Ten years after the Great Recession, Luxembourg moves to the left

Cheers and dances filled Sunday’s election night after politicians and activists frantically calculated the numerical options for future coalitions. Much is at stake. Those continuing to rule, or those getting into power, will be the ones to appoint high-level bureaucrats, allow more candidates to enter parliament (since Luxembourgish ministers do not keep their seats in the Chamber of Deputies) and set the agenda for years to come.

Voters seem to have endorsed the incumbent government, which only lost one seat, dropping from a 32-seat majority to 31 seats out of 60. Individually, both liberals and socialists lost seats, while the Green Party has been the big winner of this election, with an increase of three seats. Because the socialist party has lost three seats, it will have little negotiating power in attaining the post of prime minister, if this government continues.

Overall, the voters have sent a clearer message on actual policies. Parties that, even moderately, embraced fiscal conservatism or the ambition of balanced budgets have lost support. Both the Christian Social People’s Party (CSV) and the Democratic Party (DP) were told off, while the Green Party, which is to the left of the socialist party, and the Pirate Party were the surprise winners.

What recession?

What does this tell us about the state of affairs in Luxembourg when, 10 years after the Great Recession, parties that showed little or no interest in fiscal discipline won the election?

A few figures to consider:

  • Luxembourg’s debt of 23% is higher than in 2012, at the peak of the previous financial crisis (meaning after the bank bailout)
  • Government spending is at an all-time high, having reached more than €2 billion under this government
  • The GDP growth rate is at an embarrassing 2%

But you wouldn’t have been able to ascertain any of this information from the election campaign, as it was seemingly more important to underline the importance of the Luxembourgish language.

Warm welcome from tree-huggers

Let’s note the following: the Green Party manifesto does not even address the issue of debt. It’s only fiscally conservative stance is that it does not want to increase spending on the military, as related to Luxembourg’s NATO obligations.

‘Debt’ is also a word that cannot be found in the Pirate Party manifesto, and neither does it make any effort to reduce the Grand Duchy’s overblown spending addiction. On the other hand, both parties are happy to promise even more spending and tightening labour regulations.

How exactly Luxembourg is supposed to remain competitive through the organisation or re-organisation of transfer payments, windmills and employment protection should be a mystery to many. The message to the outside world, and particularly to businesses re-locating within the European Continent, is clear: the Grand Duchy went from “we’re open for business” to “a warm welcome from Pirates and tree-huggers”.

As are result, we’re likely to see more of the same: more spending and more absolute debt, when actually the country would now be in the position to reduce government expenditure and focus on creating more business opportunities. Even a CSV/DP government would come under considerable pressure from a left-wing opposition, dedicated to prevent any type of spending reforms.

On this 14 October, the left-wing political spectrum won, and fiscal discipline lost. We haven’t learned much.

This article was first published by the Luxembourg Times.

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About Bill Wirtz

My name is Bill, I'm from Luxembourg and I write about the virtues of a free society. I favour individual and economic freedom and I believe in the capabilities people can develop when they have to take their own responsibilities.

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