luxembourg’s  2030 
target is to reduce the number of people at risk of 

living 

(376) https://statistiques.public.lu/en/actualites/2026/stn14-26-

silc.html; the inclusion of administrative data should improve 
the accuracy and reliability of the statistics, though the break 
in series makes comparison across time less reliable. 

98 

poverty  or social  exclusion  by  4 000  compared to 
2019.  

Graph A12.1: At-risk-of-poverty or social exclusion 
rate and its components (AROP, SMSD, LWI) 

(1) AROPE: At-risk-of-poverty or social exclusion rate (% of 
total population). 
Source: Eurostat, EU-SILC [ilc_peps01n] 

Poverty  or  social  exclusion  are  much  higher 
among  children  than  the  overall  population. 
As with overall rates of poverty, a declining trend 
was observed before the change to data collection 
in  2025.  The  AROPE  rate  for  children  had  fallen 
from  26.1%  in  2023  (vs  EU  24.9%)  to  25.6%  in 
2024 (vs EU 24.2%), with a drop in the SMSD rate 
from  3.8%  in  2023  to  3.4%  in  2024  (well  below 
the  EU  average  of  7.9%),  at  least  partly  due  to 
targeted  cost-of-living  subsidies  and  in-kind  child 
transfers  such  as  the  chèque-service  accueil. 
However,  the  percentage  of  children  living  in 
households with very low work intensity had risen 
from 1.9% in 2023 to 2.6% in 2024, reflecting the 
deterioration in labour-market  conditions  over the 
period  (see  Annex  11)  although  this  too  remains 
well below the EU average of 7.4%. Following the 
methodology  change  in  2025,  AROPE  for  children 
is  25.2%,  AROP  is  only  slightly  lower  at  22.2%, 
while  SMSD 
is  almost  double  the  previous 
recorded level, at 5.8%. The most significant sub-
component  of  the  child  AROPE  rate  remains  the 
AROP  rate,  pointing to  uneven  income  distribution 
as  the  main  driver.  Single-parent  households  are 
particularly vulnerable, with 40.5% of them facing 
poverty risks in 2025. 

051015202520152016201720182019202020212022202320242025% of populationLUAt-risk-of-poverty-or-social-exclusion rateAt-risk-of-poverty rateSevere material and social deprivationPeople living in low work intensity households 
 
 
  
 
 
families  with  children  and 

Luxembourg  is  taking  significant  steps  to 
reduce poverty. A national action plan to combat 
poverty was presented in December 2025, backed 
by  around  EUR 1  billion  from  the  pooling  of 
existing  social  funding.  The  action  plan intends  to 
address  the  challenges  outlined  above  from  a 
holistic, interministerial perspective, with over 100 
measures  such  as  increased  benefits  (especially 
low-income 
for 
households), improved take-up of benefits through 
automation and simplification (particularly through 
the  rollout  of  the  guichet  social  unique  –  a  ‘one-
stop  shop’  for  issues  relating  to  social  welfare), 
more  affordable  housing 
through 
affordable  rental  housing,  though  homelessness 
will  be  addressed  in  a  separate  strategy),  better 
lifelong 
healthcare  for  the  most  vulnerable, 
learning  and  employment 
(with  a  focus  on 
vocational  training  and  youth  employment).  The 
action plan is supported by a governance structure 
with indicators and deliverables to be achieved as 
from 2026. A comprehensive approach, as set out 
both  in  Luxembourg’s  action  plan  and  in  the  EU 
anti-poverty  strategy,  remains  key  to  addressing 
the  multiple  dimensions  of  poverty  and  achieving 
the national anti-poverty target. 

(including 

Luxembourg  has  taken  measures  to  reduce 
child  poverty.  Several  actions  have  been  taken 
within  the  framework  of  the  European  Child 
Guarantee,  including  free  meals  for  children  in 
need  at  various  stages  of  their  schooling,  as  well 
as  free  health  screenings  and  vaccinations. 
Nevertheless, 
social 
challenges linked to migration and multilingualism 
and  data  monitoring  gaps,  making  it  difficult  to 
assess  whether  all  children  in  need  truly  have 
effective access to various initiatives (377). 

persistent 

there 

are 

to 

factors 

contribute 

income 
Several 
inequality, including sectoral differences and 
the  wage  gap  between  low-skilled  and  high-
skilled  jobs.  Average  annual  gross  salaries  in 
Luxembourg’s  financial  and  insurance  sector  – 
which plays a significant role in the economy – are 
around 50% higher than the average for the entire 
economy.  Salaries  earned  in  this  sector  are,  for 
instance,  2.8  times  higher  than  those  in  the 
hospitality  sector (378).  High  salaries,  while  not 

(377) https://reform-support.ec.europa.eu/publications-

0/strengthening-monitoring-evaluation-childrens-rights-and-
establishing-sustainable-stakeholder_en.  

(378) STATEC, Work and Social Cohesion Report (2024). 

99 

limited  to  the  financial  sector,  contribute  to 
increased wage polarisation. Income polarisation is 
often  a  reflection  of  the  wage  gap  between  low-
skilled  and  high-skilled  jobs:  workers  without 
upper-secondary  education  earn  on  average  25% 
less  than  those  with  upper-secondary  education 
(above  the  OECD  average  of  17%),  while  those 
with tertiary education earn about 55% more than 
those  with  only  upper-secondary  education 
(slightly  above  the  OECD  average  of  54%) (379). 
Income  inequality,  combined  with  other  factors 
such as high housing costs (see Annex 16) and the 
limited  inequality-reducing  effect  of  taxes  and 
transfers,  also  means  Luxembourg  has  a  poverty 
threshold  and  in-work  poverty  rate  above  the  EU 
average (9.5% vs 8.3%) (see Annex 11 for further 
details).  

including 

limited  awareness  of 

The  impact  of  social  transfers  in  reducing 
monetary  poverty  fell  consistently  between 
2010  and  2024,  but  the  underlying  level  is 
likely  to  have  been  underestimated.  The 
impact  had  decreased  further  from  27.4%  in 
2023,  when  it  was  well  below  the  EU  average  of 
34.7%, to 27.0% in 2024. This is largely explained 
by  low  take-up  rates  of  social  benefits  (excluding 
pensions),  which  are  affected  by  numerous 
factors, 
the 
benefits  available,  complex  information  channels 
and  application  processes,  low-income  thresholds 
and  the  fear  of  stigmatisation (380).  However, 
following the change in methodology for collecting 
data  on  income  and  living  conditions,  the  impact 
of social transfers was recorded at 44.0% in 2025, 
suggesting 
old  methodology 
the 
underestimated  the  impact.  In  January  2025, 
Luxembourg  also  simplified 
the  application 
process  for  benefits:  households  receiving  social 
inclusion  benefits  also  automatically  receive  the 
cost-of-living benefit and the energy allowance. It 
should  be  noted  that  Luxembourg  provides  other 
in-kind  contributions  which  are  not  captured  by 
poverty  risk 
indicators,  such  as  free  public 
transport,  free  schoolbooks  and  free  meals  for 
school students (381). Social economy organisations 

that 

(379) OECD, Education at a Glance (2024). 

(380) Franziskus, A., & Guio, A.-C. (2024), Précarité et (non-)recours 
aux aides financières au Luxembourg: Une étude qualitative 
(LISER study commissioned by the Luxembourg Chamber of 
Employees, CSL). 

(381) For all children in Early Childhood Education and Care (ECEC) 
and primary schools, and for children from low-income 
families in secondary schools. 

 
 
 
could  play  a  complementary  role  by  facilitating 
outreach, supporting benefit take-up and providing 
locally 
rooted  social  and  care  services  for 
vulnerable households. 

The  inequality-reducing  effect  of  taxes  and 
transfers  is  also  relatively  low.  In  2023,  the 
figure  was  34%,  significantly  below  the  49% 
average  in  the  EU (382).  The  Commission’s  2025 
Annual  Report  on  Taxation (383)  shows 
that 
Luxembourg’s tax-benefit system does not reduce 
inequality  as  effectively  as  in  other  Member 
States.  In  2023,  Luxembourg  had  relatively  high 
revenues  from  personal  income  taxes  as  a  share 
of GDP (11.6% vs an EU average of 9.3%), but this 
largely 
the  mechanical  effects  of 
automatic  wage  indexation  on  taxable  incomes 
rather  than  a  deliberate  increase  in  redistribution 
through 
lower-income 
transfers 
households. In addition, since 2010, this share has 
revenues  from 
increased  from  7.4%,  while 
corporate income taxes have decreased from 5.4% 
to 5%.  

reflected 

targeted 

to 

Energy poverty is relatively low. In 2025, 3.5% 
of the population was unable to keep their homes 
adequately warm, compared with 8.8% on average 
in  the  EU.  However,  the  extension  of  the  new  EU 
emissions trading system to buildings (ETS2) may 
increase  pressure  on  vulnerable  households. 
Heating expenditure in Luxembourg is expected to 
rise  more  than  the  EU  average  under  ETS2,  as 
ETS2-covered fuels, primarily oil and gas, account 
for  75%  of  the  final  energy  consumption  of 
households,  compared  with  just  42%  across  the 
EU.  In  this  context,  it  would  be  beneficial  to 
increase  energy-efficiency  investments  targeting 
households  experiencing  energy  poverty.  From 
2026  onwards,  the  European  Social  Climate  Fund 
will  support  the  most  vulnerable  households 
through investments of this kind. 

(382) https://employment-social-affairs.ec.europa.eu/economic-

inequalities-eu-key-trends-and-policies_en.  

(383) https://taxation-customs.ec.europa.eu/taxation/economic-

analysis/annual-report-taxation_en.  

100 

 
 
 
 
ANNEX 13: EDUCATION AND SKILLS 

improve 

Luxembourg  is  seeking  to  improve  student 
performance  and  skills,  but  challenges 
remain,  including  education  inequalities  and 
participation  in  adult  learning.  Early  school 
leaving  remains  below  the  EU  average,  although 
recent  estimates  point  to  some  volatility.    The 
youth unemployment and the rate of young people 
not  in  employment,  education  or  training  (NEET) 
improved.  People  who  have  completed 
have 
vocational  education  and  training  (VET)  typically 
enjoy high employment rates, but there is scope to 
further 
the  attractiveness  of  VET, 
particularly in science, technology, engineering and 
mathematics  (STEM)  areas,  as  a  pathway  into 
work. Participation in tertiary education is high, but 
it  does  not  fully  respond  to  labour  market  needs 
STEM 
due 
programmes,  particularly  among  women.  Training 
participation  among  adults 
increase 
substantially, particularly for older workers and the 
low  qualified,  and  especially  regarding  digital  and 
green  skills,  to  address  skills  mismatches  and 
sustain a competitive workforce and economy. The 
2025 
recommendations 
highlighted the need to improve performance and 
ensure  equal  opportunities  in  schools,  including 
through  a  national  school  quality  framework  and 
an  external  school  evaluation  system,  and  to 
address  skills  mismatches  by  stimulating  skills 
development. 

country-specific 

insufficient 

enrolment 

could 

to 

in 

Challenges  linked  to  multilingualism  in  ECEC 
persist.  To  reflect  the  linguistic  diversity  of 
society,  childcare  services  are  mainly  offered  in 
Luxembourgish or French, while German remains a 
key  language  of  instruction  in  primary  education. 
Literacy  in  German  and  Luxembourgish  is  treated 
as a single competence, with the expectation that 
language  skills  acquired  in  Luxembourgish  will 
transfer  into  German  language  skills.  However, 
research  conducted  by  LUCET  does  not  confirm 
(384)  such  transfer  effects.  Children  who  are  not 
exposed to Luxembourgish at home – nearly 70% 
of  children  –  tend  to  experience  difficulties  in 
German reading comprehension at later stages of 
education (385).  

The  quality  of  education  remains  relatively 
stable;  however,  disparities  linked  to  the 
language  background  of  students  persist. 
Between  2020  and  2022,  average  competency 
levels  measured  by  the  national  tests  (ÉpStan) 
remained  relatively  consistent  in  primary  and 
secondary schools (386). Unlike international trends, 
declines were observed more in language subjects 
than  in  mathematics.  Also,  contrary  to  cross-
country  patterns,  language  background  has  a 
greater  impact  on  school  results  than  socio-
Positively, 
economic 
Luxembourg improved the level of students’ digital 
basic skills between 2018 and 2023. 

characteristics 

(387). 

