Neistart: Government unpacks covid-19 rescue

Luxembourg finance minister Pierre Gramegna is pictured during a press conference on 20 May 2020 to unveil the "Neistart Lëtzebuerg" rescue package Luxembourg government/Jean-Christophe Verhaegen

Luxembourg finance minister Pierre Gramegna is pictured during a press conference on 20 May 2020 to unveil the "Neistart Lëtzebuerg" rescue package Luxembourg government/Jean-Christophe Verhaegen

The fresh measures will bring an additional €800m in aid to companies and individuals financially impacted by the fall-out of lockdown, bringing the total package for restarting the economy to €3b, finance minister Pierre Gramegna (DP), and deputy prime ministers Dan Kersch (LSAP) and François Bausch (déi gréng) explained. The earmarked aid is equivalent to 5% of the country’s GDP.

“The situation is very special and has led to a recession,” Gramegna said, adding: “Over the next two years we won’t have any growth. It’s a dramatic situation, not just for Luxembourg, but for most European countries.”

The three ministers explained the “Neistart Lëtzebuerg” package focuses on encouraging employment, supporting the worst-affected businesses in their recovery and ensuring a sustainable recovery.

Strengthening company liquidity was critical, Gramegna said. “People must pay their bills. Companies must pay their suppliers and taxes to ensure a virtuous circle. If we succeed, our economy will continue to function.”

What’s in the new package?

Applying for partial unemployment measures, in which the government subsidises worker salaries when there is not sufficient work for them, will be made simpler in future. Starting in July, submitting a recovery or job maintenance plan will be possible online.

Luxembourg has created a business recovery and solidarity fund to support the sectors worst affected by the covid-19 crisis. The fund will operate for six months starting 1 July, offering a monthly €1,250 grant per employee to hotel, catering and events (including cultural events), tourism and fitness centres. The grant drops to €250 for each employee on the short-time working scheme. It will be given to companies that have not yet been able to reopen. To qualify, firms must reopen for business and prove a loss of at least 25% of turnover.

It is capped at €10,000 per month for companies with fewer than 10 employees, €50,000 per month for companies with fewer than 50 employees and €100,000 per month for companies with more than 50 employees.

Luxembourg has created a new flat-rate grant for shops (excluding food) and personal care services employing under 250 people, which reopened on 11 May, offering €1,000 per employee in June, €750 in July and €500 in August, capped at €50,000 per month.

Other support measures

To promote domestic tourism, every Luxembourg citizen aged 16 or over and cross-border worker will receive a €50-voucher to spend on accommodation within the grand duchy.

Landlords that reduce rents on commercial leases will be able to benefit from a tax allowance, equivalent to twice the amount of the rent reduction, up to a ceiling of €15,000. It is also forbidden for landlords to increase rents on residential properties between now and the end of the year.

Aid for firms in temporary financial difficulty will be extended by 4 months. Companies can apply for an additional repayable advance to cover part of their costs between 15 May and 15 September 2020.

To support lawyers and trainee lawyers working under the legal aid scheme, the legal aid hourly rates will be increased by 10%.

Specific grants will be introduced to support the revival of culture and artistic creations, and the sports sector. Further details on this are expected to be outlined in the coming weeks.

The cost-of-living allowance for people on low incomes will be doubled and family support leave will be extended for people who have been forced to stop working to care for adults with disabilities or the elderly.

The maximum period of support for students in higher education will be extended for the 2020 summer semester.

To encourage sustainable business investments, Luxembourg will offer subsidies to companies that make their activities more energy efficient and increase productivity and competitiveness in the long-term. Three types of aid will be offered: investment aid for development projects, investment aid for process and organizational innovation and investment aid for energy efficiency. The support is capped at €800,000 per project and at half of the project costs.

Green transition

Bausch announced a package of green transition measures, many of them increasing the ceilings on existing incentives.

The housing bonus for projects which improve thermal efficiency in buildings will be increased by 50%. Consumers switching to renewable energies for heating will see a 25% increase in subsidy amounts. The existing subsidy on the purchasing of bicycles or e-bikes, quads, motorcycles and mopeds will be increased 100% from 11 May until the first quarter of 2021 (capped at €600 and €1,000). And anyone purchasing an electric car for the same period will receive €8,000 back from the State, up from €5,000. These grants will apply on purchases made up to 31 March 2021. Subsidies will also be offered for the installation of electric charging stations and for photovoltaic installations over 30kW.