The Economic and Social Council (ESC) has released its annual report on the country’s economic, financial and social situation. The report, which was submitted to the Prime Minister on 6 October 2022, is dedicated to the lessons to be learned from the Covid-19 pandemic from a Luxembourg perspective. It includes an assessment of the management of the sanitary crisis by public authorities and related relief measures implemented to support the economy. The ESC underlines that the financial sector had the ability to adapt quickly and effectively to the challenges resulting from the pandemic. The report further elaborates on economic challenges put forward by the pandemic and draws a series of observations for the future.
We present our takeaways from this insightful report, to which the ABBL contributed.
A resilient financial centre
All in all, the report notes that the country has weathered the pandemic comparatively well, not least due to adequate public health measures and communication coupled with generous economic and fiscal reliefs. The report notably underlines that the financial sector had the ability to adapt quickly and effectively to the challenges resulting from the pandemic.
The side benefits of digitization
Digitization of banking services, which was already well underway at the beginning of the pandemic, was decisive to ensure continuity in the services provided both to retail and business customers. Technical capabilities coupled with the adoption of regulatory reliefs and temporary agreements for tax and social security purposes enabled a swift and overall seamless shift to home working by 80% of the workforce in a matter of days.
Banks were part of the solution
Banks actively contributed to public efforts to support the economy by putting in place, in close cooperation with the Government and the CSSF, a moratorium on current loans advanced to business clients coupled with new loans to SMEs and large corporates affected by the pandemic. Upon gradual return of the workforce to the office, a certification service was offered to the members of the Association pour la Santé au travail des secteurs Tertiaire et Financier (ASTF) to ensure that protective measures put in place were in compliance with applicable regulations. This service was complemented by various guidelines and recommendations issued by the ABBL on related health and safety issues.
There are still challenges ahead
As regards economic challenges put forward by the pandemic, the report underlines the country’s digital performance and notes that, despite the emergence of new habits (homeworking, distance learning) and the dramatic increase in data traffic, existing IT infrastructures have demonstrated their resilience. The report goes on by stressing that a source of concern resides in the dependence of the country from neighboring countries and foreign markets, at a time when European solidarity and the European single market have been put to the test.
Increased reliance on home-based working has uncovered a competitive disadvantage vis-à-vis other countries relying on an essentially domestic workforce, a situation that may indeed translate into a critical vulnerability in the future. This situation shall prompt a thorough assessment of the impact of this new way of working on the social and economic model of the country but also on its public finances. We are looking forward to contributing to this reflection.
The Economic and Social Council is an advisory body to the Luxembourg government and is placed under the administrative supervision of the Prime Minister. Its responsibility is to investigate economic, financial and social issues affecting either several economic sectors or the national economy as a whole. The ESC consists of representatives from the business sector as well as employee representatives from the private and public sector and members directly appointed by the government.
Read the full report (in French): https://ces.public.lu/dam-assets/fr/avis/avis-annuels/avis-annuel-2022.pdf