Luxembourg  will  introduce  a  childcare  place 
guarantee 
by  2030,  while  measures 
improving  the  quality  of  early  childhood 
education  and  care  (ECEC)  are  ongoing.  In 
2024, 82.5% of children from birth to the start of 
compulsory  primary  education  participated 
in 
ECEC, the highest share in the EU. Children aged 1 
to  4  attending  childcare  facilities  participating  in 
the  childcare  service  voucher  scheme  (Chèque-
Service  Accueil,  CSA)  are  entitled  to  20  hours  of 
free  childcare  per  week,  to  ensure  social  equity 
and  reduce  financial  burden  on 
low-income 
families.  However,  providers  of  non-contracted 
(non-conventionné) 
charge 
additional fees. Measures to improve the quality of 
ECEC  are  ongoing,  including  strengthening  staff-
to-child  ratios,  continuing  longer-term  efforts  to 
expand  childcare  capacity  and  improve  access  to 
full-time ECEC provision across municipalities, and 
introducing  additional  pedagogical  support  in  pre-
primary settings. 

facilities  may 

The  roll-out  of  the  French  literacy  reform, 
catering for linguistic diversity among pupils, 
is  planned  for  the  2027/2028  school  year. 
The  government  has  adopted  a  law  introducing 
French  literacy  in  all  primary  schools  starting  in 
2027/2028.  This  far-reaching 
reform  grants 
parents  and  pupils  the  right  to  choose  the 
language  of  literacy  –  German  or  French.  In  the 
improve  the 
longer  term, 
performance of children who do not speak German 
or Luxembourgish at home. It builds on the ALPHA 
pilot  project,  which  demonstrated  promising 
in  terms  of  performance,  motivation, 
results 
classroom  participation  and  language-appropriate 

is  expected  to 

it 

(384) Early Childhood Education and Care in Luxembourg (LUCET). 

(385) ÉpStan Dashboard: Results from the Luxembourg school 

monitoring programme ‘Épreuves Standardisées’. 
http://dashboard.epstan.lu. 

(386) Présentation : Rapport national sur l'éducation – Luxembourg 

2024. 

(387) Ibidem. 

101 

 
 
 
 
 
 
full 

capacity 

reform  will  be 

literacy (388).  The 
rolled  out 
gradually  as  the  first  cohort  progresses  through 
primary  education,  with 
implementation 
expected  by  the  2032/2033  school  year.  Its 
success in improving students’ skills will depend on 
targeted, 
to 
schools’ 
differentiated support to students and on teachers’ 
readiness  to  manage  diverse  linguistic  profiles. 
Teacher unions (SNE/CGFP) have highlighted issues 
that need to be tackled before the national roll-out 
of the reform, including scheduling and classroom 
availability  for  parallel  French  and  German  tracks 
and the process for choosing the literacy language. 

provide 

the 

Students  at  European  public  schools  (EPS) 
perform  better,  but 
impact  on 
inequalities  warrants  close  monitoring.  Early 
evidence from the National Education Report 2024 
indicates  that  learning  in  familiar  or  preferred 
languages  can  enhance  academic  performance. 
The  share  of  pupils  attending  EPSs  is  increasing, 
with  4.9%  in  the  2024/2025(389)),  and  demand 
surpasses 
the  number  of  available  places. 
However,  EPSs  can  enrol  students  selectively, 
led  to  an  over-representation  of 
which  has 
students from higher socio-economic backgrounds. 

Starting  from  the  2026/2027  school  year,  a 
revised curriculum for primary education will 
be  implemented.  Key  drivers  of  the  curriculum 
reform  (plan  d’études)  are  new  challenges  in 
society,  such  as  digital  transformation,  well-being 
issues, multilingualism and democratic citizenship. 
The  curriculum  defines  competency  frameworks 
for  each  developmental  and  learning  domain, 
specifying  the  skills  students  are  expected  to 
acquire  by  the  end  of  each  cycle,  as  well  as  the 
annual  number  of  lessons  across  these  domains. 
However,  Luxembourg  still  lacks  a  unified  quality 
framework and external evaluation system (except 
the  ÉpStan  system  used  to  monitor  learning 
outcomes). 

Luxembourg  promotes  digital  well-being  and 
responsible  use  of  artificial  intelligence  (AI) 
in schools. The government has introduced a ban 
on  the  use  of  mobile  phones  in  primary  schools 
and limited their use in secondary schools, as part 

the 

introduced 

of  efforts  to  support  a  better  screen-life  balance. 
In  2025,  the  Ministry  of  Education,  Children  and 
Youth 
‘KI Kompass’  strategic 
framework,  which  aims  to  guide  the  responsible 
integration  of  AI  into  the  education  system.  The 
framework  categorises  AI  use  in  education  into 
three phases based on age and digital maturity of 
students:  learning  without  AI  (with  emphasis  on 
human  skills),  learning  about  AI  (understanding 
systems  and  risks),  and  learning  with  AI  (critical, 
creative use of AI as a learning tool). Additionally, 
launched  the  ki‑kompass.lu 
the  ministry  has 
platform,  which  offers  validated  AI  tools  for 
schools,  professional  development  modules  for 
educators  and  a  dedicated  support  service  for  AI 
queries. 

and 

attainment 

Early  school 
leaving,  particularly  among 
vulnerable pupils, contributes to higher NEET 
rates.  Although  the  early  school  leaving  rate 
remains  below  the  EU  average,  challenges  in 
educational 
school-to-work 
transitions  persist  for  some  categories.  The 
highest  dropout  rates  occurred  in  introductory  or 
integration pathways. These are typically attended 
by  socio-economically  vulnerable  pupils  with 
learning gaps – including in languages – and those 
who  have  recently  arrived  in  Luxembourg (390).  In 
addition,  boys  were  50%  more  likely  to  drop  out 
than  girls  in  the  2023/2024  school  year (391)  (see 
also  Annex 11).  Young  people  leaving  education 
inactivity  and 
early  are  more  exposed 
unemployment,  as  reflected  in  relatively  high 
youth  unemployment  and  NEET  rates.  NEET  rates 
also tend to rise with lower levels of education: in 
2024,  the  NEET rate  (among  those  aged  15-29) 
stood at  11.9%  for  those  with  less  than  primary, 
primary or lower secondary education (ISCED 2011 
levels  0-2),  at  9.8% (392)  for  those  with  upper 
non-tertiary 
secondary 
education (levels 3-4), and at 8.7% for those with 
upper  secondary,  post-secondary  non-tertiary  or 
tertiary education (levels 3-8). 

post-secondary 

or 

to 

Luxembourg  is  implementing  measures  to 
combat  early  school  leaving.  By  September 
2026,  the  mandatory  school  age  will  be  raised 
from 16 to 18 – a third of dropouts occur between 

(388) Hornung, C., Colling, J., Esch, P., Keller, U., Hellwig, A., Ugen, S. 
(2024). Erste Ergebnisse zum Pilotprojekt „Alpha – zesumme 
wuessen“. Nationaler Bildungsbericht Luxemburg 2024. 
www.bildungsbericht.lu. 

(389) Luxembourgish Education Ministry press release. 

(390) Ibid, p. 16. 

(391) Education and Training Monitor, 2025. 

(392) Data flagged as being ‘unreliable’ by Eurostat, but the 

general trend is confirmed over many consecutive years. 

102 

 
 
 
these  ages  –  and  this  reform  is  expected  to 
significantly  reduce  early  school  leaving.  The 
National  Youth  Service  contacts  early  school 
leavers  to  assess  their  needs  and  helps  them 
reconnect 
labour  market  or  further 
education.  The  network  of  Centres  d’insertion 
socioprofessionnelle  (CISP)  provides  alternative 
schooling  pathways  with  highly 
individualised 
support, and is currently being expanded.  

the 

to 

is  growing,  and 
The  student  population 
projections 
indicate  a 
for  2025-2030 
substantial number of extra teachers needed 
in  secondary  education.  Between  2019/2020 
and  2024/2025,  the  number  of  students 
in 
primary  and  secondary  education  increased  by 
almost  9%.  This  demographic  change  puts 
pressure  both  on  school  infrastructure  and  on 
teachers.  According  to  government  projections, 
over  500  teachers  will  be  needed  by  2030  to  fill 
in  secondary  education:  over  400 
vacancies 
teachers in German, French and English, and more 
than  160  in  mathematics.  These  needs  arise 
mainly  from  reducing  supplementary  teaching 
hours,  replacing  retiring  teachers  and  responding 
to  enrolment  growth  (393).  Teaching  is  a  very 
attractive  profession  in  Luxembourg  due  to  high 
salaries,  good  job  security  (394).  However,  high 
entry  requirements,  including  proficiency  in  all 
three  national  languages,  make  it  difficult  to 
recruit  enough  prospective  teachers.  Although 
around  1 000  students  are  currently  enrolled  in 
language 
statistics 
programmes  at  higher  institutions,  it  is  unclear 
how many intend to pursue a teaching career. 

or  mathematics 

and 

There is scope to improve the attractiveness 
of vocational education, particularly in STEM, 
as  a  pathway  into  work.  In  2023,  6  out  of  10 
students in medium-level education were enrolled 
in  programmes  with  a  vocational  orientation 
(58.0%;  EU  average:  52.9%),  although  this  figure 
has  fallen  since  2018  (62.6%).  The  proportion  of 
initial VET students in combined school- and work-
based  programmes  (ISCED  level  3)  was  only 
21.8%  in  2023,  compared  to  an  EU  average  of 
29.6% and countries with higher rates such as the 

(80.9% 

Netherlands (89.3%) and Germany (89.2%) (395). In 
2023,  only  34.5%  of  people  who  had  recently 
completed  VET  had  experienced  work-based 
learning (396), well below the EU average (64.6% in 
2023,  65.2%  in  2024).  Despite  this,  in  2023, 
people  who  had  recently  completed  VET  had  an 
employment  rate  of  80.0%,  similar  to  the  EU 
average 
in  2024). 
Luxembourg  had  the  lowest  share  of  female 
graduates  (17.2%)  in  post-secondary  non-tertiary 
vocational  programmes  in  2023.  Enrolment  in 
STEM  fields  in  medium-level  VET,  which  stood  at 
26.8% in 2024, is well below the EU average (397) 
(36.6%)  and  the  proposed  EU-level  2030  target 
(45%).  In  2024,  17.0%  of  medium-level  VET 
students in STEM subjects were female, above the 
EU average (15.9%).  

in  2023,  80.0% 

for 

law 

vocational 

Several initiatives aim to promote vocational 
pathways,  involving  skills  for  the  green  and 
introduces 
digital  transitions.  A  2024 
financial  support  for  employers  who  take  on 
employees  in basic  vocational  or  initial  vocational 
training during employment. YEP!-Schoulfoire is an 
including 
annual  education  and  career  fair, 
campaigns 
and 
education 
apprenticeships,  bringing 
together  candidates, 
companies  and  training  providers.  Luxembourg  is 
currently  developing  a  legal  framework  to  allow 
individuals  with  VET  degrees  to  continue  into 
higher  education,  aiming  to  increase  flexibility 
it 
between  pathways. 
launched one of the milestones under its recovery 
and  resilience  plan  –  the  ‘Skillsbridges’  vocational 
training 
initiative  –  which  will  offer  around 
20 courses,  helping  adults  to  adapt  to  new 
technologies  (upskilling)  and  facilitating  career 
changes  (reskilling).  From  the  2025/2026  school 
year, up to 800 people  should benefit from these 
sessions, which aim to cover areas such as AI, the 
green  transition,  renewable  energies,  construction 
and  hospitality.  There  is  scope  to  better  align  the 
supply  of  candidates  with  employers’  demand  for 
involving 
apprentices, 
professional 
employer 
in  STEM  subjects.  To 
organisations, 

In  September  2024, 

closely 
and 

chambers 

including 

notably 

by 

(393) QP 2915 : Pénurie de professeurs dans certaines disciplines - 
Nachrichten - Éducation nationale, Enfance et Jeunesse - 
Luxembourg. 

(394) Education and Training Monitor 2023. 

(395) https://www.cedefop.europa.eu/en/data-insights/2-how-
many-students-participate-work-based-initial-vet. 

(396) No data for 2024, although the figures for Luxembourg and 

the EU average have been stable in recent years. 

(397) The definition used by Luxembourg differs from the standard 
Eurostat definition, and comparisons with other countries 
should be made with caution. 

