Xavier Bettel, Yuriko Backes and Franz Fayot presented the 'Solidaritéitspak' measures to the members of the Special Tripartite Committee

In the light of certain information disseminated in particular on social media, the Ministers explained to the members of the Special Tripartite Commission the major lines of the agreement signed on 31 March 2022, as well as the modalities for their implementation.

I. Indexation and purchasing power of households

The agreement signed on 31 March 2022 between the social partners UEL, LCGB and CGFP and the government does not foresee any cancellation of an index bracket. In fact, the one for April 2022 has actually occurred. It was decided to postpone to April 2023 the index bracket which, according to the latest STATEC forecasts, should be due in August 2022. Furthermore, any additional increments that are to be applied in 2023 are to be postponed for 12 months - not cancelled - in order to provide more predictability for companies.

This measure is not only a support for companies, but also a tangible incentive for the country's competitiveness, the preservation of jobs and the continued development of the labour market.

As the index bracket scheduled for August 2022 is not cancelled, but simply postponed, the Tripartite agreement makes no provision for compensation for the index (the effect of which, especially for the most privileged households, may correspond to an increase in purchasing power). On the contrary, it emphasises compensation, or even over-compensation, for the resulting temporary loss of purchasing power, particularly for the least privileged households.

Based on the most recent data, Statec has independently calculated the evolution of the purchasing power of households for the years 2022 and 2023, taking into account the postponement of the index bracket from August 2022 to April 2023, the increase in the CO2 tax in January 2022 and January 2023, the measures already decided in the framework of the "Energiedësch" of 28 February 2022, as well as those retained in the context of the recent negotiations at the level of the Tripartite.

Based on these calculations, it appears that all these measures, taken together, not only compensate for, but also overcompensate for the loss of purchasing power caused by the current economic situation.

It should be remembered that households, depending on their situation, will not only benefit from the introduction of a new energy tax credit (Crédit d'Impôt Énergie - CIE), but also from the following measures:

• the energy allowance for low-income households;
• the stabilisation of electricity prices by increasing the state's contribution to the "contribution to the renewable/cogeneration compensation mechanism";
• the subsidy for gas network costs;
• the reduction of the price of fuel by 7.5 cents per litre until the end of July 2022 and of heating oil until the end of 2022;
  
• the freezing of rents until the end of 2022;
• the anticipatory introduction and adjustment of the rent subsidy;
• the revision of the PRIME house aid scheme and the introduction of a "social top-up" in this aid system;
• adjustments to the system of state financial aid for higher education.

While the 7.5 cents per litre reduction on diesel and petrol is already in force by regulation since 13 April, the other measures will be subject to legislation, the drafts of which are currently being finalised, and will be submitted to the Chamber of Deputies as soon as possible.

As regards the CIE, which is the flagship measure in favour of households, it appears as follows:

• for salaries and pensions between 936 euros and 44,000 euros gross per year, the CIE will amount to 84 euros per month;
• for salaries and pensions between EUR 44,001 and EUR 68,000 gross per year, it will amount to at least EUR 76 per month for this income range, and then gradually reduce to 0 for salaries and pensions exceeding EUR 100,000 per year.

The exact data per month are as follows (based on gross monthly wages):

In addition, the government undertakes to pay a tax credit equivalent (équivalent crédit impôt - ECI) to each beneficiary of the basic flat-rate amount per adult due under the amended law of 28 July 2018 on social inclusion income (REVIS). This tax credit equivalent will also be paid to each recipient of the allowance for the severely disabled (revenu pour personnes gravement handicapées - RPGH). The amount of the ECI will be EUR 84 per month for the compensation period.

Even if the aim was not to compensate for the index but for the loss of purchasing power, it is clear that those on the non-qualified minimum wage and the qualified minimum wage receive a higher monthly compensation than they would have received with a new index bracket.

In fact, anyone in tax class 1 earning less than 5,700 euros gross per month and any household in tax class 2 with an income of up to 5,000 euros, receives a higher amount in compensation than with indexation.

Here are some practical examples:

• a person earning the minimum wage (€2,313 per month from 1 April 2022) and in tax class 1 will receive €42 more net than if the index had been applied;
• a person on the qualified minimum wage (EUR 2,776 from 1 April 2022) will be paid EUR 38 net per month more than with the index;
• a single parent earning 4,200 euros gross, receives 29 euros more net per month than with the index;
• a single person with a salary of 5,000 euros gross will have 17 euros more per month than with the index.

The above calculations relate to the CIE only and do not take into account the additional gain in purchasing power obtained through the other measures mentioned above.

The CIE will be paid from the first month in which the index currently scheduled for August should have fallen, until the month in which it is postponed - so, presumably for 8 months, from August 2022 to the end of March 2023.

It will be paid, not per household, but per employee, pensioner or self-employed. It will benefit both residents and border residents.

STATEC's calculations on indexation and inflation show the cumulative effect of all the 'Energiedësch' and 'Solidaritéitspak' measures on the purchasing power of households. As a result, all households benefit from an increase in purchasing power, ranging from EUR 245 to EUR 1,196 for the year 2022 and from EUR 205 to EUR 2,055 for the year 2023, depending on the gross annual household income.

These figures also take into account the fact that family allowances will not be impacted by the shift in index brackets foreseen in the Tripartite Agreement. Indeed, the government will introduce a specific provision making an exception to this in the corresponding normative texts.

II. Measures in favour of companies

In addition to the predictability of the index and the reduction in fuel prices by 7.5 cents per litre, companies will benefit from the following support measures:

• an aid scheme aimed at offsetting part of the additional costs linked to the rise in electricity and natural gas prices, for the benefit of companies qualified as large energy consumers;
• an aid scheme to compensate for part of the extra costs of higher energy, fertiliser and input prices for companies active in primary agricultural production;
• an aid scheme to compensate for the extra costs of the greenhouse gas emission trading scheme (ETS) for the period 2021-2030;
• a new support programme called 'Fit4Sustainability' benefiting in particular small and medium-sized enterprises will be set up as part of a climate pact for businesses ('Klimapakt fir Betriber');
• the introduction of a new aid scheme to support companies in decarbonisation projects, as well as a new risk-sharing mechanism for these projects;
• the introduction of an aid scheme for the purchase of clean vehicles.

Finally, in order to facilitate access to bank credit for eligible companies with liquidity needs due to the current geopolitical situation, a guaranteed loan scheme, similar to the one launched at the beginning of the COVID pandemic, will be put in place. At the meeting of the Tripartite Committee, the members of Parliament were informed that this scheme has been notified to the European Commission for approval so that the corresponding legislative text can be submitted to the Chamber of Deputies shortly. 

III Budgetary implications

The cumulative cost of the above measures amounts to EUR 827 million, spread over the budget years 2022 and 2023. While this amount represents a significant burden on the state budget, the beneficial effects of this massive support to the country's economy should also be taken into account. Indeed, thanks to these measures, the impact of the crisis linked to soaring energy prices and the war in Ukraine will be significantly cushioned for households and businesses. More detailed estimates of the budgetary impact are presented by the Minister of Finance Yuriko Backes on the occasion of the upcoming presentation of the Stability and Growth Plan (Plan de Stabilité et de Croissance - PSC) for the year 2022.

Press release by the Ministry of State, the Ministry of the Economy and the Ministry of Finance