10.6092/issn.1561-8048/15696
Luxembourg’s national Recovery and Resilience Plan (RRP) unfolds in three directions: social, green and digital. They largely correspond to the idea of sustainable growth endorsed by the UN SDGs. The EU Commission acknowledged that the investments and reforms set out in Luxembourg’s RRP may effectively support the green and digital transitions; help to address challenges identified in the European Semester; and strengthen Luxembourg’s growth potential, job creation and economic and social resilience. Nevertheless, the country needs to cope with a number of unresolved issues, including the financial sustainability of its public pensions scheme and skills shortages in some key sectors, such as health care. Luxembourg’s RRP seems particularly promising because of the possibility it offers of building on the implementation of the European Pillar of Social Rights, thereby providing it with a solid social basis.
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Italian Labour Law e-Journal
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National Recovery and Resilience Plan: Luxembourg
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2022-10-31
2022-11-03
2022-11-03
ILLeJ
Luca Ratti
2022/11/03
10.6092/issn.1561-8048/15696
University of Luxembourg
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National Recovery and Resilience Plan: Luxembourg
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    National Recovery and Resilience Plan:                                       Italian Labour Law e-Journal
    Luxembourg                                                                  Special Issue 1, Vol. 15 (2022)
    Luca Ratti                                      NextGeneration EU in Action: Impact on Social and Labour
    luca.ratti@uni.lu                                                                                  Policies
                                                                                              ISSN 1561-8048
                                                               https://doi.org/10.6092/issn.1561-8048/15696




     National Recovery and Resilience Plan: Luxembourg
                                             Luca Ratti


                                                Abstract

     Luxembourg’s national Recovery and Resilience Plan (RRP) unfolds in three directions: social,
     green and digital. They largely correspond to the idea of sustainable growth endorsed by the UN
     SDGs. The EU Commission acknowledged that the investments and reforms set out in
     Luxembourg’s RRP may effectively support the green and digital transitions; help to address
     challenges identified in the European Semester; and strengthen Luxembourg’s growth potential,
     job creation and economic and social resilience. Nevertheless, the country needs to cope with a
     number of unresolved issues, including the financial sustainability of its public pensions scheme
     and skills shortages in some key sectors, such as health care. Luxembourg’s RRP seems
     particularly promising because of the possibility it offers of building on the implementation of
     the European Pillar of Social Rights, thereby providing it with a solid social basis.

     Keywords: Luxembourg, NextGenerationEU, National Recovery and Resilience Plan, Labour
     Law Reform, Social Europe.




1. Introduction

   Although it is one of the Member States least affected by the economic consequences of
the Covid- 19 crisis, Luxembourg nevertheless faces a number of challenges that revolve
around maintaining protection of the national productive apparatus, as well as safeguarding
employment and household purchasing power.
   Always in full accordance with the objectives of the European Union (EU), since the
beginning of the pandemic Luxembourg has put in place measures to fight against its
economic effects by diligently implementing the EU strategy. To this end, the Stabilisation
Programme and the Neistart Lëtzebuerg aid schemes have been in place since May 2020.
   Although not on the main list of beneficiaries of the funds allocated by the European
Recovery Fund ‘NextGenerationEU’, Luxembourg has directly shown its support and from


    Associate Professor of European and Comparative Labour Law, University of Luxembourg.
 Luca Ratti                                                             Italian Labour Law e-Journal
                                                                       Special Issue 1, Vol. 15 (2022)
                                                             NextGeneration EU in Action: Impact on
                                                                           Social and Labour Policies




the beginning fully shared the objectives pursued by the European Council and the European
Commission.
   It was one of the first Member States to submit (30 April 2021) its project and was part
of the first wave of countries to receive part of the funding. Its Recovery and Resilience Plan
(RRP) builds on the main axes of the dual green and digital transition, including social
cohesion and resilience.
   There is no information on the position that Luxembourg adopted in the aftermath of
the Covid-19 crisis and during the political negotiations, but one can infer that, because the
Grand Duchy's domestic policy tends always to be in line with the European trajectory, it
did not oppose but rather contributed to and encouraged the EU’s initiative.


