Wage rises limited to once a year

Indexation of wages is to become a once per year occurrence only for the next three years, Luxembourg leader Jean-Claude Juncker has announced.

Following the collapse of tripartite talks this week, Mr Juncker and government ministers were forced to make decisions without the input of workers' and employers' unions.

Speaking at a press conference on Friday at noon, the prime minister said that wage rises in-line with inflation, known in Luxembourg as indexation, would be implemented once a year in October. This new rule would apply until 2015, by which time he hopes that the country's financial situation will have returned to a level of normality.

The next salary adjustment due in March 2012, will be postponed until October 2012.

In addition, Mr Juncker announced that the changes in values of alcohol and tobacco will be removed from the index calculation. The cost of fuel will be taken into account up to a certain threshold.

The reform follows pressure from business chiefs and advisors to thwart the growing cost of salaries. High wages in Luxembourg, they say, are reducing the country's competitivity, making it less attractive for businesses to set up and operate there.