Parliament adopts 2022 budget

Finance minister Pierre Gramegna (DP) pictured in parliament on 16 December Photo: Micael Borges / Chamber of Deputies

Finance minister Pierre Gramegna (DP) pictured in parliament on 16 December Photo: Micael Borges / Chamber of Deputies

Coalition lawmakers on Thursday adopted Luxembourg’s 2022 budget with a majority of one vote, as the finance minister defended postponing a tax reform but supporting the indexation of wages.

Pierre Gramegna (DP) in October had presented the draft budget, which foresees state spending of €23.5bn compared to revenue of €22.3bn. Public debt will amount to 26.6% of GDP, below a coalition target of 30% and below an EU target of 60%, which has been suspended because of the pandemic.

During a speech on Wednesday, Gramegna had said that it was part of “the rules of the game” for the opposition to vote against the budget and this is exactly what happened on Thursday morning when 31 MPs of the DP, LSAP and Déi Gréng majority voted for the budget and 29 MPs of the CSV, ADR, Déi Lénk and Pirate Party opposed the plans.

Opposition parties during a debate on the budget had criticised its lack of vision and ambition and its failure to address social issues, such as the rising cost of living and the tax burden for single-parent families.

A comprehensive tax reform foreseen in the 2018-2023 coalition programme was shelved in the wake of the pandemic and Gramegna on Thursday once again stressed that the financial situation currently does not allow tax cuts.

The finance minister expects inflation to continue at a high level but said the indexation of salaries would act as a countermeasure.

This comes after business union UEL on Thursday said it fears a wage-price spiral, adding that indexation would increase costs for companies even further who are already facing a higher financial burden because of rising energy prices and raw materials shortages.

The group had previously called for indexation to be abolished or at least limited to low-income earners. But the government during a meeting with employee and employer groups on Monday had shot down the idea.

The 2022 budget and a multiannual budget preview to 2025, also adopted by the coalition partners, marked Gramegna’s last outing in parliament before he steps down at the start of next year to be replaced by former diplomat Yuriko Backes.