103 

 
 
 
(DAP) 

address  issues  of  multilingualism  in  VET,  starting 
in  the  2025/2026  school  year,  three  new  French-
language  programmes  were  introduced:  Diplômes 
d’Aptitude  Professionnelle 
in  opticianry, 
tattooing  and  carpentry.  In  total,  39  DAP  and  six 
Diplômes  de  Technicien  (DT)  will  be  offered  in 
French,  and  27  programmes 
leading  to  the 
Certificat de Capacité Professionnelle (CCP) will be 
bilingual  in  instruction,  with  some  courses  in 
French  and  others  in  German.  Programmes  in 
English are also being expanded: from 2025/2026, 
the  DT  in  administration  and  commerce  and  the 
DAP in machining are offered in English.  

the 

high 

Luxembourg  is  among  the  EU  leaders  in 
tertiary attainment, but a mismatch persists 
between  programmes  preferred  by  students 
and labour market needs. In 2025, 65% of 25-
34-year-olds  held  a  tertiary  degree,  compared 
with the EU average of 44.8%. Luxembourg has a 
substantial  urban-rural  gap  in  tertiary  education 
attainment  among  young  people  (aged  25-34)  at 
36.6 percentage points (pps), while the EU average 
is  22.0  pps.  However,  this  gap  is  partially  due  to 
the  highest  participation  in  tertiary  education  in 
cities (89.4%) within the EU. Attainment levels are 
particularly 
foreign-born 
among 
population,  at  74.8%  vs  52.7%  for  those  born  in 
Luxembourg.  However,  a  misalignment  exists 
between students’ programme choices and labour 
market  needs,  with  many  graduates  holding 
degrees in fields that are not among those most in 
demand (398)  (see  Annex  11).  Skills  shortages  are 
particularly severe in IT and engineering, while the 
share  of  tertiary  students  enrolled 
in  STEM 
subjects in 2023 was 27.4% (EU average: 26.9%), 
below  the  EU-level  target  of  32%.  The  share  of 
female  students  in  STEM  subjects  also  remained 
below the EU. The share of ICT graduates reached 
8.5% in 2024, among the highest in the EU (DESI 
2026),  but  declined  from  9.7%  in  2023,  when 
Luxembourg  recorded  the  highest  share.  The 
employment  rate  of  recent  tertiary  graduates 
stood  at  92.4% in  2025, close  to the  EU  average 
of  87%.  In  2025,  the  government  proposed  a 
reform  of  the  state  financial  aid  for  higher 
education students to enhance fairness and better 
adapt financial support to socio-economic realities. 
The draft reform maintains the existing four-pillar 
structure  of  financial  support,  while  introducing 
several targeted adjustments. 

reskilling 

The participation of older workers and adults 
with  low  levels  of  qualification  in  learning 
programmes  is  relatively  weak,  while  digital 
skills  levels  could  be  strengthened.  Adult 
participation  in  learning (excluding guided  on-the-
job  training)  according  to  the  adult  education 
survey (AES) rose from 42.6% in 2016 to 45.2% in 
2022,  and  was  above  the  EU  average  in  both 
years  (37.4%  in  2016  and  39.5%  in  2022). 
Luxembourg  nonetheless  remains  far  (−17.3  pps) 
from 
its  ambitious  2030  national  target  of 
62.5% (399).  More  recent  data,  from  the  labour 
force survey, suggest a possible further increase in 
participation  between  2022  and  2024.  In  2022, 
participation  of  older  workers  was  slightly  below 
the  EU  average  (29%  vs  29.9%)  and  only  just 
above  average  for  those  with  low  qualification 
levels  (20%  vs  18.4%) (400).  There  is  scope  to 
implement  a  more  comprehensive  strategy  for 
upskilling  and 
the  45+  working 
population,  including  through  individual  learning 
accounts.  Regarding  digital  skills,  in  2025,  62.4% 
of  individuals  (16-74)  had  at  least  basic  digital 
skills,  just  above  the  EU  average  of  60.4%,  but  a 
reduction on 2021 (63.8%), against  a background 
where  most  Member  States 
recorded  more 
significant  rises.  The  share  of  women  with  digital 
skills (60.9% in 2025; EU average: 59.0%) is lower 
than that of men (63.8%; EU average: 61.8%), but 
it  has  increased  since  2021  while  men’s  levels 
have  fallen.  Among  people  aged  16–24,  only 
63.6%  had  at  least  basic  digital  skills  in  2025, 
significantly below the EU average of 74.5% (DESI 
2026).  The  European  Social  Fund  Plus  (ESF+) 
cofinances  measures  promoting  lifelong  learning 
in 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 
cofinanced  by  the  ESF+  as  an  operation  of 
strategic  importance  and  aims  to  support  labour 
market  reintegration.  Overall,  35.4%  of  the  ESF+ 
allocation  targets  the  development  of  green  and 
digital jobs and skills (EUR 5.5 million). 

social 
‘Skills4Job’  programme 

including 
and 

into  work, 

employees, 

for 

(398) OECD Economic Surveys: Luxembourg 2025. 

(400) Education and Training Monitor 2024. 

(399) AES data are used for monitoring progress towards the 2030 

adult learning target. 

104 

 
 
 
ANNEX 14: SOCIAL SCOREBOARD 

Table A14.1:Social Scoreboard for Luxembourg 

Update of 4 May 2026. 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 2026 for details on the methodology 
(https://employment-social-affairs.ec.europa.eu/joint-employment-report-2026_en). 
Source: Eurostat 

105 

45.262.48.76.84.6073.96.52.0113.118.225.244.28.156.41.1Critical situationTo watchWeak but improvingGood but to monitorOn averageDynamic 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, 2025)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2025)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2025)Self-reported unmet need for medical care (% of the population aged 16+, 2025)Disability employment gap(percentage points, population aged 20-64)Housing cost overburden (% of the total population, 2025)Adult 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 marketBest performersBetter than averageEarly leavers from education and training(% of  the population aged 18-24)Young people not in employment, education or training(% of the population aged 15-29, 2025)Gender employment gap(percentage points, population aged 20-64, 2025)Income quintile ratio (S80/S20, 2025)At risk of poverty or social exclusion (AROPE) rate (% of the total population, 2025)Employment rate(% of the population aged 20-64, 2025)Unemployment rate(% of the active population aged 15-74, 2025)Long term unemployment(% of the active population aged 15-74, 2025)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2024)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2025) 
 
 
 
  
 
 
ANNEX 15: HEALTH AND HEALTH SYSTEMS 

system 

Luxembourg’s  health 
performs 
comparatively well, with high life expectancy 
at  birth  and  low  treatable  and  preventable 
mortality.  However,  access  to  healthcare 
in 
Luxembourg  is  affected  by  staff  shortages  and 
fragmented  service  delivery.  There  are  also 
opportunities to enhance efficiency through better 
use  of  data  and  technology.  These  challenges 
affect  the  public’s  health,  social  fairness  and 
productivity. 
country-specific 
recommendations  (CSRs)  highlighted  the  need  to 
ensure  availability  of  health  workforce  and 
accelerate reforms (401).  

2025 

The 

Graph A15.1: Life expectancy at birth, years 

Source: Eurostat (indicator: demo_mlexpec) 

Life  expectancy  at  birth  in  Luxembourg 
rebounded  above  its  pre-COVID-19  level and 
was among the highest in the EU in 2024. The 
gender  gap  in  life  expectancy  in  Luxembourg  is 
smaller  than  in  most  EU  countries:  women  could 
expect to live 4.7 years longer than men in 2024, 
compared with an EU average gap of 5.2 years.  

Cardiovascular  diseases  (CVDs)  and  cancer 
remained  the  leading  causes  of  death  in 
2023,  with  behavioural  and  environmental 
risk  factors  accounting  for  around  one 
quarter  of  all  deaths  (402).  Tobacco  use  is  the 
main  risk  factor,  followed  by  dietary  risks, 
highlighting  the  scope  for  stronger  preventive 
measures.  

(401) CSR 5.3 Improve the resilience of the health system by 
accelerating the reforms and ensuring appropriate 
availability of health workers. 

(402) OECD/European Observatory on Health Systems and Policies 
(2025), Country Health Profile 2025: Luxembourg. State of 
Health in the EU. 

Luxembourg  combines  very  low  levels  of 
treatable mortality (Graph A15.2) – among the 
lowest  in  the  EU,  reflecting  an  effective 
health  system  –  with  high  health  spending. 
Health  expenditure  per  capita  was  around  20% 
above  the  EU  average  in  2023,  alongside  a  high 
share  of  public  spending,  suggesting  potential 
scope  to  improve  efficiency  while  maintaining 
strong health outcomes. 

risks  but 

Luxembourg  has  put  in  place  a  range  of 
to  address  preventable  and 
measures 
lacks  an 
treatable  health 
overarching  public  health  strategy.  Action  on 
CVDs  has been  strengthened  through  a  dedicated 
2023-2026  CVD  Plan  and  the  2023  National 
Health  Plan,  which  promote  early  diagnosis  and 
stronger  care  pathways  for  people  living  with 
CVDs.  The  National  Cancer  Plan  (2020-2024), 
focused  on  prevention,  care  coordination  and 
research, has been extended until 2026. However, 
there is no overarching public health strategy, and 
several  national  action  plans  targeting  key  risk 
factors  have  recently  expired  without  renewal  or 
evaluation.  A  public  health  law  is  currently  under 
development.  In  2023,  spending  on  prevention 
accounted 
total  health 
expenditure, below the EU average of 4%.  

for  around  3%  of 

Graph A15.2: Treatable mortality 

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

health 

improving 

Greater  emphasis  on  prevention  has  the 
potential  to  generate  efficiency  gains  while 
further 
outcomes. 
Preventable mortality  declined  faster  than the  EU 
average  between  2014  and  2022;  however,  the 
gap  narrowed  in  2022,  as  preventable  mortality 
increased  in  Luxembourg,  while  the  EU  average 
fell  compared  with  2021.  Significant  risk  factors 
persist  and  are  unevenly  distributed,  with 

106 

82.282.783.083.483.2808080.681.481.520202021202220232024LuxembourgEU67.063.660.354.760.451.794.889.291.793.389.786.8201420192020202120222023per 100 000 populationLuxembourgEU 
 
      
 
      
 
 
substantial  differences  by  education  level  and 
higher  rates  of  smoking  and  obesity  among  men. 
Smoking  among  adolescents  has  decreased 
markedly, with the share of 15-year-olds reporting 
that  they  had  smoked  in  the  past  month  falling 
from 21% in 2014 to 14% in 2022, below the EU 
average. However, vaping has become increasingly 
prevalent: in 2022, 17% of 15-year-olds reported 
e-cigarette  use  in  the  past  month,  exceeding 
conventional  cigarette  smoking  and  highlighting 
emerging  risks  to  young  people’s  health.  New 
legislative  measures,  effective  from  1 January 
2026,  extend  tobacco-equivalent  obligations  and 
restrictions  to  nicotine  pouches  and  other  novel 
nicotine  products.  Obesity  remains  relatively  high 
and above the EU average, with a sharper increase 
among  adolescents:  the  share  of  overweight  and 
obese  15-year-olds  rose  from  18%  in  2014  to 
22%  in  2022,  particularly  among  boys,  driven 
mainly by poor nutrition and physical inactivity. To 
respond, Luxembourg launched a one-year pilot in 
January  2026  introducing  a  preventive  medicine 
programme  for  physical  activity  prescription, 
enabling  doctors  to  refer  eligible  patients  to 
specialised  facilities  offering  therapeutic  physical 
activity,  notably  for  cancer,  type  2  diabetes  and 
cardiovascular  diseases.  Luxembourg  benefits 
from  the  Technical  Support 
(TSI) 
screening  and 
cancer 
focused  on 
project 
treatment, which aims to implement a lung cancer 
screening  programme  and  to  comprehensively 
assess  all  existing  population-based  cancer 
screening programmes.  

