Luxembourg Introduces Its First-Ever Defense Bond
Finance Minister Gilles Roth unveiled the unprecedented financial instrument on Thursday, framing it as a mechanism to "make citizens' savings more available for economic development." The Grand Duchy aims to mobilize a portion of the €33.4 billion ($38.7 billion) currently sitting in private savings accounts across the nation.
"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," Roth declared during a media briefing.
The bond offering carries a €150 million cap, with a subscription window opening January 15 and closing January 30. Citizens can participate with investments ranging from €1,000 to €150,000 per individual, per banking institution. The securities are trading on the Luxembourg Stock Exchange. Roth indicated that overwhelming demand could trigger an early closure of the offering, while leaving the door open for future iterations of the program.
Set to mature three years after the February 5 issuance date, the bonds deliver a 2.25% fixed annual return. Roth promoted the investment as exceptionally attractive, emphasizing that domestic investors will enjoy tax-free earnings on their profits. "The effective yield therefore roughly corresponds to that of an interest-bearing savings product at 2.81%," Roth noted.
This financial strategy emerges as Luxembourg works to secure an additional €1.8 billion across the next five years beyond its 2024 budget allocations to satisfy NATO defense expenditure requirements. The alliance's smallest member currently allocates approximately €1.2 billion per year to military spending. Specific allocation of the bond proceeds remains undetermined, pending decisions from a newly established defense bond committee. Officials have pledged "transparency," with the committee tasked with producing yearly public reports on fund deployment.
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