Inflation was the main topic of the trilateral talks

The Luxembourg government held the first round of tripartite talks with trade unions and employers at Château de Senningen. The main topic of the day was curbing price rises. Prime Minister Luc Frieden presented a package of initiatives aimed at reducing energy costs, slowing inflation overall and strengthening support for citizens as part of the green transition. The proposed package of measures includes not only direct subsidies for the purchase of energy resources, but also fiscal instruments to bolster the population’s purchasing power. The head of government described the discussions as complex, emphasising that the proposed measures do not meet with unanimous approval from all sides. Nora Back, President of the OGBL, noted that the proposals put forward now require detailed economic analysis.

The need for immediate action stems from the specific nature of the national wage indexation system. Michel Reckinger, President of the Union of Luxembourg Enterprises (UEL), noted that even the current moderate rise in energy prices is bringing the start of the next wave of automatic wage increases ever closer. According to updated forecasts by Statec, Luxembourg faces another compulsory wage indexation by the end of the year, following the increase already approved in June.

Nevertheless, Statec director Tom Haas has noted a decline in volatility on the commodities exchanges. At present, the price of a barrel of Brent crude has stabilised at around $90, down from a peak of $120 in March, which points to investor optimism. Despite the markets’ cautious optimism, the agency’s analysts have prepared a stress scenario in the event of a protracted geopolitical crisis. According to economists’ calculations, a long-term conflict would trigger a 1% fall in the country’s gross domestic product as early as this year. In the medium term, this will lead to unemployment rising to over 6.6% by 2027 and a deterioration in fiscal indicators. Next year, the government deficit could come very close to the critical threshold of 3% of GDP, whilst the Prime Minister has firmly identified maintaining the stability of public finances as a priority.

Despite the seriousness of the challenges, those attending the meeting announced the resumption of constructive social dialogue following several months of bitter disagreement. Patrick Dury, President of the LCGB, described the recent negotiations as significantly more productive than the meetings of the past two and a half years. Nevertheless, representatives of the working class are refusing to sign the final agreement until the government presents a full list of legislative measures. A final compromise between business and the trade unions has not yet been reached, as the further agenda for macroeconomic discussions includes such socially sensitive areas as the reform of housing legislation and the review of the minimum wage.