Pierre Gramegna (Luxembourg Government): Taming the Black Swans 

Luxembourg’s Finance Minister, Pierre Gramegna, reassured risk managers at the ALRIM Winter E-Conference 2021 that EU unanimity and solidarity on a digital and sustainable transition for the EU economy created a positive framework on which to build the post-pandemic and post-Brexit future for the EU.   

 

The Improbabilities of Covid 

 

Choosing a phrase from the risk managers’ lexicon, Mr. Gramegna said the covid pandemic was a “black swan” that arrived with a low probability, but which has brought great damage in falling GDP and lost tax revenues. All countries had to offset the consequences of the pandemic as far as possible. He added that Luxembourg has committed nearly 20% of its GDP to measures that will help support the economy, save lives, increase investment in health, save jobs, support peoples’ livelihoods and help some companies to get through the lockdowns. Fortunately, the embracing of innovation had allowed the vaccine solution to be rolled out faster than expected. The EU Commission has now revised its estimates for Luxembourg’s fall in GDP to around three per cent, compared to a figure that was forecast to be twice as high a couple of months ago. 

“It's back because the new American president really believes in international cooperation as we in Luxembourg have always done, despite having been through a period when multilateralism was not fashionable anymore.” 

Multilateralism Regained  

 

Mr. Gramegna declared that “multilateralism is back.” He said, “It's back because the new American president really believes in international cooperation as we in Luxembourg have always done despite having been through a period when multilateralism was not fashionable anymore.” He thought it was good news for Europe in general that multilateralism is making a comeback. As an example of how multilateralism would work to lift Europe out of the current crisis, he highlighted the EU’s €750 billion Resilience and Recovery Fund that is due to be rolled out shortly. He believes the Commission has struck the right balance by insisting the Fund should be applied to the digital, as well as the sustainable, transitions of the economy. Mr. Gramegna feels Luxembourg is well-positioned to foster the digital transition, with the Luxembourg House of Financial Technologies nurturing fintech start-ups and legal measures the Grand-Duchy has taken to foster the benefits of a digital transition. 

 

The Roadway to Sustained Green Growth 

 

Luxembourg will also benefit from the proposal for a sustainable transition. The EU has decided that at least 30% of the Recovery and Resilience Fund will be dedicated to climate or environment-related projects. Mr. Gramegna says, “It's wonderful that's exactly what we need.”  Luxembourg has devised a sustainable finance framework, and a side effect of Brexit has been that Luxembourg law is being increasingly used for the issuance of green bonds. On Brexit, Mr. Gramegna said despite it being clear from the outset that Britain would lose automatic and general access to the EU single market, the UK did not seek to have financial services at the heart of the negotiations. Although this means that what used to be a four-lane road will become a one-lane road, the EU wants to pursue structured and regular dialogue with the UK to ensure that the one-lane road combines the best interests of both sides.