Public expenditure is growing too fast

(JB) Luxembourg's chamber of commerce has criticised financial chiefs for their “carefree" and "hands-off” approach to the 2012 budget.

The business representatives body accused the government's fiscal policy of failing to leave the country any leeway in the event that the eurozone crisis continues or worsens.

It said in a public statement: “The chamber of commerce is sounding the alarm and wonders how the coalition intends to meet the challenges of the deepening and continued global economic crisis.”

Luxembourg's 2012 budget is expected to leave the country with a 1.143 billion euro deficit, a hole which the chamber says is being further exacerbated by the country's increased spending (which will rise to 6.1% compared to 2011) and a slower than hoped for increase in revenues (4.9%).

Expenditure is growing at a rate too rapid for the country to sustain, said the chamber, reminding ministers of the continued threat to Luxembourg's growth posed by the economic and sovereign debt crisis.

“The proposed budget takes into account neither the crisis of confidence among investors and consumers, nor the risk of sustained inflation following repeated interventions by the European Central Bank to stabilise financial markets, while the level of inflation in Luxembourg consistently exceeds those of major trading partners of the Grand Duchy," the chamber said in its statement.

The chamber of commerce has proposed a number of amendments to the budget, including the creation of a sovereign wealth fund in 2013 to provide excess liquidity in case of future crises. It proposes the government contributes 1.66 billion euros from 2012 to 2014 into this fund.

At the same time, the chamber of commerce has called for wage rises to be curbed in public administration posts, so that they are aligned with national average wages. It is estimated that such an alignment, if imposed from 2007-2009, would have generated 56 million euros from the government head quarters alone.