Luxembourg imports its workforce and exports its unemployment. A balance that has fuelled the country’s growth in recent decades… but has come under strain in recent years. Firstly, because it is becoming increasingly difficult to import labour. And—perhaps—because exporting its unemployment will no longer be so straightforward. Why? Because a political agreement was reached on 23 April between the European Council and the European Parliament regarding the revision of the rules on the coordination of national social security systems under European Regulation 883/2004. The aim is to modernise these rules “to make them clearer, fairer and simpler to apply”, according to the Cypriot presidency, for whom this revision is “essential for strengthening the fair mobility of workers”.

The reform proposal goes beyond the simple issue of cross-border unemployment. It also covers long-term care benefits, access to social benefits for economically inactive people, family benefits, and the legislation applicable to posted workers and those working in two or more member states. But it is the issue of unemployment that is causing concern among MPs. The MP from déi Gréng, Djuna Bernard, sought clarification during Question Time on 28 April in the Parliament.

A paradigm shift

What does this agreement stipulate on this specific point? It states that the country where an employee last worked shall be responsible for paying unemployment benefits. This responsibility currently lies with the worker’s country of residence. This applies for a maximum period of six months, provided that the beneficiary can demonstrate that they have made contributions for a period of 22 weeks.

For Luxembourg, where 74% of the private sector is made up of cross-border workers, this is an issue of a scale unmatched anywhere else in the EU.

Marc Spautz, minister for Labour

“For Luxembourg, where 74% of the private sector is made up of cross-border workers, this is an issue of a scale unmatched anywhere else in the European Union [EU],” explains the minister for Labour, Marc Spautz (CSV), which estimates the budgetary cost at €200m. “This is an approximate figure due to fluctuations in the labour market and the number of cross-border workers.” Beyond the financial aspect, the entire structure of the Employment Development Agency (Adem) needs to be reviewed. The minister confirmed that the agency’s operations will need to be adapted, particularly in terms of IT systems, and its staff numbers increased. The technical challenge is considerable: establishing an automatic data exchange with neighbouring countries to ensure a smooth transition and prevent fraud or administrative errors.

Seven years of adaptation

Of course, the provisional agreement between the Council and the Parliament is far from being adopted. Two provisional agreements on the reform had been reached: in March 2019 under the Romanian Presidency, and in December 2021 under the Slovenian Presidency. In both cases, the qualified majority within the Committee of Permanent Representatives (Coreper) required to confirm these agreements was not achieved, with Belgium, the Netherlands and Luxembourg blocking the initiative. Will this time be the right one?

If an agreement were to be reached in Coreper and subsequently endorsed by the Council of the EU, the text would have to be put to a vote in the European Parliament. A vote is scheduled for July, with the text due to come into force in October, the minister said.

From that point onwards, and thanks to the negotiations previously conducted at European level by Nicolas Schmit, who was Minister for Labour in 2014, Luxembourg would have seven years to update its unemployment benefit procedures. A “crucial” timeframe that Marc Spautz hopes to use to conclude bilateral agreements with France, Germany and Belgium in order to improve communication between administrations, finalise the upgrading of Adem’s IT systems and gradually incorporate the financial burden into national budget forecasts.