Luxembourg to be first country to introduce free public transport

NSW Premier Gladys Berejiklian is seen during an announcement

Trains, tram and bus fares will all be lifted from 2020 in the 999 sq mile European nation, under ambitious government proposals.

Bettel, who took office for a second term on Wednesday, made environmental protection a key part of his election campaign. The first-of-its-kind move is expected to relieve chronic congestion in the tiny country's capital, Luxembourg City, where the 110,000 residents are joined by around 400,000 commuters every day.

Luxembourg City suffers from some of the worst traffic congestion in the world.

A study suggested that drivers in the capital spent an average of 33 hours in traffic jams in 2016.

According to The Independent, Luxembourg's transport system costs close to €1bn per year to operate, but as a result of the concessionary offers, fares amount to only €30m annually.

Apart from making public transportation free for all, the new government coalition led by Bettel, which consists of the liberal Democratic Party, the leftist Socialist Workers' party, and the Greens, is also considering legalising cannabis for recreational use.

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Sandwiched between France, Belgium and Germany, from which nearly 200,000 people enter it daily to work, the Guardian reports.

There is already free transport for under 20s while secondary school students can use free shuttles between schools and their homes.

Currently, fares are capped at €2 ($AUD3.15) for up to two hours of travel, which in the small European nation covers nearly any journey.

It's understood abolishing all public transport fares will save the government money on the collection and processing of fares.

Opinion polls before October's poll had indicated that the Christian Social People's party (CSV) - led for 19 years by the European Commission president, Jean-Claude Juncker - would end Bettel's five years as prime minister.

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