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Diplomacy in Action

Luxembourg (07/02)


For the most current version of this Note, see Background Notes A-Z.


Grand Duchy of Luxembourg

Area: 2,586 sq. km. (1,034 sq. mi.; about the size of Rhode Island).
Cities: Capital--Luxembourg (pop.81,800). Other cities--Esch/Alzette, Dudelange, Differdange.
Terrain: Continuation of Belgian Ardennes in the north, heavily forested and slightly mountainous; extension of French Lorraine plateau in the south, with open, rolling countryside.
Climate: Cool, temperate, rainy; like the U.S. Pacific Northwest.

Nationality: Noun--Luxembourger(s). Adjective--Luxembourg.
Population (2001): 442,972.
Annual growth rate:1.26%.
Ethnic groups: Celtic base with French and German blend; also guest workers from Portugal, Italy, Spain, and other European countries.
Religion: Historically Roman Catholic. Luxembourg law forbids the collection of data on religious practices.
Languages: Luxembourgish, French, and German (official); English is widely spoken.
Education: Years compulsory--9. Attendance--100%. Literacy--100%.
Health: Life expectancy--avg. 78 years; males 74 years, females 81 years. Infant mortality rate--4.7/1000.
Work force (2000, 248,000): Services--62%; agriculture--1%; industry--28%; government--9%,
Unemployment (2000 est.): 2.7%.

Type: Constitutional monarchy.
Independence: 1839.
Constitution: 1868.
Branches: Executive--Grand Duke (chief of state). Legislative--bicameral parliament (Chamber of Deputies and Council of State). Judicial--superior court.
Political parties: Christian Socialist Party (CSV), Socialist Party (LSAP), Democratic (liberal) Party (DP), Green Alternative Party (GAP), Party for Pension Rights (ADR).
Suffrage: Universal over age of 18.
Government budget (2000): $4.32 billion.

Flag: flag of Luxembourg
GDP (2000 est.): $18.2 billion.
Annual growth rate (2001 est.): 6.2%.
Per capita income (2000 est.): $44,973.
Inflation rate (2000): 2.7%.
Natural resources: Iron ore.
Agriculture (1% of GNP): Products--dairy products, corn, wine. Arable land--42%.
Services (2000 est.): 69%.
Industry (30% of GDP): Types--chemicals, steel.
Trade (1999): Exports--luf 292,714 million (US$7.6 billion): steel, plastics, rubber and processed wood products. Major markets--Germany, Belgium, France, and Asia. Imports--luf 409,923 million (US$10 billion); minerals, including iron ore, coal, and petroleum products), mechanical and electrical equipment, transportation equipment, scrap metal. Major suppliers--other EU countries (esp. Belgium, the Netherlands, France, and Germany).

The language of Luxembourg is Luxembourgish, a blend of old German and Frankish elements. The official language of the civil service, law, and parliament is French, although criminal and legal debates are conducted partly in Luxembourgish and police case files are recorded in German. German is the primary language of the press. French and German are taught in the schools, with German spoken mainly at the primary level and French at the secondary level.

June 9, 1815, after 400 years of domination by various European nations, Luxembourg was made a grand duchy by the Congress of Vienna. It was granted political autonomy in 1838 under King William I of the Netherlands, who also was the Grand Duke of Luxembourg. The country considers 1835 to be its year of independence. In 1867, Luxembourg was recognized as independent and guaranteed perpetual neutrality. After being occupied by Germany in both World Wars, however, Luxembourg abandoned neutrality and became a charter member of the North Atlantic Treaty Organization (NATO) in 1949.

The present sovereign, Grand Duke Henri, succeeded his father, Grand Duke Jean on October 7, 2000. Grand Duke Jean announced his decision to abdicate in December 1999, after a 35 year reign.

Luxembourg has a parliamentary form of government with a constitutional monarchy by inheritance. Under the constitution of 1868, as amended, executive power is exercised by the Grand Duke and the Council of Government (cabinet), which consists of a prime minister and several other ministers. The prime minister is the leader of the political party or coalition of parties having the most seats in parliament.

Legislative power is vested in the Chamber of Deputies, elected directly to 5-year terms. A second body, the "Conseil d'Etat" (Council of State), composed of 21 ordinary citizens appointed by the Grand Duke, advises the Chamber of Deputies in the drafting of legislation. The responsibilities of the members of the Conseil d'Etat are extracurricular to their normal professional duties.

Luxembourg law is a composite of local practice, legal tradition, and French, Belgian, and German systems. The apex of the judicial system is the superior court, whose judges are appointed by the Grand Duke.

Principal Government Officials
Chief of State--Grand Duke Henri of Luxembourg
Prime Minister, Minister of State, Minister of Finance, Minister of Labor and Employment--Jean Claude Juncker, (CSV)
Vice Prime Minister, Minister of Foreign Affairs, External Trade and Development--Lydie Polfer (DP)
Ambassador to the United States--Arlette Conzemius
Ambassador to the United Nations--Hubert Wurth

Luxembourg maintains an embassy in the United States at 2200 Massachusetts Avenue, NW, Washington, DC 20006 (tel. 202-265-4171). Consulates or honorary consulates are located in many U.S. cities.