Instrument 

Fragmentation in healthcare delivery and the 
use  of  data  continue  to  present  challenges, 
which  may  limit  potential  efficiency  gains. 
Recent  measures  focus  on  improving  the  general 
governance framework and strengthening the use 
of evidence in policymaking and are a step in the 
right  direction  to  address the  2025  CSR.  The  first 
national  health  plan,  published  in  2023  following 
the  Gesondheetsdësch  roundtable  and  supported 
(RRP), 
by  the  Recovery  and  Resilience  Plan 
identifies key system challenges and sets strategic 
priorities, although without concrete or measurable 
targets.  To  address  this  gap,  the  government  is 
developing public health legislation to clarify roles, 
responsibilities  and  financing  arrangements.  The 
2023 merger of two ministries into the Ministry of 
Health  and  Social  Security  marked  an  important 
step  towards  stronger  governance  and  improved 
policy  coordination,  although  an  interministerial 
body  could 
thematic  and 
further  enhance 
budgetary  alignment  across  sectors.  Additional 

system 

includes 

performance 

the  establishment  of 

progress 
the 
National  Health  Observatory  in  2022  and  of  the 
health 
assessment 
framework  under  the  TSI  project,  with  the  launch 
and  implementation  of  the  new  methodology  in 
2026.  This  should  strengthen  evidence-based 
policymaking  and  data  use  and  support  better 
planning  and  mechanisms  for  priority  setting. 
Further efficiency gains are expected from the law 
establishing  a  National  Central  Purchasing  and 
Logistics  Agency,  which  entered  into  force  on 
1 February  2026  and  aims 
to  streamline 
procedures,  reduce  administrative  burdens  on 
health  professionals,  improve  productivity  and 
deliver budgetary savings. 

health 

system 

services 

Avoidable 

remains 
Luxembourg’s 
hospital-centred,  with  a  strong  reliance  on 
specialised 
hospital 
admission  rates  are  above  the  EU  average 
contributing  to  inefficiencies.  The  country’s  small 
population 
the  availability  of  some 
specialised  services,  often  requiring  treatment 
abroad.  Waiting  times  remain  a  public  concern, 
particularly  for  emergency,  specialist,  diagnostic 
and cancer care.  

limits 

to 

have 

several 

including 

initiatives 

conditions, 

Reforms  are  underway 
strengthen 
ambulatory  and  primary  care,  but  their 
impact  remains  uneven.  To  address  these 
challenges, 
been 
introduced to bolster ambulatory and primary care, 
also  helping 
to  contain  costs.  Since  2023, 
integrated  care  networks  linking  primary  and 
specialised  providers  have  been  established  for 
chronic  pain, 
specific 
neurodegenerative  diseases,  and  adult  and 
paediatric  immuno-rheumatology,  with  additional 
networks 
for  diabetes  and  severe  obesity 
authorised  in  2025.  Expanding  these  networks 
presents  an  opportunity  to  further  strengthen 
primary  care  and  support  greater  adoption  of  the 
‘referring  physician‘  model.  The 
impact  of 
voluntary  registration  with  a  referring  physician 
alongside electronic health records remains mixed 
due  to  low  uptake  by  providers  and  patients  and 
limited 
incentives.  Discussions  are  ongoing 
regarding  the  development  of  doctors’  group 
practices  and  other  primary  care  structures, 
including  extended  opening  hours  and  funding 
frameworks  to  compensate  for  longer  service 
times.  Measures  have  also  included  reforming 
diagnostic  services,  setting  waiting-time  targets, 
decentralising  and  expanding  imaging  capacity, 
and  improving  triage  in  emergency  departments. 

107 

 
Table A15.1: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 2023 data (or latest available). 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 Portugal (licensed to practice) and Slovakia (professionally active). Latest data 
update on nurses for Belgium and Sweden: 2022; for France: 2021; for Luxembourg: 2017. 
** latest available 10-year trend: ratio 2023/2014 or 2024/2013; a factor of 2.00 means that it has doubled in 10 years. 
***’Available hospital beds’ covers somatic care, not psychiatric care. 
Source: Eurostat 

As a result, delays have been significantly reduced. 
However, challenges persist due to uneven waiting 
times  across  hospitals,  high  use  of  services  by 
non-residents,  and  high  diagnostic  exam  rates, 
raising  concerns  about  the  suitability  of  care  and 
low-value  care.  The  Hospital  Act,  adopted  by  the 
Chamber  of  Deputies  on  18 December  2025, 
supports a shift towards day care and ambulatory 
services by creating additional outpatient sites and 
satellite units for minor procedures, particularly in 
dermatology  and  ophthalmology.  The  act  also 
strengthens acute and medium-stay care capacity 
by  integrating  beds  from  the  health  reserve  and 
updating maximum hospital bed numbers to better 
reflect current activity  levels and local  needs. The 
TSI  will  help  modernise  primary  care  and  provide 
incentive  and  financing 
recommendations  for 
mechanisms  to  support  efficient  primary  care 
delivery.  

on 

reliance 

foreign-trained 

Shortages  of  health  professionals  remain  a 
key  challenge  in  Luxembourg.  The  country’s 
strong 
and 
cross-border health workers creates vulnerabilities, 
as  fluctuations 
in  workforce  availability  can 
directly  affect  access  to  care.  The  density  of 
doctors  in  Luxembourg  is  below  the  EU  average 
to  government 
(see  Table A15.1).  According 
projections,  between  59%  and  69%  of  medical 
doctors are expected to retire by 2034. The 2023 
National  Health  Plan  aims  to  recruit  over  1 200 
additional  doctors  by  2030  to  reach  the  EU 
average.  While  the  share  of  general  practitioners 
(GPs)  is  above  the  EU  average,  there  are  notable 
geographical  disparities,  with  higher  GP  densities 

concentrated in cantons hosting hospitals. Nursing 
staff numbers are higher than the EU average (see 
Table A15.1).  Nevertheless,  Luxembourg  faces  a 
significant  future  shortage:  around  900 nursing 
positions need to be filled over the next five years, 
far  exceeding  domestic  training  capacity,  which 
produced only 68 graduates in 2023-24. The 2023 
National  Health  Plan  aims  to  recruit  3 800 
additional nurses by 2030. 

of 

the 

2020 

resided 

doctors 

border 

Luxembourg’s 
cross-border 
reliance  on 
healthcare  workers  was  a  critical  issue 
closures, 
during 
underscoring  the  need  for  strategic  health 
system planning. In 2017, 68% of GPs and 49% 
of 
specialist  doctors  were  Luxembourgish. 
in 
Additionally,  75% 
Luxembourg,  while  25%  lived  in  neighbouring 
countries. 
In  2019,  30%  of  nurses  were 
Luxembourgish, and only 35% of nurses resided in 
(403).  The  proportion  of  hospital 
Luxembourg 
employees 
neighbouring 
from 
commuting 
countries has risen from 44.9% in 2019 to 48% in 
2023. Luxembourg’s small population also means 
that  certain  specialised  treatments  are  only 
available  abroad.  The  Emergency  Preparedness 
and  Response  Unit,  established  in  2021,  is  to 
develop  a  legal  framework  to  formally  recognise 
and  enable  the  rapid deployment  of  a  permanent 
health  professional  reserve.  This  initiative  builds 

(403) Observatoire National de la Santé, European Observatory on 
Health Systems and Policies, Luxembourg: Revue du système 
de santé, 2025. 

108 

2020202120222023202410-year change**EU average* (latest year) Cancer mortality per 100 000 population203.1203.4195.4191.6n.a.0.74233.1 (2023)Mortality due to circulatory diseases per 100 000 population 224.4 213.2 220.3 213.1n.a.0.72313.0 (2023)Current expenditure on health, purchasing power standards, per capita3 8114 1274 3034 5674 9721.453834.9 (2023)Public share of health expenditure, % of current health expenditure 86.5 86.2 86.1 85.6 85.81.0380.6 (2023)Spending on prevention, % of current health expenditure 5.36.44.63.22.71.283.7 (2023)Available hospital beds per 100 000 population*** 340 335 320 316n.a.n.a.440 (2023)Doctors per 1 000 population*3.73.83.94.0n.a.1.334.3 (2023)*Nurses per 1 000 population* 11.4 11.4 11.4 11.4n.a.1.057.6 (2023)*Mortality at working age (20-64 years), % of total mortality15.616.416.315.615.30.9214.3 (2023)Consumption of antibiotics in the community and hospital sectors,      defined daily doses per 1 000 inhabitants 16.1 15.9 19.1 20.2 21.60.9220.3 (2024) 
 
 
      
 
their 

too  early 

on  lessons  from  the COVID-19  pandemic,  when  a 
temporary  workforce  reserve  proved  essential. 
Measures  to  address  the  2025  CSR  through  an 
increase  of 
the  domestic  supply  of  health 
professionals are in progress. There are new study 
programmes at the University  of Luxembourg  – a 
three-year  bachelor’s  programme 
in  medicine 
(introduced  in  2020),  four  specialised  bachelor’s 
programmes  in  nursing  (2023)  and  a  general 
nursing bachelor’s programme (2024), although it 
is 
impact. 
to  fully  assess 
Discussions are ongoing regarding the introduction 
of a master’s degree in medicine at the University 
of  Luxembourg  to  complement  the  bachelor’s 
programme,  with  a  potential  launch  targeted  for 
2029,  pending  evaluation  results.  To  enhance 
health  workforce  planning,  a  digital  health 
workforce  registry,  supported  under  the  RRP,  was 
developed. To address the  2025 CSR Luxembourg 
also 
the 
campaigns 
to  attract  more 
healthcareers.lu,  which  aim 
students 
In  addition, 
targeted  financial  incentives  are  available  for 
hospital  doctors  and  general  medicine  interns. 
Progress  on  legal  frameworks  to  support  task 
sharing  and  the  establishment  of  group  practices 
has  been  slow;  however,  measures  are  still 
planned to promote multiprofessional care models 
based  on  stronger  collaboration  and  shared 
responsibilities.  On  17 December  2025, 
the 
preliminary 
Government 
regulations 
dentists, 
doctors, 
to  create 
psychotherapists  and  veterinarians 
companies.  The  bill  will  now  enter  the  legislative 
process  as  part  of  the  implementation  of  the 
2023-2028 coalition agreement, which sets out a 
legal  framework  allowing  these  professionals  to 
practise within companies composed exclusively of 
their respective professions.  

to  healthcare  careers. 

Council 
enabling 

launched 

adopted 

such 

as 

While  Luxembourg  has  been  developing  and 
streamlining  digital  health  tools,  fewer  than 
one  in  four  people  accessed  their  personal 
health  records  online  in  2024,  below  the  EU 
average.  The  uptake  of  the  electronic  health 
record  remains  limited  due  to  voluntary  adoption 
and 
low  acceptance  by  both  providers  and 
patients. The increase in usage in 2024 was driven 
by the discontinuation of CDs for medical imaging 
and  the  automatic  filing  of  hospital  discharge 
letters.  The  GesondheetsApp,  launched  in  2019, 
facilitates 
It 
will  be  expanded. 
appointment 
administrative 
exchanges.  It  will  be  adapted  for  the  secure 
exchange  of medical  information  and  payment  of 

currently 
and 

booking 

identifier, 

assessment. 

performance 

medical  bills.  Although  Luxembourg  has  a  unique 
lacks  a  national  health 
it 
patient 
information  system 
that  enables  systematic 
collection, quality  control and analysis of data for 
population  health  monitoring,  service  use  and 
A 
system 
comprehensive  national  digitalisation  strategy 
adopted  in  May  2025  identifies  three  strategic 
priorities:  artificial  intelligence,  data  and  quantum 
technologies.  To  implement  the  European  Health 
Data Space, an interministerial programme led by 
the Ministry of Health and Social Security is under 
initiated 
development.  Luxembourg  has  also 
efforts  to  implement  the  Data  Governance  Act. 
infrastructure  has  been  a 
Digital  health 
government 
capita 
information  and 
investment 
communication  technology  remains  below  the  EU 
average  (EUR 1.4 million  per  100 000  population 
in  Luxembourg  vs  EUR 2.4 million  in  the  EU  in 
2022)  (404).  In  addition  to  national  efforts,  EU 
funding 
Luxembourg 
participates  in  national  and  European  initiatives, 
including  Clinnova  and  Dataspace4Health,  which 
connect  hospitals,  research  institutes,  the  digital 
health  agency  and  the  National  Data  Service  to 
create 
data 
infrastructures  in  line  with  EU  legislation  and 
Gaia-X standards. Investments under the RRP aim 
to  accelerate  telemedicine  and  further  boost  the 
digital transformation of the health sector. 

supports  digitalisation. 

in  health  sector 

federated, 

although 

priority, 

secure 

health 

per 

as 

sector 

employment 

is 
Luxembourg’s  pharmaceutical 
characterised  by  relatively  low  economic 
significance, 
in 
is  modest. 
pharmaceutical  manufacturing 
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.  However,  participation  in  clinical  trials 
relative  to  its  population  size  is  quite  substantial. 
Despite  smaller  scales,  Luxembourg’s  extra-EU 
exports  have  shown  growth  potential,  reaching 
0.8% 
Luxembourg’s 
healthcare 
is  noteworthy,  with 
developments  in  medical  imaging  capacity  and 
appropriate  levels  of  CT  scanners  and  MRI  units, 
enhancing  its  overall  capabilities  in  healthcare 
services. 

in  2025.  Additionally, 

infrastructure 

(404) Country Health Profile 2025: Luxembourg – see earlier 

footnote. 

