Luxembourg’s public debt has more than tripled since the 2008 financial crisis, recalls the Court of Auditors in its opinion on the 2025 draft budget. However, this draft budget does not include any budgetary rebalancing strategy. in the short and/or medium term, the Court is alarmed.
The debt should stand at 27.5% of GDP in 2025, if forecasts come true, i.e. below the 30% threshold that successive governments do not want to exceed, in particular in order to preserve the triple A rating of the rating agencies. . But, according to the multiannual budget, it should increase by 7 billion euros by 2027.
“As a small open economy, Luxembourg is particularly exposed to external shocks and must therefore have greater budgetary room for maneuver than large, less vulnerable economies,” writes the institution. The Court also questions the impact of tax reductions in favor of businesses: “The positive effects of the tax cut remain uncertain, while the financial impact on tax revenues and the state budget is indisputable “.
The 5.5% increase in excise duties on cigarettes and smoking tobacco from January 1, 2025 “is more of a one-off initiative than a coherent strategy” to combat smoking, the Court further underlines, for which “revenues from the sale of tobacco should be related to the health and social costs generated by smoking”.
The institution also recommends exploring alternative tax resources to replace certain unsustainable revenues in the long term, referring to the sale of fossil fuels and tobacco “which seem to be crumbling or, at the very least, plateauing”. All this while the European Commission is proposing to impose a ban on tobacco at European level and has set itself the objective of aiming for a “tobacco-free generation” by 2040.
