Luxembourg becomes first EU country to issue such debt security
Finance Minister Gilles Roth announced the initiative on Thursday, describing it as a way to “make citizens’ savings more available for economic development.” The government aims to tap into approximately €33.4 billion held in private accounts across the country. Roth highlighted the historic nature of the move, saying, “We are the first European country since the Second World War to introduce a defense bond. No state has issued an instrument of this kind for 80 years.”
The issuance is capped at €150 million, with subscriptions open from January 15 to January 30. Individuals can invest a minimum of €1,000 and a maximum of €150,000 per person, per bank. If demand exceeds availability, the bond issuance may close early, though future schemes are not ruled out.
The bonds, set to run for three years starting February 5, offer a fixed interest rate of 2.25%. Profits from the bonds will be exempt from taxes, giving residents an effective yield of roughly 2.81%, comparable to a standard interest-bearing savings product.
The move comes as Luxembourg seeks to raise an additional €1.8 billion over the next five years to meet NATO defense spending targets. Currently, the country allocates around €1.2 billion annually to defense. The specific use of funds from the bonds will be determined by a defense bond committee, which will publish annual reports to ensure transparency.
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