Luxembourg’s Welfare State in the Crisis: A Semi Success Story

The chapter on Luxembourg demonstrates that the financial and economic crisis from 2008 onwards had little impact on a very generous welfare state. The Luxembourg government opted for a pragmatic approach to resolve the immediate effects of the crisis. Moreover, major reforms, which were underway before the crisis, were speeded up because of it. For example, the pension system was adapted to demographic changes in an ageing society. Primary health care strategies were introduced to improve management and to control the financial system. Regarding family policy, a new approach ‘investment in children' based on the United Nations Convention on the rights of the child was implemented. Last but not least, Luxembourg’s Public Employment Service underwent major changes linked to developments in the economic situation.

But this success story also showed a darker side. On the one hand, the crisis altered the Luxembourg social model based on confidence between the public authorities, the employers and the trade-unions and on consensus building (the famous ‘Tripartite'). On the other hand, case-law from the Court of Justice of the European Union regarding rights of the frontier workers, a major component of the Luxembourg labour market, showed the limits of the autonomy of public authorities to shape the Luxembourg Welfare State.