On the afternoon of Tuesday 13 May 2025, Luxembourg’s Prime Minister Luc Frieden delivered his State of the Nation address in the Chamber of Deputies (parliament), with an emphasis on “progress through stability” and “stability through progress”.

He began his speech by emphasising the need for progress through consistent effort, not least in a world undergoing such rapid geopolitical, social, technological and ecological changes.

Security, Defence & Resilience

In terms of security and defence, the prime minister noted that Luxembourg plans to reach the NATO defence spending target of 2% of gross national income (GNI) by the end of this year (rather than waiting until 2030). To fund this security expenditure, a “defence bond” (public loan) will be introduced; other funding sources include redefined investment spending priorities and the mobilisation of extra-budgetary financial resources. The Luxembourg government will also launch a second communications satellite for military purposes.

The prime minister stressed the need to strengthen resilience and preparedness, using a holistic approach. “True resilience requires coordinated action at both national and local levels,” he said, adding that “a resilient society begins with a shared awareness among all citizens”. He noted that the government will present the first national resilience strategy later this year. Already planned measures include the creation of platforms such as RESC-LU.

Sovereignty: Agriculture & Industry

The prime minister also spoke of sovereignty and lessons learned from the COVID-19 pandemic, the energy crisis and war in Ukraine (in terms of overdependence), noting that “being sovereign means being self-confident” and that “a strong Luxembourg can only exist within a strong Europe”; Luxembourg must also “play its part” as it seeks to be “at the forefront of progress”. For the Luxembourg government, agriculture and industry play an important role here. The prime minister stressed the importance of ensuring high-quality local food production and noted Luxembourg’s support for the Mercosur agreement; he added that the government would “closely monitor the effects of the agreement in consultation with the agricultural sector”. In terms of industry, the goal is to ensure Luxembourg “remains a destination of choice” for industrial players. The prime minister stated that “three political objectives converge in this effort”, notably sovereignty and security of supply, economic competitiveness and reducing CO2 emissions. He also stressed the need to support industrial actors in their decarbonisation efforts, which means simplifying administrative procedures.

Energy

Prime Minister Frieden acknowledged the challenges linked to high energy prices and emphasised the need for sustainable solutions at national and EU level. “Our industry needs clean energy, but it also needs affordable energy,” he stated, adding that energy prices remain below the European average in Luxembourg - a fact “we must preserve”. Consequently, the state has decided to mobilise €150 million to “directly benefit citizens and companies”. The public budget is set to directly finance part of the grid costs and to cover the costs of the compensation mechanism currently financed by consumers. In the medium term, ensuring affordable and competitive energy prices “will only be possible through a transition to renewable energy”. The government will expand its plans to pre-finance solar panels. Administrative simplification and digitalisation is also part of this strategy of making energy “einfach, séier, erneierbar” (simple, fast and renewable).

The prime minister added that the government wants to explore new opportunities for solar and wind energy installations, “always in balance with and respect of both humans and nature”: there is “significant potential” along the motorway network for photovoltaics, while wind turbine minimum distance requirements from roads and forests will be reduced.

Innovation, Digital Technologies & Entrepreneurship

The prime minister highlighted Luxembourg’s desire to be a “powerhouse in both finance and digital technologies”, adding that stability and trust were essential in positioning the Grand Duchy as a “data hub”. He acknowledged the opportunities linked to artificial intelligence (AI) which cannot be ignored and which could help use data to benefit society. This should be based on trust and transparency, placing “innovation at the service of humanity”.

Luxembourg will invest €3 billion from public and private players over the next six years into transforming the country into an “international centre for the secure and sovereign storage and valorisation of sensitive data from all over Europe”. The prime minister noted the upcoming creation of an AI Academy and a Deep Tech Lab. Another innovative project is the development of a large language (AI) model trained on national and European legislation. The government is also looking at ways of using AI within the ADEM employment agency to “better understand the skills jobseekers possess and those in demand by businesses”.

The prime minister also later described entrepreneurship and the success of SMEs as key to maintaining competitiveness in an “increasingly uncertain world”. To promote this, simplified administrative procedures remain essential- the government is set to present changes to the right of establishment by the end of the year. There are also plans to present a reform of the Labour and Mines Inspectorate (ITM) with a focus on prevention, awareness-raising and support. Furthermore, the government plans to make “targeted investments” in vocational training to ensure companies have “skilled and motivated staff”. The prime minister said these measures “will enable us to create the right conditions for economic growth. Growth creates jobs. It provides the state with the revenue it needs to pursue a strong social policy and make essential investments – in the energy transition, the digital future and defence.”