2. Luxembourg’s RRP: an overview

2.1 Amount requested

    The RRP that Luxembourg submitted to the European Commission on 30 April 2021
focuses on three main pillars: social cohesion and resilience; green transition; and
digitalization, innovation and governance. These three pillars, comprising a total of 20
measures, are estimated to need a total budget of 183.1 million euros. However, Luxembourg
has decided that this sum will also be financed by national funds up to 46 per cent of total
estimated cost, thus requiring a non-refundable support from the European Commission up
to 93.4 million euros, which corresponds to 0.15 per cent of Luxembourg's GDP in 2019.
The government of the Grand Duchy of Luxembourg has also chosen not to make a loan
and to ask only for grants. With the endorsement of the President of the European
Commission on 18 June 2021, and the approval of the EU Council on 13 July 2021,
Luxembourg has been able to benefit from a payment of 12.1 million euros (13 per cent EU
participation) of pre-financing from the Commission since 3 August 2021.


2.2 Majority of reforms and investments

   Luxembourg devotes 61 per cent of its plan overall to reforms and investments
concerning climate objectives (electric vehicles, biodiversity and renewable energy) and 32
per cent to reforms of digital objectives (secure communications, digital services for the
public and digital health care).




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                                                                                  Social and Labour Policies




2.3 Key measures in reinforcing economic and social resilience

    ‘The main macroeconomic challenges for the Luxembourg economy include a relatively
low participation rate for older workers and a shortage of skilled workers. In addition, the
sharp rise in housing prices is having an impact on housing affordability.’1
    To strengthen its economic and social resilience, Luxembourg has developed key
measures articulated around pillar number 1: social cohesion and resilience. This pillar is
subdivided into three components, the first called ‘Skilling, Reskilling and Upskilling’, the
second ‘Strengthening the resilience of the health system’ and the third ‘Increasing the supply
of affordable and sustainable public housing’. Each of these three categories includes one or
more reforms combined with one or more investments. The total cost of these measures
amounts to €151.9 million.
    The objective of the ‘Skilling, Reskilling and Upskilling’ component is to ‘strengthen and
diversify the professional skills of job seekers, by providing training courses that are
organized around the development of digital skills’.2 Indeed, and although Luxembourg was
one of the Member States least affected by the economic consequences of the Covid-19
pandemic (and before that, by the 2008 financial crisis), unemployment increased by 1.53 per
cent between June 2019 and June 2020, while real GDP decreased by 1.3 per cent in 2020.
The Luxembourg government’s proposal in its RRP is to develop job seekers’ digital and
managerial skills as much as possible.
    The government has launched the ‘Future Skills’ initiative, which is closely linked to the
‘Skillsdësch’ approach to skills management and development adopted in July 2020. This
initiative is focused on companies and jobseekers who receive benefits and are registered
with the Employment Development Agency (ADEM) and offers them training in digital
skills and general transversal abilities, with a focus on social skills, followed by a practical
internship in a public sector institution. In addition to this first measure there is another
called ‘Digital Skills’. This second key measure aims to allow all employees who were placed
on short-time working between 1 January 2021, and 31 March 2021, to have access to training
and support them in the digital transition. The government has therefore proposed that they
take courses in e-learning format and receive a voucher for digital training worth up to €500.
    The objective of the component ‘Strengthening the resilience of the health system’ is to
enhance the health care sector through digital solutions (digitalization). To this end, the
‘Gesondheetsdësch’ and reform of the remit of health professionals are intended to establish a
structural framework for adapting policy discussions to the health system that aim to improve
complementarity between the inpatient and outpatient sectors and to improve relations
between protected persons and service providers, while redefining ‘the missions and remits
of doctors, nurses, care assistants and other health personnel’.3 In addition, Luxembourg is
investing in telemedicine for remote medical monitoring of patients and establishing a single

1-https://ec.europa.eu/info/business-economy-euro/recovery-coronavirus/recovery-and-resilience-

facility/luxembourgs-recovery-and-resilience-plan_en
2 https://mfin.gouvernement.lu/dam-assets/publications/ProjetPRR-final.pdf, 24.
3 https://mfin.gouvernement.lu/dam-assets/publications/ProjetPRR-final.pdf, 31



