As tensions linked to the Iran conflict raise concerns about economic repercussions, Finance Minister Gilles Roth has outlined how Luxembourg intends to respond. In conversation with RTL, Roth stressed that it is essential to remain calm in order to assess the impact of the war in Iran on Luxembourg.
He added that, if necessary, the right decisions must be taken through social dialogue to ensure that both citizens and businesses remain on board.
Roth also emphasised that Luxembourg’s greatest strengths are its political stability, its AAA rating, and, above all, its social cohesion. He said that, even as Finance Minister, there are times when difficult choices must be made, as the country’s stability and continuity, and especially its social cohesion, take precedence over individual budgetary figures.
Roth indicated that the government is prepared to create some financial leeway to introduce support measures, even if this places additional strain on the budget. He pointed to potential challenges, such as minimum wage pressures, rising inflation, and increasing energy prices, stressing that both businesses and households must be taken into account.
He noted that everyday costs, including fuel prices and general price increases, will need to be closely monitored.
Roth referred to targeted measures aimed particularly at those already facing financial difficulties, mentioning instruments designed to address rising living costs. He underlined that, for the government, it is essential to act through social dialogue, using well-established tools and mechanisms already available.
The response of the European Central Bank will also be key. Its role will be to curb inflation without stifling economic growth, typically by raising interest rates.
Roth acknowledged that higher interest rates may benefit savers, but would have negative consequences for borrowers, including households with mortgages, businesses, and the state itself. He stressed the need for a careful and measured approach, ensuring that both citizens and companies remain supported.
Finally, Roth emphasised the importance of unity within the European Union, stating that the 27 member states must stand together, as they did during the 2008 financial crisis and the Covid-19 pandemic, to face the current challenges.
