The Luxembourg government has unveiled unprecedented economic measures in an effort to combat the effects of Covid-19 and prevent the country’s economy from collapsing.
Investment funds net assets were worth over €4.6 billion mid-February, which corresponded to the same level as November 2019. However, the Luxembourg association of investment funds, ALFI, revealed that over €1.2 billion of that had been wiped out due to the current crisis and that it expects losses for March to be even worse, as investors scramble to react to the situation.
Luxembourg’s stability programme takes the form of a public-private partnership and has 21 key measures designed to help companies remain viable.
€8.8 billion, or 14% of the country’s GDP, has been made available to give businesses breathing space and will allow companies to access credit, get grants and defer outstanding payments.
Lucien Freiden, the president of Luxembourg’s chamber of commerce, declared:
“We need to keep our spirits up and implement this stability programme so that the economy eventually gets back on its feet,’’ said the country’s former finance minister who added ‘‘certain companies may need to access loans or advances from the state.”
The chamber of commerce would play a key role in the coming weeks, he added, explaining which firms were eligible for what and how to go about claiming.
The association of CEOs has been mobilized, as well as six banks (Spuerkeess, BGL BNP Paribas, ING, Bil, Raiffeisen et Banque de Luxembourg), who have agreed to accept a large burden of the credit risk of SMEs and independent businesses. Bankers’ association of Luxembourg head, Yves Maas, believes that Luxembourg’s banks are responding well to the crisis. ‘‘Our banks are in good health and so are in a good position to help the country get through the current crisis. The idea is that banks assume a maximum of 15% of the credit risk in a case where the client defaults. This will be a big help to the government and to those businesses going through a difficult time at the moment. We have now started to work with the individual banks themselves to work out how to implement the plan.’’
After coming in for severe criticism during the great recession, Luxembourg’s banks are keen to be seen as part of the solution and not part of the problem this time round.
‘Piecemeal’ Stability Programme Criticized by Luxembourg opposition
The €8.8 billion program for stability presented by Luxembourg prime minister Xavier Bettel has been criticized by members of the country’s opposition, who say it does not go far enough.
Piratepartei deputy, Sven Clement, complained that “the majority of this package (€4.45 billion) is just postponements and €2.5 billion are guarantees, and of the €1.75 billion earmarked for the short term, the majority will come in the shape of liquidity going directly to workers. Therefore, the real amount being injected by this government into businesses is just €350 million. This will not be sufficient to ensure the survival of SMEs in the medium or long term.”
Clement went on to claim that a significant number of businesses would not be eligible for the program and that people who worked for themselves, such as dentists or childminders, would also be left out in the cold. He added that the refusal of the government to negotiate a freeze on mortgage payments would have serious implications for the spending power of the population when the coronavirus crisis had come to an end.
Dei Lenk deputy Marc Baum added, “the amounts engaged only concern those businesses that have been forced to close because of the outbreak. It does nothing for those independent workers or SMEs who have seen their livelihoods disappear because of this measure. And while it’s true that the program does provide for some cover for those workers who have been put on temporarily leave, these people still have the same rents and bills to pay as always.”
Edited by Aude Ghespière