Youth: Screen Time & Mental Health

Prime Minister Frieden also addressed the wellbeing of children and young people. He referred to a recent report which showed that children are spending increasingly more time in front of screens and are also “exposed to increasingly violent and sexualised content”. He stressed the need to protect children from such content, as part of their fundamental rights, also at the European level.

He spoke of mental health, noting that this “must no longer be treated as a taboo”. One concrete measure in this regard will be to increase the capacity of juvenile psychiatric units by adding more beds; another is increasing mental health first aid training. Prevention remains “a top priority”. Awareness-raising among parents is also deemed essential. “Our goal is a generation that is genuinely happy,” the prime minister said.

Economic & Social Policy

He went on to discuss issues such as the tax system, labour law and pension reform. “Our ambition is to pursue a modern social policy,” he said. On the former, he reaffirmed the government’s commitment to reforming the tax system by moving towards individualised taxation (single tax bracket). Labour law reforms are also on the agenda, with a focus on flexibility and better work-life balance for “all family structures”. Prime Minister Frieden noted that such measures are “not top-down decisions, but the result of dialogue with our social partners” - he emphasised the importance of dialogue and different opinions within a democracy.

Also regarding family life, the government will present proposals for the flexibilisation of maternity leave and the introduction of part-time work for family reasons later this year.

Concerning Sunday work, as part of “a modern social policy”, the government plans to propose offering “greater flexibility to businesses that are already authorised to open on Sundays”. Such establishments would have the choice to operate up to eight hours rather than the current four hours on Sundays. People working in these sectors on Sundays will receive a 70% bonus. “It’s not a step back, but a step forward. One that brings more choice and more freedom,” he said. The prime minister also stressed the central importance of collective agreements for labour law and for trade unions. So-called social roundtables are also set to continue between the government and its social partners.

On the pension system, Prime Minister Frieden assured that this is “a social achievement that we must preserve and guarantee for future generations”, adding that pensions are “a promise based on trust”, allowing everyone to “look towards retirement with confidence and peace of mind”. He also described the pension system as “an insurance for old age”. Nevertheless, he recalled how “the retirement period is almost as long as the contribution period” - a situation which is “no longer viable”. As such, the government plans to gradually increase the number of contribution years, while keeping the legal retirement age at 65. The goal is to “financially secure the system for the next fifteen years”. There are also plans to introduce targeted social assistance for people at risk of old-age poverty. Private third-pillar pensions are expected to become more attractive for people with extra savings.

Housing & Mobility

The prime minister noted that measures are needed in the areas of housing, mobility and security as well. He stated that the construction “crisis is behind us” and the state is not supposed to “support the housing market indefinitely”. As such, the government will phase out the temporary tax package, although the tax credit on notarial instruments ("bëllegen Akt") for primary residences at €40,000 will remain in place. Moreover, the government remains “committed to building more and faster” to ensure “everyone has access to affordable housing”. The prime minister highlighted continued investments in mobility infrastructure, notably in the rail and tramway networks, as well as on Luxembourg’s roads (e.g. completion of the Hosingen bypass) and at the airport.

Rule of Law & Migration

Prime Minister Frieden also discussed rule of law and how it too should “adapt to changes in our society”. He noted that the judiciary has been strengthened with additional hires, although more efficient procedures are also necessary. As such, the digitalisation of procedures will continue. The police will “also be given the necessary resources” to “ensure greater presence, proximity and prevention”. He added that “the fight against cross-border crime requires cross-border cooperation”, which the government plans to strengthen, for example by introducing an automatic vehicle number plate recognition system to identify wanted persons. The prime minister also emphasised the importance of Schengen as “a symbol of Europe and of our union”.

On migration, he said “the problem of illegal immigration can only be solved at European level, with stronger controls at external borders.” Migration policy in general should be "inspired by the heart, guided by reason”, he noted, adding that the right to asylum “must be guaranteed” on the one hand while “illegal immigration must be tackled” on the other.

Concluding Remarks

In closing his speech, Prime Minister Frieden highlighted the fundamental principles of “peace, freedom, justice”, stressing that these “are values that we must embody every day”. He added that “each generation must redefine these values”, referring to women’s rights but also referring back to the subjects of defence and resilience, renewable energy, innovation and entrepreneurship, work-life balance, childhood wellbeing and “a dignified retirement”.

“That is what sovereignty is all about: the freedom to make your own decisions and shape your own future. That is what we want for our country,” he said, adding that “all progress is the result of change” and “what we must avoid at all costs is standing still, paralysed by the fear of change”. He also acknowledged different opinions once again, but called for everyone to “work together in the interests of our country and its citizens”.

“That is the conviction of this government: Progress through stability. Stability through progress,” he concluded.