Preparations for tripartite talks amid tense atmosphere

In 2004, the tripartite coordination committee mandated an economist from the Paris-Sorbonne University to evaluate the competitiveness of Luxembourg’s economy and make some recommendations. The same economist has again attracted attention in Luxembourg with the recent presentation of a second report. The trade unions, which are apprehensive about the upcoming tripartite committee meetings, have expressed surprise, as the economist was not mandated on this occasion.

Observatory of Competitiveness

In May 2003, Luxembourg set up an Observatory of Competitiveness (Observatoire de la compétitivité). Its role is to help the government and the social partners to define the overall direction and content of policies that will encourage and are compatible with long-term competitiveness of the national economy as a source of growth and prosperity. Initially, the Observatory of Competitiveness was tasked with preparing a draft report for the Tripartite Coordination Committee (Comité de coordination tripartite) on the competitiveness of Luxembourg’s economy. In order to do this, the government appointed an external expert. A series of interviews took place between the social partners and the economist, Lionel Fontagné, who had been appointed to compile the survey questionnaire.

First report on competitiveness

The first report Competitiveness in Luxembourg: A flaw in the steel (Compétitivité du Luxembourg: une paille dans l’acier (1.3Mb PDF) was presented in November 2004. It highlighted the structural weaknesses that were hastening the decline in the competitiveness of Luxembourg’s economy, particularly the mediocre performance of the education system, high inflation and pay rises that were outstripping increases in productivity. It also presented some thoughts on how these problems might be addressed. The report met with a favourable reception from the Luxembourg Employers’ Association (Union des Entreprises Luxembourgeoises, UEL), which believed that the author had succeeded in striking a balance between the need for competitiveness and for social cohesion throughout his analysis and recommendations. The Luxembourg Confederation of Independent Trade Unions, (Onofhängege Gewerkschaftsbond Lëtzebuerg, OGB-L) and the Luxembourg Christian Trade Union Confederation (Lëtzebuerger Chrëschtleche Gewerkschafts-Bond, LCGB) argued that some of the points made in the report appeared to call into question certain aspects of the social cohesion and well-being of the Grand Duchy of Luxembourg. In particular, the trade unions doubted whether abolishing the automatic indexation of salaries or reducing the minimum wage could be regarded as measures to improve the effectiveness of the economy while ensuring social cohesion.

Second report leaves trade unions sceptical

Five years later, in 2009, with the social partners preparing for tripartite talks in 2010 which look set to be difficult if not momentous, the presentation of a second report by Lionel Fontagné has been greeted with surprise on the part of OGB-L as Mr Fontagné was not requested on this occasion to compile a report. Thus, the trade union confederation questions the purpose of the report, by referring to it as a manoeuvre that aims to impose a particular agenda on the tripartite talks. Meanwhile, LCGB has responded sceptically, claiming that the report does not contain any proposals to move the debate forward. Entitled Competitiveness in Luxembourg: After the bubble (Compétitivité du Luxembourg: après la bulle (195Kb PDF)), the document has noticeably contributed to the tension between the social partners already felt by the trade unions.

The report contends that structural reforms are far more necessary than they were five years ago, and that they will be more stringent because one of the key topics to be addressed is labour costs. The economist believes that the country needs to focus on productivity, which has been neglected in recent years. In order to attract cross-border workers, salaries have been increased, without sufficient productivity gains necessarily being recorded over the same period. More generally, the main areas for reform suggested in the report are public finance, the labour market and policy on business competitiveness.

Although OGB-L agrees that structural measures need to be taken, this does not mean that it is prepared to sign an agreement at any price. While seeking to downplay the seriousness of the situation, it has expressed regret that what it calls ‘histrionics in connection with the preparations for the tripartite talks’ could jeopardise the negotiations.

Need for new tripartite growth pact

The Minister for the Economy and Foreign Trade, Jeannot Krecké, shares the expert’s views on the need for a new pact for growth and employment. However, the achievement of such an agreement requires a shared analysis of the situation, which does not currently take place according to the minister. A series of bilateral talks with the social partners is currently being conducted by the government, which takes the view that efforts will have to be shared in a way that is both socially acceptable and fair, but that they will also have to be effective in order to be credible to the general public. If no agreement is reached, the government will assume its responsibilities, the minister emphasised.

Odette Wlodarski, Prevent