In a State of the Nation address delivered right at the halfway point of a term of office and against a backdrop of social unrest, there is a significant risk that the focus will be more on the past than on the future. A trap that he has not always been able – or known how – to avoid Luc Frieden who refrained from making any announcements that might have, in a sense, pulled the rug out from under the social partners.

There was therefore no question of risking being seen once again as the one who undermines the Luxembourg model of social dialogue – a recurring criticism from the opposition and the trade unions – by announcing new support for businesses and individuals or adjustments to the next indexation bands. It was necessary to calm the situation.

Revitalising social dialogue

Quite logically, a number of announcements – or, in this case, the lack thereof – were intended to ease social dialogue, which is struggling to get back on track. As for the non-announcements, it is worth noting that the contentious social issues – namely the organisation of working hours and the minimum living wage – were not mentioned. The first issue, however, does feature – and prominently so – in the coalition agreement.

Nor was there any mention of the state of public finances – and more specifically of the widening deficits, which appear to be becoming structural, as feared by the IMF and the National Council of Public Finance.

The same was true of the balance of the maternity health insurance (AMM) accounts. Luc Frieden showed the same reticence on this subject. He gave no indication as to how the accounts might be brought back into balance. Whilst the AMM reserve is expected to fall below the 10% threshold in 2027, an increase in social security contributions is nevertheless one of the options being explored. This increase would be 0.25%, shared equally, with 0.125% borne by the insured and 0.125% by employers. A highly contentious issue. It will be up to the Minister of Health Martine Deprez to make a decision in the autumn.

Avoiding a general strike

On the subject of healthcare, Luc Frieden stated that there would be no withdrawal from the national health scheme during this parliamentary term. Whilst the renewal of the agreement between doctors and the National Health Fund (CNS) has stalled and it seems increasingly certain that the government will have to take a decision to resolve the issue of reimbursement for medical care and procedures, this will not result in a reduction in benefits for insured persons.

“We remain committed to a healthcare system based on solidarity. A two-tier healthcare system is detrimental to social cohesion,” the Prime Minister stated. This was a red line for the trade unions, who had been threatening to take action on 1 May, there would have been a general strike if that had been the case. An announcement designed to defuse the situation. And whilst access to healthcare is one of those issues that has been mobilising the public, particularly since the Covid pandemic, Luc Frieden announced that the government will fund an extra shift in hospital A&E departments. It’s a gift.

Will this be enough to secure an agreement between the social partners on the measures to be taken to tackle the energy crisis? It’s not certain. Luc Frieden, however, emphasised that the ‘divergent realities’ – meaning the opposing positions held by different parties on the solutions that should be adopted to tackle rising energy costs and inflation – must not divide us, but bring us together. He called for an end to opposition and for us to move forward together ‘so that the nation remains united’.

It remains to be seen whether he will be heard.

The big comeback of housing

Housing is once again at the heart of the government’s priorities. Just one year after the Prime Minister stated in the 2025 State of the Nation address that the government had no intention of replacing the private sector, the government is backtracking. Recognising that despite the administrative simplification measures taken – measures of which Luc Frieden remains convinced of the relevance – “the market was not moving in the desired direction”, he announced various measures to encourage new construction in the private sector and create more affordable housing in the public sector:

– strengthening buyer protection, particularly with regard to completion guarantees;

– a reduction in registration fees for new buildings;

– a doubling of the budgets for social housing providers;

– the extension of the off-plan purchase scheme ‘for several years’, with an additional budget of €300 million;

– calls for proposals for ‘vacant lots’, i.e. undeveloped plots of land within urban areas;

– a reduction in the VAT rate for the construction of housing intended for affordable rental;

– the launch of a public housing bond modelled on the defence bond, which raised €150 million.

Protecting the self-employed

“Growth is the driving force behind our standard of living, and that engine has stalled,” the Prime Minister acknowledged. Here too, he is calling on the social partners to work together to find the right solutions to get that engine running again.

In the meantime, the government has announced new measures to streamline administrative procedures. In practical terms, businesses will in future be issued with a single digital identification number valid across all government departments; a single procedure for setting up businesses will be introduced; and efforts will be made to modernise company law, accounting law and the law of obligations.

Another major announcement: the creation of a new framework for social security cover for the self-employed, with measures covering unemployment, social security and taxation. The so-called ‘second chance’ scheme will be strengthened so that setbacks can be overcome more easily and no longer penalise the self-employed.