109 

 
 
ANNEX 16: HOUSING 

rates, 

interest 

Luxembourg  faces  persistent  housing  supply 
remains 
constraints.  Land  mobilisation 
limited,  due,  in  particular,  to  land  hoarding, 
the concentration of land ownership (405) and 
slow  activation  of  planned  plots.  Combined 
with  strong  demographic  growth  and  sustained 
cross-border  labour  demand,  these  factors  have 
long  outpaced  new  construction.  In  recent  years, 
the slowdown in residential development has been 
exacerbated  by  higher 
rising 
construction  and  material  costs,  labour  shortages 
in  the  construction  sector,  and  lengthy  planning 
this 
and 
background, Luxembourg received a 2025 country-
specific  recommendation  (CSR)  which  called  for 
increasing the housing supply through: (i) adopting 
a comprehensive land-use policy; (ii) a property tax 
reform; (iii) developing large-scale district projects 
on public land; and (iv) strengthening coordination 
with  urban  planning  and  cross-border  public 
transport,  and  for  mitigating  risks  related  to  the 
housing market by phasing out fiscal incentives to 
borrow  and  by  strengthening  the  macroprudential 
framework.  While  first  steps  to partially tackle 
some  of  these  problems  are  underway,  key 
aspects remain unsolved. 

procedures. 

permitting 

Against 

by 

and 

strengthening 

The  current  tax  framework  does  not  appear 
to  be  aligned  with  the 2025  CSR  which  calls 
for  the  phasing  out  of  fiscal  incentives  to 
borrow 
the 
macroprudential  framework.  Key  demand-side 
tax  advantages,  especially  mortgage 
interest 
deductibility  and  the  permanent  increase  of  the 
Bëllegen  Akt  (tax  credit  for  the  purchase  of  a 
primary  residence),  remain  in  place  and  continue 
to support borrowing and housing demand (Annex 
3). 

Pressures are particularly acute in the social 
and  affordable  housing  segments.  Despite 
policy  efforts,  the  supply of  social  and  affordable 
housing still fails to meet demand, leading to long 
waiting lists and limited turnover. High land prices 
and fiscal constraints weigh on the ability of public 
authorities  and  housing  funds  to  scale  up  supply 
at  the  required  pace.  As  a  result,  access  to 
affordable  housing  has  become 
increasingly 
and  middle-income 
constrained 

low- 

for 

households,  including  key  workers,  undermining 
social cohesion and labour market functioning. 

remains  a  major 
Housing  affordability 
challenge, 
in  particular,  for  vulnerable 
groups.  Housing  costs in Luxembourg  are  among 
the highest in the EU relative to income, absorbing 
a  growing  proportion  of  household  expenditure 
cost 
and  pushing  many  households 
overburden.  This  affects,  in  particular,  lower-
income  households,  young  people  and  single-
parent  families,  who  are  facing  increased  risks  of 
insecurity  and  energy 
overcrowding,  housing 
poverty.  These  dynamics  risk  entrenching  social 
inequalities,  constraining 
labour  mobility  and 
weighing  on  long-term  economic  growth,  while 
increasing pressures on social  assistance systems 
and cross-border commuting. 

into 

Housing market developments 

methodology, 

Despite a decline over 2023 and 2024, house 
prices  continue  to  be  overvalued.  After 
doubling  over  a  decade,  house  prices  started  to 
correct  in  2022,  falling  over  15%  in  two  years. 
Since late 2024, house prices have started to grow 
again  recording  1.6%  year-on-year  growth  in 
standard  European 
2025.  Based  on 
the 
Commission 
price 
overvaluation peaked at around 40% in 2022. The 
gap then narrowed but remained at around 10% in 
2025.  Although  the  price-to-income  ratio,  which 
measures  purchase  affordability,  is  decreasing,  it 
was  still  9  percentage  points  above  its  long-term 
average  in  2025.  Moreover,  the  house  price  level 
remains high. In 2022, the average time needed to 
buy  100 m²  increased  to  16.1  years  but  fell  to 
12.1  years  in  2025.  That  same  year,  8.9  years 
were needed on average in the EU. 

house 

(405) Observatoire de l’Habitat, ‘Note de l’Observatoire de l’Habitat 

n°32’, 2023. 

110 

 
 
 
 
 
Graph A16.1: House prices, rents and price-to-
income evolution in LU and EU27 since 2005 

Graph A16.2: Borrowing costs and housing loans 

Source: Eurostat 

Source: ECB 

Demand  for  newly  built  housing  remains 
relatively  low  despite  rising  demand  for 
existing housing. In Luxembourg, there has been 
a  sharp  rise  in  the  population.  Since  2010,  it  has 
risen  by  around  35%.  This  is  due  to  immigration, 
which,  together  with  rising  earnings,  supports 
demand  for  housing.  After  a  decline  in  prices  in 
2022-2023  due  to  the  rise  in  interest  rates  and 
falling  demand  (Graph  A16.2),  there  has  been  a 
pickup  in  demand  for  household  loans  and  in 
consumer confidence. This led to a slow but steady 
recovery in the housing market in 2025. However, 
the  current  market 
is  mainly 
observed for existing buildings. This appears to be 
linked  to  two  factors:  (i)  the  price  of  new  builds 
still  reflecting  the  very  high  land  prices  from 
before  the  cooling  of  the housing  market;  and (ii) 
buyers being wary of the solvency of constructors 
and  unwilling  to  risk  their  capital  by  buying  new 
housing off plan. 

improvement 

The  proportion  of  households  renting  their 
home  has  increased  and  rents  have  been 
rising  in  recent  years.  In  2024,  36.5%  of 
households  were  renting  their  homes,  up  from  a 
long-term average of 29%. Rental prices (including 
standing  and  new  rental  contracts)  continued  to 
rise. In 2024, tenants in Luxembourg spent 27% of 
their income on rent, making it the second highest 
in the euro area for rent costs as a percentage of 
income.  The  lack  of  housing  supply  alongside 
sustained  demand,  supported  by  a  range  of  tax 
incentives  has  fuelled  a  steady  rise  in  prices, 
especially  since  the  2000s,  which  over  time  has 
led  to  persistent  tension  in  the  rental  market  in 
Luxembourg. 

for 

Building  permits  are  decreasing,  implying 
that  the  supply  shortage  is  expected  to 
persist.  Too  few  dwellings  have  been  completed 
in  recent  years  to  accommodate  the  growing 
population.  With  permits  granted 
the 
construction  of  737 m²  per  thousand  people  in 
2024, permitting remains high compared  with the 
EU average. However, it is falling and is historically 
low  for  Luxembourg  (Graph  A16.3).  This  leading 
indicator  shows  that  the  housing  shortage  is  not 
expected  to  be  addressed  in  the  short  term. 
Investment in residential real estate has remained 
low  or  has  fallen  since  2020,  influenced  by  high 
construction costs, protracted planning procedures 
and  uncertainties  surrounding  project  profitability. 
In  terms  of  investment  needs,  29 432  dwellings 
are  expected  to  be  completed  by  2035,  while  an 
estimated  133 360  new  dwellings  will  be  needed 

111 

751001251501752002252502750507091113151719212325Index (2005 = 100)Nominal prices LUNominal prices EU27Rental prices LURental prices EU27Price-to-income ratio LUPrice-to-income ratio EU273032343638400123451819202122232425Interest rates LUInterest rates EAStock of loans, % of GDP (rhs) 
       
      
by  that  year  (406).  This  leaves  a  predicted  housing 
construction gap of 103 928 dwellings. 

Graph A16.3: House supply indicators in LU since 
2005 

such  obligations  vary  (Annex  19).  The  2025  CSRs 
also called  on  Luxembourg to develop  large-scale 
district  projects on public land.  While Luxembourg 
continues  to  advance  ongoing  large-scale  district 
developments,  while  also 
to 
mobilise private land for the creation of affordable 
rental  housing  by  partnering  with  private 
developers  and  social  landlord  (407),  broader  land 
mobilisation tools are still pending. 

launching  pilot 

in 

to 

of 

the 

units 

Luxembourg  has  taken  steps  to  improve 
coordination  between  housing  policy  and 
urban  planning  and  cross-border  public 
transport.  Luxembourg  received  a  2025  CSR  on 
strengthening 
coordination  with  urban 
planning  and  cross-border  public  transport.  The 
adoption  of  the  Article  29bis  reform  under  the 
‘Pacte  Logement  2.0’  strengthens  the  integration 
of  affordable  housing  requirements  into  local 
development  plans  by  mandating  a  minimum 
new 
affordable 
proportion 
neighbourhood  projects  and  providing  planning 
flexibilities 
implementation. 
support 
Nevertheless,  the  broader  structural  alignment 
between  land  mobilisation,  spatial  planning  and 
housing delivery remains incomplete. Amendments 
to  the  ‘Pacte  Logement  2.0’  that  aim  to  simplify 
procedures 
for 
municipalities  were  tabled  in  2025  and  remain 
under  parliamentary  consideration.  Furthermore, 
Luxembourg  stepped  efforts  to  strengthen  cross-
to  ease  commuting 
border  public 
bottlenecks  and  supporting  labour  mobility  in  a 
context 
cross-border  workforce 
dependence:  expansion  and  reorganisation  of  the 
Régime Général des Transports Routiers (RGTR) on 
key  routes,  rail  infrastructure  investment  (Annex 
19),  preparatory  work  on  fare  harmonisation  and 
mobility planning (Luxmobil 2025 survey). 

strengthen 

transport 

support 

strong 

and 

of 

The property taxation reform aims to update 
valuations  and  incentivise  development,  but 
its 
implementation  remains  delayed  and 
uncertain.  Luxembourg  received  a  2025  CSR  on 
adopting  a  property  tax  reform.  The  ongoing 
reform covers both the land tax and a new tax on 
the  non-mobilisation  of  buildable  land  and  seeks 
to address the structural inequities of the existing 
system,  which  is  still  based  on  outdated  unit 
values,  lacks  automation  and  results  in  uneven 
taxation across municipalities. The tax on the non-

Source: Eurostat 

Structural policies 

tools 

called 

to  adopt  general  and 

The  shift  from  passive  planning  to  more 
remains 
land-use 
interventionist 
limited.  Municipalities  are  entrusted,  within  their 
autonomy, 
specific 
development  plans  (PAG/PAP).  However,  these 
tools  mainly  regulate  how  land  may  be  used, 
rather than whether it must be developed, despite 
being  legally  binding  and  explicitly  encouraging 
densification. 
on 
The  2025  CSRs 
Luxembourg  to  adopt  a  comprehensive  land-use 
policy. The Bauvertrag reform aimed to strengthen 
the  link  between  planning  decisions  and  actual 
housing  construction  implementation.  However, 
none  of  its  most  impactful  aspects  (construction 
deadlines  with 
PAG 
sanctions, 
amendments, ministerial land consolidation) are in 
force  yet.  The  bill  has  remained  stalled  in  the 
concerns  over 
legislative  process  due 
the 
proportionality, 
and 
legal 
constitutional  protection  of  property 
rights, 
resulting  in  multiple  amendments  and  prolonged 
effective 
negotiations. 
implementation  depends  on  close  coordination 
between  the  state  and  municipalities,  whose 
administrative capacity and willingness to enforce 

to 
certainty 

fast-track 

addition, 

its 

In 

(406) Balouktsi et al. (2026) Housing investment needs in the EU. 

(407) Chronicle.lu, 293 Housing Units Acquired as Affordable 

JRC Technical Report 144419.  

Housing PPP Initiative Launched, 2025. 

112 

0.00.51.01.52.02.53.03.54.04.55070901101301501701902100507091113151719212325% of GDPIndex (2005 = 100)Residential building permits in m2, indexResidential buildings producer prices, indexInvestment in dwellings (right-hand side axis) 
       
 
 
to 

mobilisation  of  buildable  land  seeks  to  address 
targeting  buildable  but 
land  hoarding  by 
undeveloped  plots  by  exponentially  increasing  tax 
rates 
incentivise  development,  alongside 
exemptions  and  abatements  for  agricultural  use. 
Although  the  initial  bill  was  tabled  in  2022  and 
government 
extensive 
amendments  were 
introduced 
in  2025,  the  absence  of  binding 
legislative  deadlines  makes  its  entry  into  force 
timeline  envisages 
uncertain.  The 
implementation  in  2028  and  fiscal  effects  from 
2030  (408).  Based  on  the  estimates  presented, 
mobilising  approximately  2 400  hectares  of  land 
would enable around 125 000 housing units to be 
developed.  The  tax  on  vacant  dwellings  was 
decoupled  from  the  original  draft  legislation  to 
prevent  additional  delays  in  the  adoption  of  the 
land  tax  reform  and  the  tax  on  the  non-
mobilisation  of  buildable  land,  all  currently  under 
parliamentary scrutiny.  

indicative 

The  favourable  tax  treatment  of  owner-
occupied  housing  may  put  upward  pressure 
on  house  prices  and  prevent  lower-income 
from  owning  property.  The 
households 
deductibility  of  mortgage  interest  payments  has 
been  in  place  since  1983  and  was  significantly 
expanded  in  2017  and  2023.  The  scheme  allows 
for  the  deduction  of  interest  payments  of  up  to 
EUR 3 000 per person annually during the first six 
years  of  occupancy,  corresponding  to  EUR 12 000 
per  year  for  a  household  of  four.  In  a  context  of 
relatively  inelastic  housing  supply,  such  tax  relief 
is  largely  capitalised  into  higher  property  prices 
rather than translating into sustained affordability 
increasing  households’ 
gains  for  buyers.  By 
borrowing  capacity  and  willingness  to  pay,  the 
measure  puts  upward  pressure  on  house  prices, 
with a significant share of the benefit accruing to 
property  sellers.  While  higher-income  households 
may have easier access to credit and may be less 
affected  by  this  dynamic,  the  overall  effect  is 
likely 
prices,  weaken  housing 
affordability  and  potentially  crowd  out  lower-
income households from owning property, while at 
the same time generating substantial fiscal costs. 
Reflecting  these  challenges,  Luxembourg  received 
a  2025  CSR  to  phase  out  fiscal  incentives  to 
borrow. 

inflate 

to 

(408) Chambre des députés Grand-Duché de Luxembourg 

‘Présentation du projet de réforme de l'impôt foncier’, 
2025. 

