On Thursday 17 June, the Idea Foundation presented its “Inventory before the end of the crisis”, containing 18 contributions on topics such as taxation, the real estate market, telecommuting. Among the contributors, economists Narimène Dahmani and Michel-Edouard Ruben have co-written a chapter entitled “Supporting as much as necessary, that's how much!”. The two outline their analysis of the aid provided by the government in the middle of the pandemic.

Supporting as much as necessary?

“When the crisis arrived, the State said: 'we will support as much as necessary'. Two plans were announced: a stabilisation plan (Stabiliséirungspak) and a recovery plan (Neistart Lëtzebuerg). Fortunately, not all of what was announced--€11 billion--has been spent [editor's note: only €2.5 billion in the first quarter of 2021]. This means that the economy has been able to remain stable.

“When we analyse in more detail what has been done, we notice that direct aid [editor's note: which includes repayable advances] has been used up to 52%. This includes partial unemployment, which has helped to maintain salaries and employment, but also companies that have not been forced to get rid of their employees in order to eventually rehire them afterwards--as happens in the United States, which does not have this system. And also the stimulus funds, the assumption of uncovered costs, the compensation for the self-employed, etc."

“While the measures of guarantee (of the state for loans) and deferral (of taxes, social contributions, etc.) have been very little used. This can be seen as a good thing, as it can be assumed that the much talked about risk of over-indebtedness of companies and zombification effect will be lessened.

With all of this, can we say that the state has supported businesses and independents “as much as necessary”?

“One way to answer this question is to compare the performance of Luxembourg's companies and economy with that of other countries. We can see that this has enabled us to support the economy in a very skilful way, which has held up well. Jobs have been created, the recession has been less deep than in other countries, and the economy is rebounding well.

“There is also the room for manoeuvre part. What was announced has been under-utilised, but that means that if needed, there is still money in the coffers to act, which is still very reassuring."

What support is still needed?

“That's the question that remains unanswered. Economic policy is also an art. We discuss the brushes with the government, but the government paints the picture. The principle is to support as much as necessary. It’s not how much we need, but what we need to do, we will do, as much as necessary."

Until when? For whom?

“There are some areas that we will have to more or less stop supporting, others that we will have to continue to support. Again, the question is: is there enough room to do so? Is there enough money in the coffers to do it? And is there the will to do it? I think the answer to all these questions is yes.

Besides that, the best economic policy is to stop the epidemic. Vaccination, and that it works.”

This article was originally published on Paperjam.lu. It has been translated and edited for Delano.