Maurice Bauer (Chamber of Deputies and City of Luxembourg): Investing Today to Secure Tomorrow
Maurice Bauer, Member of Parliament, rapporteur for the 2026 budget, and First Alderman of the City of Luxembourg, outlines fiscal priorities, competitiveness challenges, and the collective effort required to safeguard Luxembourg’s prosperity.
How would you describe the 2026 budget and its financial balance?
I presented a budget grounded in responsibility and ambition. For 2026, expenditures total thirty-two point six billion euros, while revenues reach thirty-one point one billion, leaving a shortfall of one point five billion euros. This gap reflects a deliberate decision: to invest now in order to secure long-term prosperity. Revenue rests on three pillars: direct taxation from companies and individuals; indirect taxation, including VAT, excise duties, and product-based levies; and registration duties. The financial sector remains the principal contributor, highlighting both strength and vulnerability. The competitiveness of the financial centre sustains our ability to finance social cohesion and ecological transition. For decades, robust public finances spared citizens from questioning revenue sources. That comfort must not breed complacency. Strategic choices made in the nineteen-eighties, from satellite initiatives to European fund regulation, still yield returns. Comparable boldness must shape today’s decisions. Reliance on one dominant industry requires vigilance and renewed diversification, while protecting the sector that supports national ambition. Sound budgeting calls for anticipation, discipline, and clarity about both risks and opportunities.
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Does Luxembourg face a diversification challenge despite its success?
Dependence on finance endures, despite sustained diversification efforts. Initiatives in satellite technology, space ventures, logistics, and innovation clusters have broadened the base. More than eighty space-focused companies now operate in Luxembourg, demonstrating how calculated risk can redefine a small nation’s profile. Yet finance continues to anchor fiscal stability. Awareness of this concentration must deepen across society. Luxembourg competes daily with Paris, Berlin, Frankfurt, and London. Agility, technological leadership, and resilience will determine future market share. Sustainable finance exemplifies our innovative capacity; the Luxembourg Stock Exchange remains a global leader in international and sustainable listings. Future budgets can further strengthen green technologies and digital transformation, reinforcing attractiveness for investors and entrepreneurs. The 2026 budget introduces targeted tax incentives to support start-ups and talent. Confidence in domestic champions is essential. Local expertise in technology and artificial intelligence merits recognition equal to that often granted to foreign giants. Dialogue between public authorities, international professionals, and entrepreneurs remains crucial. Prosperity cannot rely on habit; it demands reinvention and coordinated effort.
“We invest today to secure tomorrow’s prosperity.”
How do you integrate risk, green policy, and defense into fiscal strategy?
Budget preparation now integrates scenario analysis, notably interest rate variations. A shift of one hundred basis points affects growth, employment, and fiscal balance. A decrease of that scale could nearly eliminate the deficit. Such modelling strengthens prudence and clarifies exposure to external shocks. Debt and deficit ratios remain moderate compared with neighbouring countries, reflecting political consensus on discipline. Green taxation requires balance. The CO₂ tax reduced fuel competitiveness, lowering annual receipts by nearly one hundred million euros. Tobacco, by contrast, still generates about one point six billion euros due to favourable price differentials. Policy remains pragmatic: advancing ecological objectives while preserving fiscal stability. Rising defense expenditure, driven by geopolitical developments and NATO commitments, led to the launch of a Defense Bond. This instrument allows citizens to contribute directly to national resilience, supported by tax deductions. Similar tools could address housing or pensions, encouraging civic participation in structural priorities.
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