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                                                              NextGeneration EU in Action: Impact on
                                                                            Social and Labour Policies




digital register of health professions, in order to collect both administrative and professional
information and thus better respond to policy issues, such as access to care in all regions,
access to health data, and management of health professionals.
   Finally, the objective of ‘Increasing the supply of affordable and sustainable public
housing’ is supposed to ‘remedy the shortage of affordable and sustainable housing on the
real estate market to improve the quality of life of the Luxembourg population’.4 To this end,
Luxembourg plans a reform called Pact Logement 2.0, as well as investment in the
‘Neischmelz’ project in the south of the country (Dudelange). The Luxembourg real estate
market has increased exponentially over the past two years (an increase in the value of real
estate of around 16.7 per cent between the fourth quarter of 2019 and the fourth quarter of
2020), while demand has increased only slightly. To remedy this marked imbalance, the
government has put in place the Pact Logement 2.0, which builds on the first Pact Logement
introduced in 2008. The objective of Pact 2.0 is to increase the supply of affordable and
sustainable housing, to mobilize the existing land and residential potential, and to improve
residential quality, thus granting access to housing for many citizens. Finally, the ‘Nesichmelz’
project is focused on the three pillars of sustainable development, namely ecological,
economic and social, and is the first project that would create new neighbourhoods that meet
both the demand for affordability and the objectives of sustainable development promoted
by the EU.


3. Social and labour dimensions of the RRP

3.1 Assessment of Luxembourg’s Recovery Plan by the European Commission and
the Council of the European Union

    Both the European Commission and the Council are unanimous consider that the
Luxembourg RRP constitutes ‘to a large extent a comprehensive and adequately balanced
response to the economic and social situation, and thus contributes appropriately to the six
pillars referred to in Article 3 of Regulation 2021/241’.5 Luxembourg thus merits a grade A
‘for evaluation criterion 2.1 of Annex V of Regulation 2021/241’.6
    The Commission, which had to examine Luxembourg's plan within the framework of 11
criteria, considered that although the small financial contribution would not be sufficient to
respond to all the challenges identified in the country-specific recommendations, ‘all the
measures presented within each of the eight components of the plan seem to be globally
coherent’.7 The key percentages of this plan, which are well above the target values set out
in Regulation 2021/241, are those related to investments in climate (60.9 per cent) and digital
(31.6 per cent). In addition, the Commission considers that the plan has ‘a relatively strong


4 https://mfin.gouvernement.lu/dam-assets/publications/ProjetPRR-final.pdf, 36
5 https://eur-lex.europa.eu/legal-content/FR/TXT/HTML/?uri=CELEX:52021SC0159&from=EN
6 https://eur-lex.europa.eu/legal-content/FR/TXT/HTML/?uri=CELEX:52021SC0159&from=EN
7 Ibid.



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                                                              NextGeneration EU in Action: Impact on
                                                                            Social and Labour Policies




social dimension and is characterized overall by a good balance between reforms and
investments’.8
   With regard to the social and employment policy aspects, the European Commission
considers that the plan adequately addresses the shortage of health professionals and skills,
as well as the emerging needs of the health care system, ‘in particular through the redefinition
of the competences of the health professions and the digitization of the health sector,
including through the implementation of a telemedicine solution’.9 Finally, the Commission
appreciates the initiatives ‘FutureSkills’ and ‘DigitalSkills’ as measures intended to promote
professional development and retraining in Luxembourg.
   For its part, the Council also estimates that Luxembourg’s RRP provides a balanced and
appropriate response to the six pillars referred to in Article 3 of Regulation 2021/241.


3.2 Integration of the European Pillar of Social Rights (EPSR)

   In its analysis published on 18 June 2021, the Commission considered that in view of the
reforms and investments envisaged by Luxembourg’s RRP, the plan could be assessed as
contributing greatly to the implementation of the EPSR.
   The EPSR comprises 20 principles articulated in three chapters: equal opportunities, fair
working conditions, and social protection and inclusion. All such principles are monitored
by the so-called ‘social scoreboard’, which, based on indicators provided by the Member
States, makes it possible to monitor societal progress and should enable the detection in good
time of the main social and employment challenges and the progress made over time.
   An analysis of the components of Pillar 1 of the RRP in terms of the types of social rights
concerned and the aspects of the Social Scoreboard addressed will be presented here.

