New tripartite agreement to tackle economic situation

On 28 April 2006, the Tripartite Coordinating Committee concluded an important agreement on how to prepare for Luxembourg’s future in the current difficult economic climate. The agreement addresses social, financial and economic measures affecting the country. A parliamentary debate on the agreement followed soon after its conclusion. Among other points, the discussion questioned the committee’s legitimacy to conclude agreements, as compared to the parliament, which must vote on them. On 2 May 2006, in his State of the Nation declaration, Prime Minister Jean-Claude Juncker reaffirmed the role of the coordinating committee in industrial relations issues.

Roles of committee and parliament

The Tripartite Coordinating Committee (Comité de coordination tripartite) was established by a 1977 law, authorising the government to take measures aimed at stimulating economic growth and maintaining full employment (LU9711127F). In cases where the social partners are more directly involved, the committee has the authority to assess these issues with a view to implementing measures such as: limiting overtime, extending the regime of short-time compensation to companies that are experiencing structural difficulties and reducing production costs in order to safeguard employment. The committee can also make recommendations regarding measures aimed at protecting employment. Its consultation role involves examining the global economic and social situation and completing an analysis of the extent of unemployment in Luxembourg.

The committee can sign internal agreements between its members. The tripartite agreement concluded on 28 April 2006 on how to prepare for Luxembourg’s future has thus been signed by the government representatives, the employers and the trade unions. In order for the agreement to come into effect, it must first be endorsed by the parliament, which thus preserves its responsibility in this regard. Although the government is accountable to the parliament, and not to the committee, this does not prevent opinions being exchanged and agreements being negotiated within the committee, provided that the parliament can debate these agreements and endorse them with a vote.

Content of agreement

Faced with a situation that is not yet being described as a crisis – but which requires determined action to re-establish the balance of the Luxembourg economy – the government, employers and trade unions have agreed a set of measures that address six main economic areas:

  • controlling inflation, in particular by voluntary price control agreements agreed with various economic sectors;
  • addressing the budget deficit by controlling public expenditure and increasing revenue, particularly by increasing VAT on certain services from 12% to 15%;
  • introducing a series of complementary measures to promote corporate competitiveness by supporting exports, controlling energy costs, freezing public sector pay and supporting innovation;
  • improving the jobs market by revising unemployment legislation, reinforcing the policy of keeping people in employment and simplifying overtime procedures;
  • merging salaried workers and employees into a single status;
  • adopting social security measures to ensure the long-term viability of the pension scheme.

As expected, reactions to these measures have been varied. However, as the agreement was reached by the key stakeholders (the government, trade unions and employers), it has led to a compromise situation wherein each player has made some concessions, thereby ensuring greater acceptance of the terms of the agreement.

Industrial relations model

On 2 May 2006, in his State of the Nation declaration, Prime Minister Jean-Claude Juncker underlined the role of the coordinating committee in industrial relations issues and emphasised the importance of the Luxembourg industrial relations model. In his opinion, modern political organisation must encourage consultation and dialogue with those in charge of the economy and the wage system and should not be limited to a debate between government and parliament. Prime Minister Juncker insisted on this point because the tripartite model is sometimes subject to a degree of criticism from politicians.

The presence of the Tripartite Coordinating Committee also gives an opportunity for reflection before policy decisions are taken. Thus, any measures – such as changes in indexation, the de-indexation of child and family benefits and other social payments, modernising employment policy or improving competitiveness – must be announced to and discussed with the social partners prior to being debated in parliament. After all, the social partners do share responsibility for competitiveness, co-manage social security budgets and are responsible for company wage policy.

Franz Clément, CEPS/INSTEAD

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