Both the government and the municipalities will be confronted with a decrease in earnings. Taina Bofferding, minister for Home Affairs, commented:
"Luxembourgish municipalities are not at risk of declaring bankruptcy. It is important for me to underline this fact and guarantee that governmental employees will always be paid by their respective municipalities. We have a row of mechanisms in place to prevent a collapse of the system!"
Municipalities are protected by law in several cases. First of all, spending must always be inferior to earnings. Second, the final results of the annual budget must remain positiv. And finally, the reimbursement of all loans must be inferior to 20% of all incomes, which guarantees that a municipality maintains a certain level of flexibility and manoeuvrability when it comes to paying back loans.
It follows that even if a municipality has to close its 2020 budget with a deficit, it will have the possibility of absorbing it the following year. A downward spiral where a local municipality will only increase its deficits is thus impossible in the Grand Duchy.
"Investments in the public sector therefore have to continue, not only to avoid an economic recession, but most importantly because they continue to develop and advance our society", emphasised Bofferding.
