Evolution and structure of general government expenditure since the mid 90’s

In absolute terms, general government expenditure (central government, local authorities, social security) is very high in Luxembourg, € 34 400 per capita against € 14 000 in the euro area on average in 2011. Relative to GDP, public spending in Luxembourg is however well below the European average: 42% of GDP in the Grand Duchy in 2011, against 50% of GDP in the euro area. With the crisis, as in other European countries, the share of public expenditure in GDP rose sharply in Luxembourg from 36.3% of GDP in 2007 to 44.6% in 2009, returning to 42% in 2011. This trend is largely the result of the GDP slump and not so much of increases in spending. The equilibrium of public finances is weakened by sluggish tax revenues following the economic downturn. Regarding the structure of public spending, benefits and social transfers in kind or in cash account for nearly half of public expenditure (47.3% in 2011) in Luxembourg, a percentage comparable to the average for the euro area (46.8% ). With 27.7%, the share of operating costs (remuneration and intermediate consumption) in total expenditure is below the European average (32.6%). Public investment in Luxembourg reached 9.1% of total public expenditures in 2011, almost double the corresponding share in the euro area (4.7%). Finally, the debt service is still very low: it is equivalent to a little more than 1% of total public expenditure in Luxembourg, but more than 6% in the euro area on average in 2011.