Luxembourg reaffirms its reputation as Europe's fiscal "excellent" performer

Against the backdrop of growing uncertainty in the global economy, Luxembourg remains one of the few eurozone countries able to maintain financial stability and credit confidence at the highest possible level. On 31 October 2025, Morningstar DBRS and Fitch Ratings affirmed the country's AAA long-term sovereign credit rating with a stable outlook.

The decision comes just weeks after the presentation of the 2026 budget, entitled "Grandir ensemble" (Grow together), and was a vote of confidence in the government's fiscal policy. Both agencies stressed that the country's budget remains strong, despite growing defence funding commitments and increasing social spending due to an ageing population.

Most notably, even with a projected budget deficit of 0.8% of GDP in 2025, Luxembourg's fiscal position looks significantly better than that of most of its European neighbours. This is due to its extremely low level of public debt, which is projected to be just 26.8 per cent of GDP. With eurozone countries increasingly struggling with debts exceeding 100 per cent of GDP, Luxembourg's resilience is enviable.

The agencies also noted the high quality of public institutions, the stability of the political system and the developed economy. Luxembourg, with its robust financial sector, continues to be a safe haven for investors and financial institutions in the centre of Europe.

However, the Morningstar DBRS and Fitch Ratings reports are not without caveats. They point out that the Grand Duchy's economy remains vulnerable to external shocks, including global financial instability and geopolitical risks. Of particular concern are international tensions and potential market volatility, especially given Luxembourg's dependence on the state of the global financial sector.

The agencies themselves expect economic growth to remain moderate in 2025, but the economy should accelerate as early as 2026, fuelled by the recovery of the financial sector. This is especially important for a country where the financial services sector plays a key role in generating GDP and budget revenues.