Index, energy bonus, subsidies: what to expect in Luxembourg in 2023

Maëlle Pintoavatar

Published on 06/10/2022, by Maëlle Pinto

Negotiations began on Sunday 18 September, at a tripartite meeting of the highest importance. After 3 days of intensive discussions on topics such as the upcoming indexations, inflation and rising energy prices, the various representatives reached an agreement in principle. On Wednesday 28 September 2022, the social partners and the government signed the agreement.

Rising inflation

This year 2022 is marked by a sharp rise in inflation of 6.9%. This has had a strong impact on the Luxembourg population, which was waiting for the Grand Duchy's government to take action to deal with this worrying crisis.

Prime Minister Xavier Bettel said he was aware of the current situation and concerned about rising energy prices and costs in the upcoming months. Thus, to cope with this situation, the State will finally release more than one billion euros to implement a package of measures that are supposed to support households and businesses in the face of these soaring prices. It should, for example, introduce a temporary reduction in VAT on all goods and services.

All these decisions have the common objective of lowering inflation to 2. 6%, or 4 points.

A sharp rise in energy prices

Most of this inflation is due to the sharp rise in energy prices. That is why the government has also taken the decision to cap energy prices. This will freeze electricity prices, limit the increase in gas prices to a maximum of 15% compared to the current level, but also halve the fuel oil prices (from 7. 5 to 15 cents per liter). The State will also support SMEs with new energy subsidies and an extension of the energy bonus, already in place, for the new year 2023.

The rise in energy prices is of great concern to Luxembourg’s inhabitants, but also to the world. Therefore, it will be necessary to closely monitor its variation and the decisions taken by individual Governments in the months and years ahead.

Are you prepared to no longer have the right to heat your office space, school or even your own home as you wish? 🤔

Two indexations for 2023

Contrary to the estimates given by Statec, inflation is expected to trigger only one new index for 2023. It will be expected in February 2023 and will replace the one that was supposed to happen in November 2022. As a reminder, the July 2022 indexation had also been postponed to April 2023. Thus, 2023 should be marked by two new indexations, in February and April 2023. The other two indexes originally planned by Statec are not expected until 2024.

However, if three new index brackets fall in 2023, a new tripartite could be held to make new decisions and perhaps introduce new index brackets. So, your salaries will increase in 2023 and that's good news!

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