In response to the economic challenges arising from the coronavirus crisis, the Luxembourg government announced on 25 March 2020 the launch of a massive stabilization program for the national economy. Measures for a total of €8.8 billion will help companies face the immediate shortage of cash and maintain employment. Prime Minister Xavier Bettel outlined the content of the stabilization program, which includes different measures adding up to a budget of €8.8 billion, or over 14% of GDP. The initiative testifies to the government’s firm determination to support the national economy. According to the Prime Minister, it is made possible by Luxembourg’s “very performing economy and strong finances”. he measures aimed at preventing the spread of the coronavirus have brought many companies to a complete or near stand-still, and while staff can work from home in some cases, in others, activity has virtually ceased. The government has therefore made the short-term employment mechanism, by which the state covers 80% of salary costs during the period of inactivity in order to avoid that employees are made redundant, widely available. €500 million per month are now being set aside to cover these costs, and an accelerated procedure has been put in place to deal with support requests and process payments.
The government has also reserved a monthly sum of €200 million to provide advance payments of the costs related to the extraordinary family leave that is being granted to parents having to care for their young children at home while schools and childcare facilitates remain closed.
The workforce in Luxembourg is characterized by a very high number of cross-border workers from France, Belgium and Germany who are subject to strict limitations on the number of days per year that they can work outside the Grand Duchy while still falling under the Luxembourg tax regime. As the exceptional circumstances now oblige many of them to work from home, agreements have been concluded with Belgium and France to temporarily wave the limit regarding the amount of days they can work at home without being taxed in their country of origin.