Luxembourg announces deficit reduction plans

Luxembourg may be among Europe’s richest countries thanks to banking secrecy provisions, but even it can’t escape from a round of public debt-tightening, its prime minister said on Wednesday.

Jean-Claude Juncker, who also acts as the finance chief for the 16 European Union countries that share the under-pressure euro currency, presented the Luxembourg parliament with a plan to rid the country of its deficit by 2014.

“Our objective is to have a budget deficit of zero in 2014,” Juncker told lawmakers.

According to new EU figures released on Wednesday, Luxembourg’s deficit should hit 3.5 percent in 2010 — which is a half-percentage point above agreed bloc limits that Juncker, as Eurogroup president, is empowered to police.

“If it goes on like that, the European Commission will take action against Luxembourg over its excessive deficit,” he said.

Juncker called on his people to show “a little bit of courage” as he outlined measures including a public sector wage freeze for the next three years and the end of family support payments once offspring turn 21.

Currently, child benefit payments can be received up to the age of 27 in Luxembourg if offspring remain in education.

Juncker also raised the highest tax threshold from 38 percent to 39 percent, introduced a 0.8 percent ‘crisis tax,’ which will be levvied on all incomes, whether from wages or investment earnings, apart from social security payments, and raised the rate of a ‘solidarity tax’ from 2.5 percent to 4.0 percent for households and from 4.0 percent to 5.0 percent for businesses.

Banking bonuses are also in Juncker’s sights.

“The banks and the big businesses have to understand that now is not the time to pay people enormous bonuses, the public will no longer accept that,” he added.