09 february, 2010
The crucial tripartite meeting that will discuss the outline of the 2011 budget will now take place at the end of February rather than January as previously suggested. It is due to conclude by the end of April, but finding the 2 billion euros needed to balance the budget will prove to be difficult. Prime Minister Juncker told an OGBL conference in December that change was necessary but that “reform does not mean dismantling.” He called on the “social partners” to not take irreconcilable positions before the talks. OGBL chairman Jean-Claude Reding suggested he would be open during the discussions: “the world is changing and social policy equally… We want structural reforms but not those presented by economic circles.”
Speaking later to La Voix, Juncker said: “difficult decisions must be taken in 2010. I will be happy if the Luxembourgers will keep a sense of unity and harmony and not allow themselves to be guided by corporate jealousies.” He expressed his concerns about the attitude of the social partners: “glaring at each other, explaining to the other what they must do.” The tripartite will feature the main trade unions, employers groups and senior ministers.
Despite these pleas, unions and employers groups have been taking pot-shots at each other via the press. Reding told the Chamber of Salary Earners (CES) New Year's reception that the deficit should not be reduced through spending cuts but via increased taxes. Social benefits should not be cut and he cautioned against a hasty withdrawal of state spending saying this kept personal spending power buoyant and boosted the infrastructure network. He added that the salary index had not caused the financial crisis. Economic diversification, particularly into green technology, was the way forward, he said.
Robert Dennewald of the mainly manufacturing employers group FEDIL also took up the cudgels. Speaking to Belgian daily "Le Soir" he said “Luxembourg model seriously in danger." He called for an end to salary indexation and a rapid reform of public sector wages. He also pointed out that the country was now hugely dependent on non-Luxembourgish labour, even if he was exaggerating to say that “80-90% of private sector employees are foreigners.” Union leaders reacted strongly to this “malicious propaganda”, not least because Dennewald had aired these issues in a foreign newspaper.
Bankers also had their say. “In the future, the financial sector will not drive Luxembourg’s growth as it did in the past. Globally the financial sector will shrink and Luxembourg can not escape,” said ABBL director general Jean-Jacques Rommes at an 8th January press conference. No longer would banks be the engine for growth in employment and tax income, he added: “the country will have to adapt.” Extravagant state spending has kept the country from feeling the effects of the crisis, he said, but that there is now a “real problem” with a two billion euro hole in the public finances. “We are talking about a recovery, but it is really a numerical effect,” he pointed out. “We are coming out of a deep hole.” He said that the bank bail-outs should not be blamed for this as banks remain one of the biggest net contributors to tax.