Housing-related  tax  support  introduced  in 
2024  was  only  partially  withdrawn  in  2025 
(Annex  3),  thereby  prolonging  demand-side 
pressures  in  a  structurally  tight  housing 
market.  Luxembourg  received  a  2025  CSR  to 
mitigate  risks  related  to  the  housing  market  by 
phasing  out  fiscal  incentives  to  borrow  and  by 
strengthening  the  macroprudential  framework. 
Although  some  temporary  measures  expired,  the 
increased 
‘Bëllegen  Akt’  (tax  credit of  up  to 
EUR 40 000  for  the  purchase  of  a  primary 
residence)  was  made 
thereby 
sustaining  demand-side  support.  Given  structural 
supply  rigidities, these  instruments  are  unlikely to 
expand housing supply in the short term and may 
instead  contribute  to  higher  prices.  As  such,  their 
continuation  may  weaken  efforts  to  address 
affordability  challenges  and  moderate  demand 
pressures.  Overvalued  house  prices,  the  large 
share  of  variable-rate  mortgages,  and  high 
household  indebtedness  pose  systemic  risks.  No 
new  macroprudential  measures  have  been 
introduced. 

permanent, 

in  Luxembourg 

Despite  recent  reforms,  the  private  rental 
market 
remains  under 
pressure, reflecting both regulatory frictions 
and  insufficient  supply.  An  increase  in  the 
proportion  of  rental  housing  could  improve  the 
dynamics  of  the  housing  market  and  ease 
constraints  on  labour  mobility,  investment  and 
economic  growth.  The  law  on  residential  leases 
entered into  force in  2024,  introducing  significant 
changes to landlord–tenant relationships, including 
a reduction of the rental guarantee to two months’ 
rent,  a  formal  system  for  co-tenancy,  equitable 
sharing  of  agency  fees, mandatory  written  leases 
and  procedural  protections  for  tenants.  However, 
the  reform  has  not  fundamentally  altered  rent-
setting  mechanisms.  As  annual  rent  remains 
capped  at  5%  of  the  capital 
invested,  the 
framework continues to influence expected returns 
and  investment  decisions  and  thus  may  limit 
supply (409). 

in 

new 

housing 
decline 
The 
sharp 
is  primarily 
in  Luxembourg 
construction 
driven  by  a  simultaneous  deterioration  in 
production  conditions  and  access  to  finance. 
increased 
Construction  producer  prices  have 

(409) Kholodilin, ‘Rent control effects through the lens of 

empirical research: An almost complete review of the 
literature’, 2024. 

113 

 
 
  
 
time, 

tighter  banking 

significantly  (+30%  between  Q1  2021  and  Q3 
2025  (410)),  while  financing  has  become  more 
restrictive, particularly for small and medium-sized 
developers.  Off-plan  sales  (Vente  en  l’état  futur 
d’achèvement,  VEFA)  are  often  a  prerequisite  for 
bank  financing,  as  lenders  rely  on  pre-sales  to 
mitigate  risk.  Although the  required threshold  has 
fallen  from  around  50%  to  30%,  securing  these 
pre-sales has become increasingly difficult due to 
declining  buyer  confidence,  driven  by  recent 
developer  bankruptcies  and  concerns  over  the 
effectiveness  of  completion  guarantees.  At  the 
regulation  and 
same 
prudential  requirements  (including  Basel  II  and 
European Central Bank standards) oblige banks to 
allocate  more  own  funds  to  risky  projects, 
discouraging  smaller  developments  and  favouring 
large  players  with  strong  balance  sheets.  In  this 
context,  building  permits  fell  by  26.6%  between 
Q1 2021 and Q3 2025 (a fall of 45% in terms of 
m2 of useful floor area), reflecting households’ and 
developers’ ex ante decisions to defer or abandon 
planned 
in  dwellings 
represents  only  3%  of  GDP,  vs  5.3%  at  EU  level, 
and  has  been  falling  since  2019  (411).  This 
contraction underscores that the current slowdown 
is  less  the  result  of  insufficient  demand  or 
excessive prices than of weakened project viability 
and constrained financing conditions, especially for 
actors with limited balance-sheet capacity. 

Investment 

projects. 

Vulnerable groups 

Housing affordability in Luxembourg remains 
a  concern, particularly  for  young people  and 
households  with  modest  incomes.  With  an 
annual  housing  price  index  of  162.50  in  2024, 
residential  housing  prices  are 
Luxembourg’s 
roughly 6% higher than the EU-27’s average index 
level  of  153.44  (2015  =  100  as  the  reference 
year).  Luxembourg’s  standardised  house  price-to-
income  ratio  was  119.39,  significantly  above  the 
EU  average  of  98.89,  indicating  particularly  low 
housing affordability. The latest Housing in Europe 
in 
report  shows  that  overall  housing  costs 
Luxembourg  in  2024  (including  water,  electricity, 
gas and other fuels) remained among the highest 

(410) Eurostat, ‘Building permits - quarterly data’. 

(411) Eurostat, ‘Gross fixed capital formation by main asset type’.  

rate  decreased 

in  the  EU  (78%  above  the  EU  average)  (412).  The 
in 
housing  cost  overburden 
2024(413). While Housing cost overburden has been 
flagged  as  a  critical  issue  in  Luxembourg  for 
several  years,  it  decreased  from  11.5%  in  2023 
(above  the  EU  average  of  8.8%)  to  8%  in  2024 
(below  the  EU  average  of  8.2%)  (414).  In  2024, 
tenants in Luxembourg spent on average 27.0% of 
their disposable income on rent, compared with an 
EU  average  of  22.3%,  showing  that  renting  is 
particularly  costly  in  Luxembourg.  Nevertheless, 
the 
lower  overburden  rate  since  2023  was 
particularly pronounced among tenants and can be 
partially  explained  by  Luxembourg’s  increase  of 
the rent subsidy by  an average of 50% from late 
2022,  where  eligibility  is  limited  to  those  whose 
rent  is  greater  than  25%  of  their  net  income.  At 
the  same  time,  a  recent  LISER  study  (415)  also 
highlights  an  overburden  which  is  almost  three 
times higher for households with modest incomes 
than for the most affluent ones. Young people are 
also  particularly  affected,  since  the  proportion  of 
income which 18-29-year-olds spent on housing in 
2023 was 52% (vs EU average of 32(416) (). Other 
salient  social  aspects  of  housing  in  Luxembourg 
include  the  relatively  high  proportion  of  people 
living in under-occupied homes (57.5% of the total 
population  vs  EU  average  of  33.1%)  and  the 
comparatively  high  percentage  of  people  living  in 
dwellings with structural deficiencies (18.0% vs EU 
average of 15.6%). 

Social  housing  is  still  a  challenge,  despite 
measures  to  expand  supply.  A  major  obstacle 
to  social  housing  supply  is  the  difficulty  public 
providers face in acquiring private plots, combined 
with  strong  population  growth.  In  2024,  the 
Société  Nationale  des  Habitations  à  Bon  Marché 
(SNHBM, a public developer also acting as a social 
landlord)  began  building  301  affordable  housing 

(412) https://ec.europa.eu/eurostat/web/interactive-

publications/housing-2025. 

(413) It should be noted that this indicator is subject to volatility, 
with breaks in the series from 2020 up to and including 
2023. See also Annex 12. 

(414)The overburden rate should be read together with the tenure 
structure (homeowner, tenants), that may differ across 
country and regions.  

(415) https://logement.public.lu/fr/publications/observatoire/note-

44.html. 

(416) Eurofound 2025: living conditions and quality of life. 

Foundational challenges: the housing struggles of Europe’s 
youth. 

114 

 
 
 
Graph A16.4: Selected housing affordability indicators 

Source: Eurostat and European Commission calculations.  The overburden rate should be read together with the tenure structure 
(homeowner, tenants), that may differ across country and regions. 

(e.g. 

units,  up  from  230  in  2023.  SNHBM’s  medium-
term  objective  is  around  400  units  per  year, 
subject  to  land  availability.  The  state  also  buys 
housing  units  under  construction  to  add  to  the 
affordable  stock 
the  2024-2027  VEFA 
programme,  with  a  target  of  800  units).  More 
broadly, the 2025 budget law raised spending for 
the Fonds Spécial pour le Logement (Special Fund 
for  Affordable  Housing)  by  EUR 130  million 
compared  with  the  2024  budget,  and  a  further 
EUR 2  billion  in  spending  was  announced  for  the 
development  of  affordable  housing  over  2025-
2028.  Despite  these  and other  initiatives (e.g.  the 
Housing Pact 2.0 and the Affordable Housing Law 
(417),  there  is  still  considerable  scope  to  increase 
the availability of social housing, which represents 
only  3-4%  of  the  total  stock.  Around  6  000 
households  were  on  the  waiting  list  for  social 
housing  in  2025,  a  number  which  has  almost 
doubled since 2021.  

Affordability  and  availability  pressures 
disproportionately  affect  homeless  people 
and those with disabilities. According to a June 
2024 census (418) there were 300 homeless people 
in  Luxembourg,  although  this  was  a  point-in-time 
snapshot,  dependent  on  specific  criteria  rather 

(417) Housing Pact 2.0 (part of Luxembourg’s Recovery and 
Resilience Plan) is a partnership between the national 
government and the municipalities that provide funding, 
planning tools and support to increase the supply and quality 
of affordable housing and mobilise land for development. 
Luxembourg’s Affordable Housing Law (2023) sets up a 
framework for state-supported creation, financing, allocation, 
and management of affordable homes to expand supply and 
ensure rents or prices remain accessible to households 
struggling to find suitable housing. It also incorporates 
existing provisions on social rental management as a specific 
social housing strand. 

(418) ESPAN, The fight against homelessness and its links with 
anti-poverty policies in Luxembourg, Jeff Weitzel, 2025. 

than an exhaustive overview, focusing for example 
on people living in the street (ETHOS (419) 1) or in 
emergency  accommodation  (ETHOS  2).  According 
to  OECD  data  from  2022  (OECD  2024),  the 
estimated  proportion  of  homeless  people  was 
0.11%  of  the  national  population  in  that  year,  or 
in 
about  696  people.  The  main  challenges 
Luxembourg  are  a 
lack  of  affordable  and 
permanent  housing,  the  absence  of  a  national 
homelessness  strategy,  and  limited  access  to 
income  support  and  benefits  for  the  homeless. 
Luxembourg  has  nevertheless  committed 
to 
implementing  a  new  housing-led  homelessness 
and  housing  exclusion  strategy,  which  is  separate 
from  the  recently  published  anti-poverty  plan. 
Since  2022,  monitoring  and  data  quality  have 
been 
improved  through  twice-yearly  national 
homelessness counts and there is a robust supply 
of  NGO-based,  largely  state-financed,  emergency 
and  transitional  housing.  People  with  disabilities 
suffer  from  an  insufficient  supply  of  accessible 
housing.  Legal  accessibility  requirements  for  new 
housing,  through  the  Accessibility  Act  (2022), 
require at least 10% of homes in all new collective 
residential buildings to be accessible. However, this 
means that many existing homes are inaccessible 
or expensive to retrofit. People with disabilities are 
also 
low-income 
households and consequently face higher housing 
cost  overburden  rates.  There  is  also  a  lack  of 
systematic 
disability-related  data,  with  no 
monitoring  of  housing  accessibility, 
retrofit 
implementation  or  the  residential  autonomy  of 
people with disabilities. 

over-represented 

among 

(419) European Typology of Homelessness and Housing Exclusion 

115 

 
 
 
 
HORIZONTAL 
ANNEX 17: SUSTAINABLE DEVELOPMENT GOALS 

social 

fairness 

This  annex  assesses  Luxembourg’s  progress 
on the sustainable development goals (SDGs) 
along  the  dimensions  of  competitiveness, 
and 
sustainability, 
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 
inequalities  and  tackle  climate 
poverty,  fight 
change  and 
the  environmental  crisis,  while 
ensuring that no one is left behind. The EU and its 
Member  States  are  committed  to  this  historic 
global  framework  agreement  and  to  playing  an 
active  role  in  maximising  progress  on  the  SDGs. 
The graph below is based on the EU SDG indicator 
set developed to monitor progress on the SDGs in 
the EU. 

