Luxembourg

As countries seek to learn from the COVID-19 crisis and increase their resilience for the future, evaluations are important tools to understand what worked or not, why and for whom. This report is the first of its kind. It evaluates Luxembourg’s responses to the COVID-19 crisis in terms of risk preparedness, crisis management, as well as public health, education, economic and fiscal, and social and labour market policies. While Luxembourg’s response to the pandemic has been particularly agile, preserving the country’s resilience will require maintaining high levels of trust in government, reducing inequalities, and laying the foundations for inclusive growth. The findings and recommendations of this report will provide guidance to public authorities in these efforts.

The COVID-19 crisis has had a profound impact on SME access to finance. In particular, the sudden drop in revenues created acute liquidity shortages, threatening the survival of many viable businesses. The report documents an increase in demand for bank lending in the first half of 2020, and a steady supply of credit thanks to government interventions. On the other hand, other sources of finance declined, in particular early-stage equity. This paper, a special edition of Financing SMEs and Entrepreneurs, focuses on the impacts of COVID-19 on SME access to finance, along with government policy responses. It reveals that the pre-crisis financing environment was broadly favourable for SMEs and entrepreneurs, who benefited from low interest rates, loose credit standards and an increasingly diverse offer of financing instruments. It documents the unprecedented scope and scale of the policy responses undertaken by governments world-wide, and details their key characteristics, and outlines the principal issues and policy challenges for the next phases of the pandemic, such as the over-indebtedness of SMEs and the need to continue to foster a diverse range of financing instruments for SMEs.

Luxembourg has made progress in decoupling environmental pressures from economic growth, treating wastewater and managing waste and materials. It has also positioned itself as an international centre for green finance. Yet, it remains one of the most carbon- and material-intensive economies in the OECD. The country is a crossroads for freight traffic and attracts thousands of daily cross-border commuters. This exacerbates greenhouse gas emissions, air pollution and road congestion. Urban sprawl, landscape fragmentation and agriculture exert strong pressures on biodiversity. To steer its economy towards a greener model, Luxembourg has set ambitious environmental objectives. Greening taxation, providing stronger price signals, promoting eco-innovation and the circular economy, mainstreaming biodiversity into all policies, and investing in low-carbon infrastructure and sustainable mobility, should be priorities. This is the third Environmental Performance Review of Luxembourg. It evaluates progress towards green growth and sustainable development, with special chapters focusing on two major issues: air quality and mobility, and biodiversity.

Trends in bank profitability and factors affecting it are major indicators of changes in the state of health of national banking systems. This publication provides nationally aggregated financial statements of banks data for OECD member countries. The coverage of banks is not the same in each country, though the objective is to include all institutions that conduct ordinary banking business, namely institutions which primarily take deposits from the public at large and provide finance for a wide range of purposes. Some information on the number of reporting banks, their branches and staff is also included, as well as structural information regarding the whole financial sector. Moreover, ratios, based on various items of the financial statements of banks in percentage of some specific aggregates, are supplied to facilitate the analysis of trends in bank profitability of OECD countries. Times series available vary according to country, but generally the last five years of available data are shown.