Thirty-Nine Percent

Luxembourg's public debt is projected to climb from 26.5% of GDP in 2025 to 39% by 2031, according to the latest assessment from the International Monetary Fund. If accurate, the country would breach the Maastricht criteria from 2029 onwards, as the government deficit would exceed the 3% of GDP threshold set by the European Union.[1]

The primary driver, according to the IMF, is the cost of the government's tax reform. The projections were raised in parliament by Green MP Sam Tanson, who submitted an urgent question to Finance Minister Gilles Roth. Tanson asked whether the government shares the IMF's assessment, whether the costs of the tax reform may have been underestimated, and whether current fiscal policy should be revised in light of these projections.[1]

Luxembourg has long enjoyed a comfortable debt ratio, well below the EU's 60% Maastricht ceiling. At 26.5%, it remains one of the least indebted countries in the eurozone. But the trajectory matters more than the current level. A jump of 12.5 percentage points in six years implies sustained deficit spending, driven by tax cuts that reduce revenue while expenditure continues to grow.

The question is whether the tax reform will generate enough growth to offset its own cost. The government has bet on it. The IMF, by contrast, appears sceptical enough to publish a projection that has a finance minister answering parliamentary questions about it.

39% is still low by European standards. Germany sits above 60%, France above 110%, Italy above 135%. Luxembourg is not about to become Greece. But the Maastricht breach in 2029 would be a first, and firsts tend to carry political weight that exceeds their economic significance. A country that has never missed the criteria is about to, and the explanation is a tax cut that has not yet paid for itself.[2]