      Component 1A: Skilling, Reskilling and Upskilling

    Overall, the Commission considers this strand to be important for social cohesion and
places particular emphasis on the ‘FutureSkills’ investment. Indeed, the latter provides for
jobseeker training only if they are on benefits and registered with the Employment
Development Agency (ADEM). Age is not a strict criterion. This component is part of one
of the three major objectives to be achieved by 2030 presented by the European Commission
on 4 March 2021 and related to participation in training for at least 60 per cent of adults each
year.
    Beyond this ‘FutureSkills’ investment, the RRP includes ‘improving access to the labour
market, mitigating the repercussions of the crisis on employment and stimulating the
reinforcement of skills’.10 This is thanks to the ‘DigitalSkills’ investment, which provides for
requalification and professional development.

8 Ibid.
9 https://eur-lex.europa.eu/legal-content/FR/TXT/HTML/?uri=CELEX:52021SC0159&from=EN.
10 https://mfin.gouvernement.lu/dam-assets/publications/01-PRR-juin-Luxembourg.pdf.



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                                                                       NextGeneration EU in Action: Impact on
                                                                                     Social and Labour Policies




    Finally, the Luxembourg government regards skills development to be in line with the
first chapter of the EPSR on equal opportunities and labour market access.
    The assessments of the European Commission and the Luxembourg government are in
keeping with the indicators of the Social Scoreboard. As regards the first pillar, Luxembourg
is consistently rated satisfactory compared with the EU average for the main indicators. For
example, 65 per cent of the Luxembourg population have basic or better general digital skills
compared with 56 per cent for the EU. Furthermore, 8.8 per cent of young Luxembourgers
aged 15–29 are not in employment, education or training (NEET) compared with 13.1 per
cent at EU level. Indeed, in 2019 in Luxembourg, this rate was close to zero. The Covid-19
pandemic has evidently had a strong effect on this, which is surely one of the reasons why
Luxembourg has introduced measures for mass training of jobseekers.

       Component 1B: Strengthening Health System Resilience

   The Commission considers that for this component, the strengthening of the health care
system should benefit the most vulnerable people and contribute to the implementation of
EPSR Principle 16,11 as well as to social cohesion by addressing the gaps in access to health
care in underserved areas.12
   The government considers that this component is part of ‘the fight against the economic
and social repercussions of the crisis by aiming at an appropriate management and
organization of the sector's resources through capacity building and structural adaptation of
the sector’.

       Component 1C: Increasing the Supply of Affordable and Sustainable Public Housing

    Finally, concerning strand 1C, the Commission considers that it is in line with principle
19.a of the EPSR, which provides that ‘access to social housing or housing assistance of good
quality shall be provided for those in need’.
    Although Luxembourg's indicators are below the European average, the pre- and post-
crisis Covid-19 reports highlighted the housing problem as one of the most pressing for
Luxembourg’s citizens.


3.3 Recommendations made in the 2019 and 2020 European Semester cycles

   This section concerns the potential linkages between the country-specific
recommendations (CSR) made during the 2019 and 2020 European Semester cycles and the
three components of pillar 1, namely ‘Skilling, Reskilling and Upskilling’, ‘Strengthening


11 Principle 16 of the EPSR is dedicated to health care and states: ‘Everyone has the right to timely access to
affordable, preventive and curative health care of good quality.’
12 https://eur-lex.europa.eu/legal-content/FR/TXT/HTML/?uri=CELEX:52021SC0159&from=EN.



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                                                              NextGeneration EU in Action: Impact on
                                                                            Social and Labour Policies




Health System Resilience’, and ‘Increasing the Supply of Affordable and Sustainable Public
Housing’.

