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National Plan for Smart, Sustainable and Inclusive Growth Luxembourg 2020

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National Plan for Smart, Sustainable and Inclusive Growth Luxembourg 2020 National plan for smart, sustainable and inclusive growth Luxembourg 2020 National Reform Programme of the Grand Duchy of Luxembourg under the European semester 2020 English courtesy translation of the original document (in French) Photos © SIP; SIP Jean-Christophe Verhaegen; Luxinnovation SIP Claude Piscitelli; TommL; SIP Claude Piscitelli 2 Foreword The preparation of the 2020 National Reform Programme (NRP) started at the beginning of the year. Outlining the Government’s strategy to respond to the major challenges of the Luxembourg economy, the NRP fits into the European semester and serves as a basis for discussions to be held with the European Commission on the efforts made by Luxembourg to guide its development. The NRP was enriched this year by assimilating not only economic, social and environmental objectives, but also through its integration of the sustainable development goals. This was implemented to make the NRP an instrument for integrating economic policies and to provide a longer-term view of the challenges that lie ahead. In March 2020, this agenda was completely disrupted by a health and economic crisis of unprecedented magnitude. The gradual spread of the Covid-19 Coronavirus all over the world has forced the vast majority of countries to drastically restrict social contacts amongst their citizens and, above all, to abruptly halt a large part of the economic activity. A health crisis that results in a large number of deaths has now resulted in an economic crisis of unprecedented scope. At the time this document was to be finalized, the Member States of the European Union began to implement strategies for lifting restrictions and gradually restart activities that have been at a standstill, revive their economies and to partially restore liberties to citizens who have been confined for weeks. Once restrictions are lifted, we cannot however expect a return to what we considered normal beforehand. The Coronavirus will remain present for many more months and our society will have to adapt to a new mode of operation to combine the imperatives of the health crisis, in particular with regard to the capacities of hospitals and regarding the need to jump-start and support the economy. The measures and decisions taken by the Government, namely the stabilisation plan for the economy, aim to mitigate the social and economic consequences of the crisis in the short term. However, it will also require action over the long-term. The aftereffects of this crisis will bring on the need for reconstruction. This will be an opportunity to rethink our society and to foster another model of prosperity that promotes improved economic resilience to crises like the one brought on by Covid-19. The importance of the health system also became particularly visible during this crisis. In particular, health infrastructure will need to be further developed in order to be able to counter possible future crises. Similarly, it is important to encourage strengthening a broad base of health personnel. Each crisis brings its share of lessons to be considered in the future, so as to elicit the correct reaction for proper daily functioning. The NRP, in conjunction with the SGP (Stability and Growth Programme), will therefore have to evolve over the next few years to account for a vision of a future that will not be identical to the pre-crisis situation. The basic objective of achieving sustainable development is in no way called into question. However, certain priorities must be adapted and planning the way to achieve resilient and sustainable economic growth concerns all of us. Such development is essential as a future basic principle for all political, economic and ecological action. The Government had already paved the way with its 2017 embrace of the strategy of the Third Industrial Revolution, developed collaboratively under the aegis of the economist Jeremy Rifkin, as a general orientation for the economic development of the country. Subsequently, the many reflections and ideas born from this broad conceptualization effort made their way into the different ministerial departments. Today, the reflections in the Rifkin report remain more relevant than ever. A way to emerge from the crisis toward economic recovery should be based on these scenarios to start a digital, intelligent and sustainable society. The current crisis has spurred a blatant digitalization trend. Digitization is a key strategic axis that both increases the productivity of available resources and reduces environmental impacts. To ensure proper development, digital infrastructures will themselves have to reduce their environmental footprint by using the best possible