Luxembourg  performs  well  on  SDGs 4  and  9 
but needs to catch up with the EU average on 
SDG 8.  The  number  of  patent  applications  to  the 
European  Patent  Office  is  above  the  EU  average 

in  2025) 

(236 applications per million inhabitants vs 156 in 
the  EU 
(SDG 9).  Furthermore,  the 
percentage  of  adults  with  at  least  basic  digital 
skills  decreased  from  63.8%  of  individuals  aged 
16 to 74 in 2021 to 62.4% in 2025 (above the EU 
average of 60.4%) (SDG 4). Meanwhile, the rate of 
young  people  aged  15-29  neither  in  employment 
nor in education and training increased from 6.5% 
in  2019  to  8.7%  in  2025  but  remains  below  the 
EU  average  of  11%  (SDG 8).  The  recovery  and 
resilience  plan 
(RRP)  envisages  reforms  and 
investments  to  promote  a  data-based  economy 
and  digitalisation  of  public  administration.  It  also 
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. 

Luxembourg 

is 

improving 

on 

several 

Graph A17.1: Progress towards the SDGs in Luxembourg 

For a detailed progress assessment towards the various SDGs, see the annual Eurostat report ‘Sustainable development in the 
European Union’; for extensive data on the short-term SDG progress of EU countries, see Key findings – Sustainable development 
indicators; for an interactive visualization of SDG progress of EU countries, see SDG country overview. 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 or six 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 29 April 2026. Data refer mainly to the period 2019-2024 or 2019-2025. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

116 

 
 
 
 
 
 
sustainability  indicators  SDGs 2,  6,  7,  9,  11, 
12,  13  and  15)  and  performs  well  on  SDGs 
9, 11  and  15.  Luxembourg  has  a  greater 
proportion  of  terrestrial  protected  areas  than  the 
EU average, with 38.6% of its total area consisting 
of  terrestrial  protected  areas  compared  to  26.4% 
across  the  EU  in  2023  (SDG 15).  The  country 
further improved its performance on the recycling 
of municipal waste as a percentage of total waste 
generated (SDG 11) from 49.0% in 2018 to 56.5% 
in  2023,  well  above  the  EU  average  (47.9%).  The 
air  emission  intensity  of  fine  particulate  matter 
from industry decreased from 0.05 grams per euro 
in 2018 to 0.03 in 2023 below the EU average of 
0.05 (SDG 9). 

energy 

in  gross 

However,  it  needs  to  catch  up  with  the  EU 
average  on  SDGs 2,  6,  7,  12  and  13.  It  has 
made progress on organic farming, increasing the 
proportion of agricultural land dedicated to organic 
farming  from  4.4%  in  2019  to  7.2%  in  2024, 
albeit still below the EU average of 10.9% (SDG 2). 
On  SDG 6,  Luxembourg’s Water  Exploitation  Index 
improved from 0.6% of renewable water resources 
in  2018  to  1.9%  in  2023,  still  below  the  EU 
average  of  5.2%.  On  SDG 7,  the  percentage  of 
renewable 
energy 
consumption increased from 7% in 2019 to 14.7% 
in  2024  (still  below  the  EU  average  of  25.2%).  In 
contrast,  energy 
import  dependency  as  a 
percentage  of  imports  in  gross  available  energy 
decreased from 95% in 2019 to 91% in 2024 but 
remains above the EU average of 57.3 %. Despite 
a  slight  decrease  from  4.34  in  2019  to  4.09  in 
2024,  the  consumption  footprint  by  unit  of 
transgression  of  planetary  boundaries  (SDG 12) 
still  exceeds  the  EU  average  (3.15).  Luxembourg 
decreased 
its  net  greenhouse  gas  emissions 
(SDG 13)  from  16.8 tonnes  per  capita  in  2019  to 
10.1 tonnes in 2024, but it remains above the EU 
average of 6.5 tonnes. 

final 

Luxembourg  is  improving  on  SDG  indicators 
related  to  social  fairness  for  SDGs 3,  5,  7 
and 10. The percentage of people aged 16 or over 
who  perceive  their  health  as  good  or  very  good 
increased  from  71.9%  in 2019  to  73.1% in  2024 
(SDG 3). 
against  an  EU  average  of  68.5% 
Furthermore, 
relative  median  at-risk-of-
poverty  gap  showed  improvement,  decreasing 
from  24.6%  in  2019  to  19%  in  2024  (SDG 10). 
The  percentage  of  the  population  unable  to  keep 
their  home  adequately  warm  did  increase  from 
2.4%  in  2019  to  3.6%  in  2024  but  remains  well 
below the EU average of 9.2% (SDG 7). On SDG 5, 

the 

Luxembourg  reduced  its  gender  employment  gap 
(from  9.1 pps  of  those  aged  20-64  in  2019  to 
6.8 pps  in  2025,  well  below  the  EU  average  of 
9.6 pps).  Positions  held  by  women 
in  senior 
management  as  a  percentage  of  board  members 
did  increase  from  13.1%  in  2019  to  23.5%  in 
2025  but  remained  below  the  EU  average  of 
33.6%. 
the 
population  self-reporting  an  unmet  need  for 
medical care (SDG 1) is better than the EU average 
(1% vs 2.5% for the EU in 2024). 

Luxembourg’s 

percentage 

of 

Conversely,  it  is  moving  away  on  some 
indicators for SDGs 4 and 8. On SDG 4, tertiary 
educational  attainment  as  a  percentage  of  the 
population  aged  25-64  jumped  from  56.1%  in 
2019 to 65% in 2025, well above the EU average 
of  44.8%.  However,  while  still  below  the  EU 
average of 9.4%, 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. The in-work-at-risk 
of  poverty  rate increased from  12.1%  in  2019 to 
13.4%  in  2024,  remaining  above  the  EU  average 
(8.2%) (SDG 8). 

While  Luxembourg 
improving  on  one 
is 
indicator  related  to  macroeconomic  stability 
(SDG 16),  it  is  moving  away  from  others 
(SDGs 8 and 17). It 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  26.5%  in  2025  but  remains  very  low 
compared to the EU average of 81.7%. Meanwhile, 
the  investment  share  of  GDP  decreased  from 
18.1% in 2019 to 15.4% in 2024, remaining below 
the EU average at 21.7% (SDG 8). On SDG 16, the 
percentage  of  the  population  that  perceived  the 
independence  of  the  justice  system  as  very  good 
or fairly good increased from 70% in 2019 to 77% 
in 2025, much higher than the EU average of 54%. 
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. 

117 

 
ANNEX 18: COMPETITIVE REGIONS 

Regional development trends 

Although  Luxembourg  performs  well  above 
the  EU  average  in  most  indicators,  GDP  per 
head  is  largely  driven  by  Luxembourg  city 
and  is  undergoing  a  steady  relative  decline. 
Between 2004 and 2014, GDP per head increased 
steadily,  peaking  at  282%  of  the  EU  average. 
Since 2014, it has stagnated, growing slower than 
the EU average but remaining well above it (242% 
of  the  EU  average  as  of  2024).  Similar  patterns 
can be observed in gross national income over the 
same  period.  Luxembourg’s  development  model 
relies  heavily  on  cross-border  workforce  inflows 
and  fast  population  growth,  which  outpace 
productivity  gains.  This  results 
long-term 
convergence  issues  between  rural  and  urban 
areas. 

in 

Map A18.1:  GDP per head compared with the EU 
average 

jobs  in  Luxembourg  city  means  that  peripheral 
zones  struggle  to  attract  knowledge-intensive 
activities,  resulting  in  most  of  productivity  gains 
remaining in urban areas.  

Employment  and  unemployment  rates  vary 
by territorial type in Luxembourg. The average 
rate of employment is lower in towns and suburbs 
(71.8%)  and  rural  areas  (72.9%)  than  in  cities 
(81.3%).  The  unemployment  rate  is  higher  in 
towns  and  suburbs  (7.6%)  than  in  rural  areas 
(5.5%)  and  cities  (6.0%).  Both  employment  and 
unemployment  rates  deteriorated  in  all  areas 
compared with 2023 (see Annex 11).  

The  population  is  growing  faster  in  cities, 
driven  by  a  positive  net  migration  of  young 
workers.  Both  positive  net  migration  and  natural 
population  growth  result  in  higher  demographic 
growth than the EU average (Table A18.2). 

Key challenges for regional 
competitiveness 

Luxembourg’s  large  cross-border  workforce 
strongly  contributes  to  housing  and  mobility 
challenges  both  in  cross-border  territories 
and  the  main  commuter  belts.  Tackling 
through  more  efficient 
territorial  disparities 
housing,  transport  and  territorial  planning 
is 
necessary  for  economic  growth.  Luxembourg’s 
land  planning  strategy  (PDAT)  aims  to  ensure 
horizontal  coordination  among  national  sectoral 
policies  (such  as  for  transport,  housing,  economic 
activity  and  environmental  conservation)  and 
vertical 
municipalities’ 
responsibilities (420). The national mobility plan sets 
for  strengthening  multimodal 
out  guidelines 
capabilities 
cooperation, 
particularly  for  rail  and  road  public  transport (421). 
The 2025 county-specific recommendations (CSRs) 
for  Luxembourg  point  to  the  need  to  “improve 
cross-border 
transport 
challenges are to be tackled in close collaboration 
with  municipalities.  Land  planning  efficiency  is 
hindered by a lack of coordination at national level 

connections”. 

cross-border 

alignment 

Local 

with 

and 

(420) Ministry of Housing and Spatial Planning, 2023, PDAT. 

(421) Ministry of Mobility and Public Works, 2025, PNM 2035. 

2021-2023 average GDP per head in purchasing power 
standard compared with the EU average. 
Source: Commission calculation based on Eurostat 16 July 
2025 data 

Luxembourg’s  productivity,  driven  by  the 
capital,  remains  high  but  is  slowly  declining 
(Table  A18.2).  The  country’s  economy 
is 
characterised  by 
large,  highly  productive 
financial  sector,  which  is  concentrated  in  the 
Luxembourg  city  area.  This  sector  accounts  for 
25% of GDP, 11% of employment and 25% of tax 
revenues.  The  concentration  of  financial  sector 

its 

118 

 
 
 
 
 
 
 
 
Table A18.1:Main development trends, challenges and the concentration of resources 

Source: Commission analysis based on Eurostat data; categories of regions based on Map A18.1 

due  to  the  high  autonomy  of  municipalities (422). 
Furthermore,  the  PDAT  lacks  a  legal  basis  for 
enforcement,  leading  to  a  lack  of  coordination 
between  planning  and  sectoral  policies (423). 
Although  the  national  land-use  plan  sets  out  a 
long-term vision  and  identifies paths to  solutions, 
high decentralisation in spatial planning is a major 
bottleneck to achieving that vision. 

Map A18.2:  Effort rate for accessing property by 
municipality (2023) 

Source: Fondation IDEA (2024) 

Housing affordability is an increasingly acute 
issue  in  cities  and  a  major  bottleneck  to 
competitiveness.  The  household  effort  rate  for 
housing 
(the  share  of  household  disposable 
income spent on housing costs) rose by more than 
10  percentage  points  between  2017  and 
2022 (424).  The  effort  rate  for  accessing  property 
varies  by  municipality,  with  the  highest  rates  in 
municipalities  with  low  socio-economic  indicators 

(422) Ministry of Housing and Spatial Planning, 2023, PDAT; OECD, 
2020, ‘Policies for a more efficient and inclusive housing 
market in Luxembourg’. 

(423) Ministry of Housing and Spatial Planning, 2023, PDAT; OECD, 

(424) National Institute for Statistics, 2023, PIBien-être Report - 

2025, OECD Economic Surveys Luxembourg 2025. 

Statistics Portal - Luxembourg. 

119 

Main development trendsMore developed regions (population 682 000)Although Luxembourg’s average GDP per head (in purchasing power standard, PPS) between 2021 and 2023 was above the EU average, relative performance across key indicators is weakening, with population growth outpacing economic expansion. The regional development model is characterised by strong territorial concentration of highly-skilled jobs in the capital, with rural areas facing moderate labour market outcomes and higher risks of social exclusion. Rapid population growth and cross-border employment have created great pressure on housing prices and availability, hindering further growth and highlighting a continued need for more effective urban and suburban spatial planning. Urban mobility infrastructure is efficient but remains underused due to commuters’ reliance on road infrastructure, particularly on cross-border routes. Long-term, sustained competitiveness and quality of life will require increased diversification of the economy, better coordination in land planning and targeted decarbonisation efforts, including tapping rural areas’ potential for producing solar energy.Specific territoriesMeasures under the Just Transition Fund focus on the 11 municipalities that make up the South region. This area is the second development pole of Luxembourg, historically shaped by its industrial and manufacturing activities. It accounts for more than a third of national jobs affected by the green transition, making it highly exposed to the transition’s impact on the economy and employment. The region also has higher concentrations of low-income households and an ageing building stock, making it more vulnerable to energy poverty risks and increasing the need for targeted energy-efficiency and renovation investments. The strong flow of cross-border commuters creates acute and growing pressure on the transport system, requiring continued support to smart urban planning and investments in low-carbon local transport solutions. 
 
