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Eurofound's COVID-19 EU PolicyWatch collates information on the responses of government and social partners to the crisis, as well as gathering examples of company practices aimed at mitigating the social and economic impacts.

Factsheet for case LU-2020-12/469 Updated – measures in Luxembourg

State guarantee scheme for new bank loans for a maximum period of 6 years

Régime de garantie étatique pour de nouveaux crédits bancaires sur une durée maximale de 6 ans

Country Luxembourg , applies nationwide
Time period Temporary, 18 March 2020 – 30 December 2021
Type Legislations or other statutory regulations
Category Supporting businesses to stay afloat
– Access to finance
Author Patrick Thill (LISER) and Eurofound
Case created 10 April 2020 (updated 21 July 2021)

Background information

Based on a draft legislation still discussed in Parliament (Projet de loi Nr 7545 visant à mettre en place un régime de garantie en faveur de l'économie luxembourgeoise dans le cadre de la pandémie COVID-19) and in order to help businesses during the crisis, new credit lines will be guaranteed at 85% by the Luxembourg government and 15% by the participating banks (for example BCEE, Raiffeisen) for loans granted during the period starting 18 March 2020 until 20 December 2020. The loans are intended as a subsidiary tool, after having resorted, where possible, to the tools of the Société nationale de crédit et d'investissement (SNCI), the Office du Ducroire or the European Investment Bank in particular.

Content of measure

New credits for are reserved for businesses that were viable before 18 March 2020. The eligible business must contact one of the participating banks in Luxembourg to apply for a bank loan.

The maximum amount can be up to 25% of the business turnover for the year 2019. There are two pathways, depending on the size of the company:

For small and medium-sized enterprises, the guarantee premium, borne by the borrower, is set at:

  • 0.25% for a maximum maturity of one year;
  • 0.50% for a maximum maturity of three years;
  • 1% for a maximum maturity of six years.

For large companies, the guarantee premium, borne by the borrower, is set at:

  • 0.50% for a maximum maturity of one year;
  • 1% for a maximum maturity of three years;
  • 2% for a maximum maturity of six years.

Updates

The following updates to this measure have been made after it came into effect.

30 June 2021

The minister of finance, representatives of the ABBL and the banks BCEE, BIL, BGL BNP Paribas, Banque de Luxembourg, Raiffeisen, ING, Bank of China and Banque BCP agreed on the extension until 30 December 2021 of the regime of State-guaranteed loans in favour of the Luxembourg economy in the context of the COVID-19 pandemic.

Communicated by the ministry of finance on 30 June 30 2020. Mainly companies in the trade sector made the most use of this aid €60.8 million in nominal loans). The other sectors that used the measure were: the manufacturing industry (€24.4 million), the construction sector (€23.7 million) as well as accommodation and catering (€21 million) of loans granted.

The banks gave €309 million in loans not guaranteed by the state to support businesses. It should be noted that at present, the Luxembourg State has not yet had to intervene as a guarantor on an outstanding loan.

21 December 2020

At the request of the minister of finance, representatives of the ABBL and the banks BCEE, BIL, BGL BNP Paribas, Banque de Luxembourg, Raiffeisen, ING, Bank of China and Banque BCP agreed on the extension until 30 June 2021 of the regime of State-guaranteed loans in favour of the Luxembourg economy in the context of the COVID-19 pandemic. Communicated by the ministry of finance on December 21, 2020.

Use of measure

Until 1st March 2021, 379 eligible applications were processed and granted to benefit from the state guarantee scheme to take out a bank loan of up to 25% of turnover. The total amount of the granted bank loans was €188,178,390.

Target groups

Workers Businesses Citizens
Does not apply to workers Applies to all businesses Does not apply to citizens

Actors and funding

Actors Funding
National government
Company / Companies
National funds
Other

Social partners

Social partners' role in designing the measure and form of involvement:

Trade unions Employers' organisations
Role Consulted Consulted
Form Any other form of consultation, institutionalised (as stable working groups or committees) or informal Any other form of consultation, institutionalised (as stable working groups or committees) or informal

Social partners' role in the implementation, monitoring and assessment phase:

  • Social partners jointly
  • Main level of involvement: Unknown

Involvement

Social partners assess the draft legislation in the course of the legislative procedure.

Views and reactions

Not available.

Sources

  • 27 March 2020: Projet de loi Nr 7545 visant à mettre en place un régime de garantie en faveur de l'économie luxembourgeoise dans le cadre de la pandémie Covid-19 (www.chd.lu)
  • 21 December 2020: Prolongation du régime des prêts garantis par l'État (gouvernement.lu)
  • 04 January 2021: Etat des lieux au 19 octobre 2020 des aides accordées aux entreprises (gouvernement.lu)
  • 01 March 2021: Etat des lieux au 1er Mars 2021 des aides accordées (meco.gouvernement.lu)
  • 30 June 2021: Prolongation de régimes d'aides liés à la COVID-1 (meco.gouvernement.lu)

Citation

Eurofound (2020), State guarantee scheme for new bank loans for a maximum period of 6 years, case LU-2020-12/469 (measures in Luxembourg), COVID-19 EU PolicyWatch, Dublin, http://eurofound.link/covid19eupolicywatch

Disclaimer: This information has not been subject to the full Eurofound evaluation, editorial and publication process. All information is preliminary and subject to change.