Luxembourg’s recovery and resilience plan

Luxembourg’s recovery and resilience plan contains 20 measures (8 reforms and 12 investments) which will help the country become more sustainable, resilient and better prepared for the challenges and opportunities of the green and digital transitions. Those measures will be financed by €93million in grants. 61% of the plan will support climate objectives and 32% will foster the digital transition.

The transformative impact of Luxembourg’s plan is the result of a combination of complementary reforms and investments, which address several specific challenges of Luxembourg and will support cohesion and growth potential in the long term. The reforms will address bottlenecks to lasting and sustainable growth, while investments are targeted at green and digital transition. They will contribute to clean energy and transport, biodiversity protection, as well as the digitalisation of public administration and, as part of a European project, developing and deploying an ultra-secure communication infrastructure based on quantum technology. The plan will also provide training to job seekers, short-time and older workers, improve the resilience of the healthcare system and increase the availability of affordable housing. The plan also contributes to promoting a transparent and fair economy, through measures aimed at ensuring effective supervision and enforcement of the anti-money laundering framework. All reforms and investments must be implemented within a limited timeframe, as the Regulation on the Recovery and Resilience Facility foresees implementation by August 2026.

The economic impact of NGEU in Luxembourg could lead to an increase of GDP between 0.5% and 0.8% by 2026. Luxembourg’s economy will benefit significantly from the Recovery and Resilience Plans of other Member States, for instance through exports. These spill-over effects account for 0.7% percentage points of the 0.8% gross domestic product impact by 2026. These estimates do not include the possible positive impact of structural reforms, which can be substantial. Altogether, this demonstrates the added value of joint and coordinated action at the European level.

+ 0.5-0.6%

Impact of NextGenerationEU on Luxembourg's gross domestic product by 2026

830

Jobs by 2026

0.7%

Gross domestic product benefits thanks to other Member States’ recovery and resilience plans in 2026

When designing the recovery and resilience plan, Luxembourg authorities consulted the Luxembourg Parliament and social partners, while pursuing a close dialogue with the Commission ahead of the formal submission of the plan on 30 April 2021. On 18 June 2021, the Commission gave its green light to the plan. On this occasion, President von der Leyen symbolically transmitted the Commission’s assessment to Prime Minister Bettel during a visit to Luxembourg. The recovery and resilience plan was in turn adopted by the Council on 13 July 2021 opening the door to its implementation and financing.

Recovery and resilience plan for Luxembourg

Green transition

Luxembourg still has the highest greenhouse gas (GHG) emissions per capita in the EU, despite a relatively less carbon-intensive economy. To reach climate neutrality, Luxembourg needs to significantly reduce emissions notably in the transport and building sectors.

Key measures for the green transition

Luxembourg’s plan puts a strong focus on the green transition. Its contribution to the green transition amounts to 61% of its total allocation of €93 million. Specific measures include €30.5 million to enlarge the network of charging points for electric vehicles across the country and €24 million to supply a new housing district with heat and electricity produced from renewable energy sources. The plan also directs €6 million to establish a 'Naturpakt' with municipalities to provide financial support for actions to protect nature and prevent biodiversity loss.

Example project: Electro-mobility

This investment of €30.5 million aims to foster the deployment of a dense, accessible network of charging points for electric vehicles across Luxembourg. It consists of a support scheme that will financially support initiatives taken by businesses and complement existing schemes to make electric mobility more attractive for Luxembourg’s drivers. With the deployment of 2,600 additional charging points, this measure is expected to make a useful contribution to the shift towards sustainable mobility.

Digital transition

Luxembourg is among the EU leaders in connectivity with high coverage of next-generation access networks. However, Luxembourg needs to invest in digital skills. In addition,the use of digital public services remains below the EU average.

Key measures for the digital transition

Luxembourg’s plan contributes to the digital transition of the country with a broad and cross-cutting approach. Specific measures to support securing Luxembourg's digital transition include a €10 million investment and a related reform to support quantum-technology communication for ultra-secure connectivity solutions, to improve the security of public sector communicationsas part of a wider European project, and €13 million to digitalise the public administration, simplifying internal processes as well as those with firms and citizens. The plan also includes an investment on digital skills for workers and two investments to increase the efficiency of the health sector through its digitalisation.

Example project: Digitalise the National Employment Agency (ADEM):

Luxembourg’s recovery and resilience plan includes an investment to address the challenges arising from the major changes affecting the labour market. The objective of this investment is to digitalise the Agency for the Development of Employment (ADEM) by upgrading its IT resources. This will increase the efficiency of ADEM notably by speeding up processes within the organisation, creating a more personalised approach and improving the execution and control of financial assistance to beneficiaries.

Economic and social resilience

Key macro-economic challenges for Luxembourg’s economy include, in particular, a relatively low activity rate for older workers, and a shortage of skilled workers, including in strategic sectors such as information and communication technologies and healthcare. In addition, sharply rising housing prices have an impact onhousing affordability, which also risks amplifying inequalities.

Key measures in reinforcing economic and social resilience

The Recovery and Resilience Plan is expected to have a positive impact on inclusive growth and productivity via a higher labour force participation rate and a better matching between labour supply and demand, thereby reinforcing economic and social resilience. In particular, a contribution to skills development is provided by investments of €6.5 million in two vocational training programmes, “Digital Skills” and “Futureskills”, which aim at developing digital and managerial skills among job seekers. The plan also includes a complementary reform, “Skillsdësch”, to design training programmes for the most promising job profiles. The single digital register for health professions as well as the reform redefining the competences, tasks and responsibilities of healthcare professionals will contribute to anticipating shortages of healthcare professionals. The reform of the “Housing Pact” will strengthen the public sector's capacity to increase the supply of affordable and sustainable housing. The plan also includes investments amounting to €12.7 million in the modernisation of the public administration and digitalisation of public services so that people and firms can more easily access these services. Lastly, in the fight against money laundering and terrorist financing, the plan foresees the adoption of a new law to improve supervision against money laundering and to perform assessments of money-laundering and terrorist-financing risks in order to strengthen the resilience of the economy.

Example project: ‘Housing Pact 2.0’

Against the backdrop of very high housing prices in Luxembourg, this reform aims at better targeting the governmental support to municipalities to create affordable housing, and to better use the existing residential housing and land potentially available for construction. The objective is to mobilise available land and buildings to increase and improve the supply of affordable housing through public financial incentives to municipalities for acquiring plots of land to build as well as unused buildings to renovate.
The Recovery and Resilience Plan of Luxembourg is consistent with relevant country-specific challenges and priorities identified in the context of the European Semester, the annual cycle of coordination and surveillance of the EU’s economic policies. For a detailed explanation of the European Semester see the following link: The European Semester explained | European Commission (europa.eu)