       Component 1A: Skilling, Reskilling and Upskilling

    The Commission considers that this strand addresses, in a first step, CSRs 1 and 3 of 2019
related, respectively, to raising the employment rate of older workers by strengthening their
employment opportunities and employability, as well as encouraging investment policy so as
to stimulate skills development. In a second step, CSRs 2 and 3 of 2020 are aimed at
mitigating the impact of the crisis on employment by paying particular attention to people in
difficult labour market situations, as well as the contribution of digitalization and innovation,
including in the business sector.
    This component provides ‘initiatives that allow the development of digital skills needed
by jobseekers to meet the expectations of the private and public sectors’,13 such as the
‘FutureSkills’ and ‘DigitalSkills’ initiatives, aimed at ‘improving the skills of the Luxembourg
workforce and increasing the employability of jobseekers and facilitating their reintegration
in the short term’. Another aim is to offer training to adapt to digital changes.
    According to the summary table of the 2019, 2020, and 2021 country-specific
recommendations, however, published in the spring 2022 semester, CSR 2019 items 1 and
3, assessed in May 2022, are currently rated as exhibiting ‘limited progress’, with relevant
actions expected in 2022 through 2025. Recommendations 2 and 3 from 2020 are assessed
as substantial and as having made some progress, with relevant actions also expected in the
coming months.

       Component 1B: Strengthening Health System Resilience

    The Commission believes that the 1B strand on improving the resilience of the healthcare
sector through digital solutions echoes Recommendation 1 of 2020. The Council considers
that ‘the reform consisting of a legislative overhaul of the competences of a number of health
professionals should enhance the attractiveness of the professions in this sector and address
the shortage of practitioners in a context of increasing demand for care’. Furthermore, ‘the
development of teleconsultation would also be a way to alleviate the pressure on health
professionals, while reducing physical travel in the context of the Covid-19 pandemic’.14
    In addition, according to the aforementioned summary table, the 2020 recommendation
is the one considered to have made the most significant relevant progress.
    Component 1C: Increasing the Supply of Affordable and Sustainable Public Housing
    Finally, and concerning the last part of Pillar 1, the Commission makes a direct link to the
2019 and 2020 Recommendations on ‘directing investments towards the green transition, in
particular towards sustainable buildings, clean and efficient energy production and use’, as


13   https://eur-lex.europa.eu/legal-content/FR/TXT/HTML/?uri=CELEX:52021SC0159&from=EN.
14   Ibid.

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     Luca Ratti                                                            Italian Labour Law e-Journal
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                                                                NextGeneration EU in Action: Impact on
                                                                              Social and Labour Policies




well as ‘directing investment- related policy in a way that increases the supply of housing,
including by increasing incentives and removing barriers to construction’15 through the
Housing Pact 2.0 and the ‘Neischmelz’ project.
   According to the summary table, however, the 2019 and 2020 Recommendations 3 are
considered to have made only some progress.


4. Lessons from the previous crisis

    Luxembourg has not been subject to an in-depth examination by the Commission since
the Covid-19 pandemic. It has therefore not received any fiscal/macroeconomic
recommendations in this context, including within the framework of the European Semester
2022.
    But although it has not received any specific fiscal recommendations, Luxembourg has
received four country-specific recommendations from the Council. With regard to social and
employment protection, the Council recommends that for the years 2022 and 2023
Luxembourg seeks to improve ‘the long-term sustainability of the pension system, in
particular by limiting early retirement and increasing the employment rate of older workers’,16
‘take steps to effectively combat aggressive tax planning’,17 ‘proceed with the implementation
of its recovery and resiliency plan’,18 and ‘reduce the impact of inequities on student
performance and promote equal opportunity for all students in the education system’.19
    Overall, probably the most critical CSR to be implemented is the one focused on
improving the sustainability of the public pension system, which is seen as too generous, in
particular with regard to early retirement schemes. The remaining Council recommendations
are focused mainly on social and employment protection. This is also explained by the fact
that the measures in the Recovery and Resilience Plan have not been implemented to a great
extent.
    The Luxembourg government considers the adoption of the NextGenerationEU
recovery plan as a ‘real budgetary impulse’.20 In line with EU objectives, Luxembourg's
policymakers have been influenced mostly positively, namely in their constant efforts to
develop plans and implement measures to revive the country's economy optimally, while
complying with climate and digital requirements.
    There is no formal national debate in Luxembourg on the possibility of reintroducing
austerity measures. Reform of the public pension system, although featuring in some public