 
 
 
  
 
 
   
 
(Map  A18.2).  Rental  prices  also  spike  closer  to 
Luxembourg city (Map A18.3). Housing supply has 
failed  to  meet  the  rising  demand.  Despite  the 
availability  of  serviced  land,  much  of  it  has 
remained  vacant  due  to  a  lack  of  incentives  for 
both municipalities and private owners to develop 
it (425)  (see  Annex  16).  Housing  investments  are 
hindered  by  insufficient  capacity  at  municipal 
level.  Although  municipalities  are  responsible  for 
several  aspects  of  housing  in  Luxembourg  – 
including for providing affordable housing – fiscal 
and  planning  capacity  constraints  limit  sufficient 
investment  and  construction (426).  The  2025  CSRs 
for  Luxembourg  highlight  the  need  to  ‘increase 
housing  supply, 
in  particular  by  adopting  a 
comprehensive  land-use  policy  and  property  tax 
reform’. 

Map A18.3:  Rental prices by municipality, 2022-
2024 

region  are 

implementation 

was  close  to  its  limits,  emphasising  the  need  for 
more  frequent  and  higher-capacity  services (427). 
Therefore,  new  tram  lines  in  the  city  and  to  the 
the  making.  Public 
south 
in 
transportation 
is 
solutions 
advancing  between  the  Agglo-centre  and  the 
South  Region.  There  is  however  still  room  for 
multimodal  improvements  in  rural  areas  more 
distant  to  the  main  rail  axis  (428)  (429).  Most 
commuters  travel  to  the  two  main  employment 
centres: the Agglo-Centre around Luxembourg city 
and  the  south  agglomeration  (Map  A18.4).  Under 
in 
the  national  mobility  plan, 
developing  the  rail  infrastructure  are  planned or 
already  being  implemented  (430).  Besides,  the 
insufficient availability of affordable housing leads 
to  heavy  and  long  cross-border  commuting  which 
is  a  major  source  of  greenhouse  gas  emissions. 
Cross-border  commuting  remains  a  persistent 
challenge,  with  reportedly  inefficient  connections 
leading  to  an  overreliance  on  car  usage  thus 
aggravating  congestion  on  the  main  road  axes 
(see Annex 8). 

investments 

Source: LISER (2024) 

commuter 

This  generates  high 
flows, 
especially  in  the  south-west  of  the  country 
which  lead  to  major  transport  bottlenecks. 
Following the introduction of free public  transport 
in 2020 and the introduction of the tram, capacity 

(425) LISER, 2024, Les cahiers de la Grande Région : Le logement, 
une problématique transfrontalière; OECD, 2022, OECD 
Economic Surveys Luxembourg 2022. 

(426) Syvicol, 2023, Priorités d’action du comité pour la période 
2024 – 2029; OECD, 2025, OECD Economic Surveys 
Luxembourg 2025. 

(427) OECD, 2025, OECD Economic Surveys Luxembourg 2025. 

(428) OECD, 2025, OECD Local Data Portal. 

(429) IDEA, 2024, Le codéveloppement dans l’aire métropolitaine 

transfrontalière du Luxembourg. 

(430) Ministry of Mobility and Public Works, 2025, PNM 2035. 

120 

 
 
 
 
 
 
Table A18.2:Key indicators for Luxembourg 

Dark green – the indicator is at least 120% of the EU average. 
Light green – the indicator is at least 100% but less than 120% of the EU average. 
Yellow – the indicator is at least 90% but less than 100% of the EU average. 
Light red – the indicator is at least 75% but less than 90% of the EU average. 
Dark red – the indicator is less than 75% of the EU average. 
This colour scale applies to ‘positive’ indicators where higher values are favourable. 
For ‘negative’ indicators (where higher values are unfavourable), the colours are reversed. 
Source: Eurostat data 

Rural areas struggle with access to services, 
and  innovation  and  companies  are  highly 
concentrated  in  Luxembourg  city  and  the 
Agglo-Centre.  Policies,  such  as  the  research  and 
innovation  smart  specialisation  strategy (431),  aim 
to promote economic diversification into ICT, data-
driven  services  and  high-end  health,  space  and 
green technologies by spreading productive assets 
beyond  the  Agglo-Centre (432).  However,  public 
R&D investment was lower than the EU average in 
2024,  with  the  risk  of  insufficient  investment 
impeding 
smart 
attainment 
specialisation objectives (see Annex 4). In addition, 
continuing  to  improve  digital  connectivity  and 
broadband  speeds  in  rural  areas  could  improve 
(433).  Territorial 
local  business  environments 
disparities in access to education and educational 
attainment levels are driving competitiveness gaps 
in  rural  areas.  The  urban-rural  divide  in  adult 
participation 
in 
in  education  and 
Luxembourg  is  higher  than  the  EU  average.  Only 
48%  of  rural  residents  hold  a  tertiary  degree 
against 81% in cities. Luxembourg has a relatively 

training 

the 

the 

of 

(431) Smart specialisation strategies are strategic, territorially 

based frameworks for innovation and industrial policy that 
help Member States and regions identify and leverage their 
unique comparative advantages to address structural 
challenges, foster economic transformation and enhance 
competitiveness. 

(432) Ministry of the Economy, 2024, RIS3. 

(433) JRC, 2025, ‘Entrepreneurship in the EU: key insights into 

business dynamics in rural regions’, JRC143536; European 
Commission, Rural observatory – Broadband speed (mobile 
networks) and Rural observatory – Broadband speed (fixed 
networks). 

substantial  urban-rural  gap  in  tertiary  education 
attainment  (TEA)  among  young  people  (aged  25-
34)  at  36.6% 
(see  Annex  13). 
(EU:  22%) 
Additionally,  closing  the  rural-urban  broadband 
speed  gap  could  attract  more  new  businesses  to 
rural areas (434). 

to 

just 

transition  plan  due 
of  manufacturing 

Luxembourg  has  untapped  potential  for 
renewable energy, including in just transition 
territories with high emissions. Under the Just 
Transition Fund, transition territories are supported 
in  increasing  the  share  of  renewable  energy 
produced.  The  South  region  (composed  of  11 
municipalities)  is  the  main  area  of  focus  of  the 
territorial 
the 
concentration 
industries 
generating  high  emissions (435).  Wind  energy 
production  is  close  to  reaching  its  maximum 
technical  potential.  However, 
solar  energy 
production  remains  underused,  particularly  in  the 
post-industrial  South  region  where  investments 
solar  energy 
are 
deployment.  This 
relevant  as 
Luxembourg  stands  among  the  Member  States 
with the highest production potential per unit area 
in urban zones. The 2025 CSRs highlight the need 
to  ’support  municipalities  in  deploying  renewable 
campaigns, 
energy’.  Meanwhile, 

targeted  at 
is  particularly 

exploration 

specifically 

(434) European Commission, 2025, ‘Digital Decade Country report 
(Luxembourg)’; European Commission, Rural observatory – 
Broadband speed (mobile networks) and Rural observatory – 
Broadband speed (fixed networks). 

(435) Fonds Européens, 2023, Plan territorial pour une transition 

juste.  

121 

GDP per head (PPS, index)Population growthGrowth in natural populationNet migration of population aged 15-39Real GDP per head growthProductivity: GDP (PPS) per hour worked (index)Population aged 25-34 with high educational attainmentEmployment in knowledge-intensive servicesEmployment rate 20-64Unemployment rateAt-risk-of-poverty or social exclusion rate (AROPE)EU27=100Average annual change per 1000 residentsAverage annual change per 1000 residentsAverage annual change per 1000 residents aged 15-39Average annual % changeEU27=100% of population aged 25-34% of total employment% of population aged 20-64% of labour force% of population20242015-20242015-20242014-20232014-2024202420252025202520252024EU1001.8-1.77.11.4100.044.841.776.16.021.0Luxembourg24518.73.234.6-0.1169.165.058.673.96.520.0  
 
 
 
  
 
including  test  drilling  in  the  southern  part  of  the 
country,  are  under  way  to  tap  into  geothermal 
energy,  with  the  objective  of  developing  district 
heating networks (436). 

Map A18.4:  Cross-border workers in Luxembourg 
by place of residence, 2022 

Source: LISER (2024) 

(436) Department of Energy, 2022, Activity report 2022.  

122 

 
 
 
 
 
ANNEX 19: TRANSPORT 

This  Transport  Annex  presents  the  state  of  play 
and  the  challenges  Luxembourg  faces  with  the 
implementation  of  the  trans-European  transport 
network  (TEN-T),  the  European  railway  traffic 
management  system  (ERTMS)  and  the  roll-out  of 
Sustainable Aviation Fuels (SAF). 

The  North  Sea  –  Rhine  –  Mediterranean 
corridor  is  the  only  TEN-T  corridor  that 
crosses  Luxembourg.  The  TEN-T  in  Luxembourg 
comprises 216 km of rail (of which 117 km are on 
the core network) and 90 km of road (of 69 are on 
the  core  network).  Luxembourg  has  37 km  inland 
waterways  on  the  TEN-T,  one  airport  (a  core 
airport), one port (a core port) and one urban node 
(437). 

on 

focuses 

Luxembourg 
capacity 
improvement  and  station  modernisation. 
Following  the  completion  of  the  EuroCap-Rail 
direct link between Luxembourg and Bettembourg, 
works  continue  on  the  Bettembourg  station  (new 
track  layout  and  signal  box,  completion  set  for 
2035)  and  peripheral  stations  at  Howald  and 
flows.  The 
Hollerich 
improve  passenger 
to 
Wasserbillig 
level 
line  upgrade  will 
crossings  by  2030,  enhancing  safety  and 
reliability.  The  Bettembourg  marshalling  yard 
redevelopment  adds  reception  sidings  and  train-
splitting facilities, addressing freight handling  

remove 

bottlenecks by 2036.  

Given the role that inland waterways play in 
the county’s logistics, Luxembourg also plans 
to  invest  in  upgrades  of  locks  along  the 
Moselle river (EUR 240 million by 2034). 

The  ERTMS  is  essential  to  digitalising  the 
railways and to modernising and harmonising 
railway operations across Europe.  The ERTMS 
ensures the safety of rail networks by providing a 
unified signalling system that significantly reduces 
the 
It  also  provides 
interoperability  between  national  rail  systems, 
improving  cross-border  train  movements.  Finally, 
the  ERTMS  enhances  network  capacity  and 
operational 
the 
competitiveness of the rail sector.  

risk  of  accidents. 

efficiency, 

increasing 

The  ERTMS  has  been  fully  rolled  out  across 
the  Luxembourgish  network  (except  for  a 
new line of 9 km on which it will be deployed 
in  2026) (438).  Harmonising 
technical  and 
operational rules with the minimisation of national 
rules  in  line  with  the  EU  directives  on  rail 
interoperability  and  safety  remains  critical  to 
ensuring seamless cross-border rail transport. 

Table A19.1: ERTMS deployment in Luxembourg. 

Source: Based on ERTMS – Third work plan of the European Coordinator Matthias Ruete. 

(437) TENtec Information System, according to Reg. 2024/1679. 

Coordinator Matthias Ruete. 

(438) Based on ERTMS – Third work plan of the European 

123 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Map A19.1:  TEN-T Cross-Border & National Priority Sections in Luxembourg 

The  railway  network  in  Luxembourg  does  not  yet 
achieve  the  travel  speed  required  for  passenger 
trains under the TEN-T Regulation by 2040.  

Luxembourg  has  no  domestic  national 
sustainable  aviation  fuel  (SAF)  production 
but  is  eager  to  develop  an  eSAF  (produced 
from hydrogen) ecosystem in Luxembourg. To 
this  end,  Luxembourg  participates  in  the  eSAF 
Early  Movers  Coalition  and  Luxembourg  airports, 
as well as aircraft operators invested in European 
eSAF  projects.  However,  achieving  ReFuelEU 
Aviation’s  objectives 
requires 
scaling  up  SAF  production,  both  SAF  of  biological 
(bioSAF)  and  eSAF.  Luxembourg  could 
origin 
further deploy eSAF supply chains to its airports to 
support passenger and freight transport departing 
from  Luxembourg,  notably  by  ensuring  sufficient 
revenues (EU ETS, ReFuelEU Aviation penalties) are 
used for production support, such as double-sided 
auction mechanisms. 

in  Luxembourg 

124