The National Medium-Term Budgetary and Structural Plan (PBSN) is the new budgetary reference document at European level, introducing multi-year financial planning for EU Member States. The government is required to produce an annual progress report (RAA) on this plan.
The report is due to be assessed by the National Council of Public Finances (CNFP). And the CNFP’s latest assessment is not kind to the government. In it, the Council notes a marked deterioration in Luxembourg’s economic and budgetary situation in 2025 compared with the October 2024 forecasts. Thus, in 2025, growth will have reached only 0.6%, compared with the 2.7% anticipated. On the budgetary front, the general government deficit is projected to reach 2% of GDP in 2025, compared with the 0.6% of GDP forecast.
And for 2026, the outlook looks challenging, with growth forecast at 1.7%. This forecast is lower than that set out in the October 2024 National Budget Plan. However, the forecast for a general government deficit of €400 million – or 0.4% of GDP – remains unchanged. This is regretted by the CNPF, which criticises the government for failing to take into account either the significant downward revision of €1bn in the nominal general government balance for 2025, or the sustained growth in central government expenditure observed in the first quarter of 2026 (+8.6% compared with the first quarter of 2025). These factors have been incorporated by Statec, which puts the deficit at €1.143bn, or 1.2% of GDP.
The CNFP considers it “difficult to justify” that the forecasts for 2026 do not incorporate the revised results for 2025, creating major inconsistencies between the various official documents. In this context, it considers that the information provided in the April 2026 RAA concerning the year 2026 remains largely insufficient to enable it to carry out a reliable assessment of the budgetary situation for that year.
An undeniable budgetary slippage
Whilst not entirely reliable, the assessment is critical. The CNFP points to an “undeniable” budgetary slippage in 2025. For the institution, the conclusion is clear: Luxembourg has not adhered to the expenditure path set by the Council of the European Union for the year 2025. Whilst the ceiling for growth in net primary expenditure (NPE) was set at 5.8%, the observed growth reached 8.1%. This annual deviation represents 1.03% of GDP, more than triple the European reference threshold of 0.3%. This deviation is attributable to sustained growth in central government expenditure, notably through increases in current transfers, employee compensation and intermediate consumption.
Despite exceeding this limit, Luxembourg has so far avoided an excessive deficit procedure. Indeed, as long as the country meets the Maastricht criteria – a public deficit of less than 3% (set at 2% in 2025) and debt of less than 60% of GDP (set at 26.5%) – it remains subject to the preventive arm of the governance framework.
The CNFP nevertheless points out that the average growth rate of public debt over the 2025–2028 period, set at 4.9%, is significantly lower than its historical average growth rate of 6.6% observed between 1996 and 2023. In the CNFP’s view, adhering to the budgetary trajectories will now require ‘substantial efforts to control expenditure’. Rigorous monitoring is deemed essential to ensure the sustainability of public finances in the face of the challenges of an ageing population, housing and defence.
Greater transparency is required
He also calls for a comprehensive update of the budget forecasts to ensure the transparency, consistency and accuracy of the budget figures. “Using the most recent estimates available is essential for monitoring developments in Luxembourg’s public finances and ensuring their long-term sustainability.”
The Council also regrets the absence of figures expressed in millions of euros (as the data is provided only as a percentage of GDP); the lack of detail on revenue measures; and a change in the categories used to track reforms, which makes year-on-year comparisons very difficult.