15 Ibid.
16 https://ec.europa.eu/info/sites/default/files/2022-european-semester-csr-luxembourg_fr.pdf, 11.
17 Ibid.
18 Ibid.
19 Ibid.
20 https://gouvernement.lu/fr/actualites/toutes_actualites/communiques/2020/12-decembre/16-gramegna-

budget-2.

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                                                                           NextGeneration EU in Action: Impact on
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debates and in the media,21 so far does not appear to have been the object of substantial
political reflection.
   Social partners in Luxembourg have played a very active role in developing the Recovery
and Resilience Plan. It is beholden on the government of the Grand Duchy to consult civil
society, notably within the framework of the annual social dialogue on the European
Semester. Luxembourg has therefore obviously also consulted the social partners, and more
particularly their representative associations, on this important project.
   The RRP was presented by the Minister of Finance and the social partners were able to
discuss it and defend their ideas. In particular, they expressed their agreement with the main
goals of the RRP, highlighting that it should ‘promote a European model based on social
inclusion, the creation and support of quality jobs and the acceleration of the green transition,
emphasizing the need to help workers who must adapt to the transition to a green and digital
economy’.22
   On a second occasion, this time with the Finance and Budget Committee of the Chamber
of Deputies and before the final transmission to the EU Commission, the social partners
were consulted once again. Finally, within the framework of the ‘Skillsdësch’ project, the
social partners are regularly invited by the Tripartite Coordination Committee to discuss the
competences and missions of the latter.


5. Final considerations

   Although Luxembourg has not been significantly impacted by the Covid-19 pandemic
from an economic perspective, it still faces many challenges. The Luxembourg government
formulated its RRP with a view to achieving economic recovery.
   With climate and digital issues at the heart of the plan, Luxembourg has also incorporated
the notion of social cohesion and resilience, albeit to a lesser extent. Although most of the
reforms and investments envisaged by the government have been approved by the European
Commission and the Council and are assessed as ‘largely’ meeting the requirement of
strengthening Luxembourg's growth potential, job creation and economic, social and
institutional resilience, certain indicators in particular need to be monitored, such as early
school leavers, long-term unemployment, in-work poverty, and the impact of social transfers
on poverty reduction.
   Moreover, despite the considerable effort made by Luxembourg’s government in terms
of access to employment, it remains to be seen whether the measures taken will achieve the
goals established by the Action Plan implementing the EPSR.23 Indeed, to take the example
given above, the rate (8.8 per cent) of young Luxembourgers who are not in employment,

21-https://www.wort.lu/fr/luxembourg/le-systeme-de-retraite-a-besoin-d-une-reforme-

62dfb13bde135b923681d242.
22 https://ec.europa.eu/info/sites/default/files/2022-european-semester-csr-luxembourg_fr.pdf.
23 In particular, the targets of having at least 78 per cent of the population aged 20 to 64 in employment, at least

60 per cent of all adults participating in training every year by 2030 and reducing the number of people at risk
of poverty or social exclusion by at least 15 million.

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                                                            NextGeneration EU in Action: Impact on
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education or training is certainly lower than the European average of 13.1 per cent, but they
will probably not benefit from the training offered under the DigitalSkills programme, given
that only workers who were in short-term work schemes in January, February and March
2021 are admitted to it. The same Commission’s evaluation noted that Luxembourg’s
Cohesion and Social Resilience pillar, addressing the challenges of long-term sustainability
of public finances, skills shortages, investment in enterprises and stimulating innovation in
the business sector, respond only partially to the challenge.
   However, and thanks to the recommendations made by the Commission in the context
of the last European Semester, by the end of 2022 and during 2023 Luxembourg should
consider the issues raised and implement them to the best of its ability.




Copyright © 2022 Luca Ratti. This article is released under a Creative Commons Attribution
4.0 International License




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