technologies in terms of energy efficiency and renewable energies. In addition, digitalization is also playing an increasingly important role in health fields such as the public health system; one example of this is the development of remote consultations. The European Council, the European Parliament and the European Commission recently agreed on two overlapping key ambitions and priorities of the European Union: the transition to climate neutrality by 2050 and the need to take the lead in assimilating the digital revolution within an increasingly digital economy and society. Luxembourg’s Government fully supports these ambitions. The challenge now is to develop policy measures and a regulatory framework that will enable the government to act. Luxembourg should be one of the first countries to adopt a vision combining a digital strategy and the Green Deal. The crisis has also highlighted the importance of flexible and resilient strategic value chains for the economic stability of the European Union. The digital transformation of the Luxembourg economy and in particular of its industrial fabric offer a unique opportunity to build production capacities and resilient value chains in its strategic economic sectors as the country gradually emerges from the Covid-19 crisis. In addition, the Covid-19 pandemic demonstrated that the internal market at community level failed to remain fully functional during the Covid-19 crisis. Border closures, ad hoc supply difficulties, the need to set up specific channels to ensure the shipment of goods within the European Union testify to certain shortcomings. For Luxembourg in particular, certain border closings posed major challenges: the flow of essential deliveries and the free movement of cross-border workers, who represent 46% of total domestic payroll employment, were hampered or restricted. Maintaining cross-border flows is vital for the Grand Duchy and therefore it is crucial that the single market is consolidated in order to avoid disrupting intra-community flows of people, goods and services. Regional coordination will become more important in the future. Close consultation with the border regions should lead to concentrating selected value chains within the Greater Region and consolidating them, for the benefit of all the countries concerned. 4 ACRONYMS ADEM Employment Development Agency AI Artificial Intelligence ALJ Local Youth Action ASBL Non-Profit Organisation BTS Vocational Training Certificate CEFN National Economic and Financial Committee CePAS Psycho-Social and Scholastic Assistance Centre CIEDD Inter-Ministerial Committee on Education for Sustainable Development CIP Professional Initiation Classes CNCD National Council for Sustainable Construction CNFPC National Centre for Continuous Vocational Training CNP National Productivity Board CRP Public Research Centre DESI Digital Economy & Society Index DSGE Dynamic Stochastic General Equilibrium EFT ESF European Social Fund ENAD National School for Adults ERA European Research Area ERDF European Regional Development Fund ESC Economic and Social Council ESF European Social Fund ETS Emission Trading Scheme EU European Union FEAD Fund for European aid to the most deprived FEDIL Federation of Luxembourg Industrial Operators FNR National Research Fund FNS National Solidarity Fund GDP Gross Domestic Product GHG Greenhouse Gases GIE Economic Interest Group GNI Gross National Income HPC High Performance Computing ICT Information and Communications Technologies IFEN Institute of National Education Training Programmes IFSB Institute for Training in the Construction Industry IGSS General Inspectorate of Social Security INAP National Institute for Public Administration INFPC National Institute for the Development of Continuing Vocational Training IPIL Institute of Intellectual Property KTOE Kilo-tonne oil equivalent LENOZ Luxembourg Sustainability Certificate for Residential Buildings LIH Luxembourg Institute of Health LIS Luxembourg income study LISER Luxembourg Institute of Socio-Economic Research LIST Luxembourg Institute of Science and Technology LLL Lifelong learning LSA Luxembourg Space Agency LSM Luxembourg structural model MECDD Ministry of the Environment, Climate and Sustainable Development MENJE Ministry of National Education, Childhood and Youth MIP Macroeconomic Imbalance Procedure MODU Sustainable Mobility Strategy MTO Medium-Term Objective 5 NECP National Energy and Climate Plan NEET Not in education, employment or training NRP National Reform Programme NZEB Nearly zero-energy buildings OECD Organisation of Economic Cooperation and Development ONIS National Office for Social Inclusion PAEE National Energy Efficiency Action Plan PAG General Development Plan PAN National Action Plan PDAT Master Programme for Spatial Planning PNDD National Plan for Sustainable Development PPB Draft budgetary plan PPP Public-Private
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