In the assertion, ABBL chairman Guy Hoffmann cautions that although a short-term resolution is required to “manage massive increases in fuel and commodity prices”, an overuse of the indexation course of may even result in destructive implications for the nation’s monetary sector. In mild of the upcoming tripartite assembly, the Bankers’ Association thus urges all involved events to “limit indexation to once per year”.
ABBL press release
Indexation – ABBL calls for a balanced method Luxembourg, 17 March: It is not any shock that geopolitical occasions have an effect on the native economic system. According to STATEC, the inflation fee for 2022 is predicted to be 4.4%, due to the pandemic of the final two years and the Russian-Ukrainian battle of the previous couple of weeks. The OECD has additionally just lately revised its international output forecast downwards by 1% and raised its inflation estimate by 2.5%.
The automated indexation mechanism in Luxembourg is a confirmed financial instrument to make sure that salaries hold tempo with the price of dwelling, however at what price to competitivity? After an index enhance in October 2021, STATEC now predict an additional index in Q1 and probably a second in This fall of this 12 months.
According to Guy Hoffmann, Chairman of the ABBL: “Whilst we understand that a short-term solution is necessary to manage massive increases in fuel and commodity prices, the impact of multiple indexations within a few quarters will have significant implications for the financial sector.
Financial institutions choose to locate in Luxembourg for a myriad of reasons, but for 90% of the banks and financial services companies, they have a parent company elsewhere, in countries which do not necessarily have the same indexation mechanism and have difficulty understanding an automatically triggered increase in employment costs of their Luxembourg branch.
The financial sector is a key pillar of the Luxembourg economy, contributing around 30% to GDP, 12% of employment and over 35% of State revenues (source CES). In view of the upcoming Tripartite discussion, the ABBL strongly encourages those around the table to agree to limit indexation to once per year in until the end of the current period of economic instability.”