Since the end of World War II, the Christian Social Party (CSV) has usually been the dominant partner in governing coalitions. The Roman Catholic-oriented CSV resembles Christian Democratic parties in other west European countries and enjoys broad popular support. However, in June 1999, national elections ushered in a new government. For the first time since 1974, the Socialist Party (LSAP) ceded its junior coalition position with the long-reigning CSV majority to the Liberal Democrat Party (DP).

The DP is a center party, drawing support from the professions, merchants, and urban middle class. Like other west European liberal parties, it advocates both social legislation and minimum government involvement in the economy. It also is strongly pro-NATO. In the opposition since 1984, the DP had been a partner in the three previous consecutive coalition governments.

The Green Party has received growing support since it was officially formed in 1983. It opposes both nuclear weapons and nuclear power and supports environmental and ecological preservation measures. This party generally opposes Luxembourg's military policies, including its membership in NATO.

National elections are held at least every 5 years and municipal elections every 6 years. In the June 1999 parliamentary elections, the CSV won 19, the DP 15, the LSAP 13, the ADR (a single-issue party that emerged from the LSAP focused on pension rights) 6, the "Greens" 5, and the PCL 1. Hence, for the first time since 1974, the Socialists (LSAP) ceded their junior coalition position with the long-reigning Christian Socialist (CSV) majority to the Liberal Democrats. Jean-Claude Juncker (CSV) remained for a second 5-year term as Prime Minister, and Lydie Polfer (DP), the former Luxembourg City mayor, was named Vice Prime Minister and Foreign Minister.

Although Luxembourg in tourist literature is aptly called the "Green Heart of Europe," its pastoral land coexists with a highly industrialized and export-intensive economy. Luxembourg enjoys a degree of economic prosperity almost unique among industrialized democracies.

In 1876, English metallurgist Sidney Thomas invented a refining process that led to the development of the steel industry in Luxembourg and the founding of the Arbed company in 1911--now the world's largest steel producer. The iron and steel industry, located along the French border, is the most important single sector of the economy. Steel accounts for 29% of all exports (excluding services), 1.8% of GDP, 22% of industrial employment, and 3.9% of the work force.

The restructuring of the industry and increasing government ownership in Arbed began as early as 1974, and eventually led to a merger with two European steel giants, resulting in Arcelor, the world's most productive steel mill. As a result of timely modernization of facilities, cutbacks in production and employment, and recent cyclical recovery of the international demand for steel, the company is again profitable. The company specializes in production of large architectural steel beams and specialized value-added products by recycling steel scrap metal rather than mining and producing new steel.

There has been, however, a relative decline in the steel sector, offset by Luxembourg's emergence as a financial center. Banking is especially important. In 2000, there were 202 banks in Luxembourg, with 23,464 employees. Political stability, good communications, easy access to other European centers, skilled multilingual staff, and a tradition of banking secrecy have all contributed to the growth of the financial sector. Germany accounts for the largest-single grouping of banks, with Scandinavian, Japanese, and major U.S. banks also heavily represented. Total assets exceeded $600 billion at the end of 2000. More than 14,000 holding companies are established in Luxembourg. The European Investment Bank--the financial institution of the European Union--also is located there.

Government policies promote the development of Luxembourg as an audiovisual and communications center. Radio-Television-Luxembourg is Europe's premier private radio and television broadcaster. The government-backed Luxembourg satellite company Societe Europeenne des Satellites (SES) was created in 1986 to install and operate a satellite telecommunications system for transmission of television programs throughout Europe. The first SES "ASTRA" satellite, a 16-channel RCA 4000, was launched by Ariane Rocket in December 1988. SES presently operates 13 satellites with ASTRA 1K, the world's largest telecommunication satellite ever, to be launched before the year 2003.

Luxembourg offers a favorable climate to foreign investment. Successive governments have effectively attracted new investment in medium, light, and high-tech industry. Incentives cover taxes, construction, and plant equipment. U.S. firms are among the most prominent foreign investors, producing tires (Goodyear), chemicals (Dupont), glass (Guardian Industries), and a wide range of industrial equipment. The current value of U.S. direct investment is almost $1.4 billion, on a per capita basis--the highest level of U.S. direct investment outside of North America.

Labor relations have been peaceful since the 1930s. Most industrial workers are organized by unions linked to one of the major political parties. Representatives of business, unions, and government participate in the conduct of major labor negotiations.

Foreign investors often cite Luxembourg's labor relations as a primary reason for locating in the Grand Duchy. Unemployment in 2000 averaged less than 2.7%.

Luxembourg's small but productive agricultural sector provides employment for less than 2% of the work force. Most farmers are engaged in dairy and meat production. Vineyards in the Moselle Valley annually produce about 15 million liters of dry white wine, most of which is consumed locally.

Luxembourg's trade account has run a persistent deficit over the last decade, but the country enjoys an overall balance-of-payment surplus, due to revenues from financial services. Government finances are strong, and budgets are normally in surplus.

Luxembourg has long been a prominent supporter of European political and economic integration. In efforts foreshadowing European integration, Luxembourg and Belgium in 1921 formed the Belgium-Luxembourg Economic Union (BLEU) to create an inter-exchangeable currency and a common customs regime. Luxembourg is a member of the Benelux Economic Union and was one of the founding members of the European Economic Community (now the European Union). It also participates in the Schengen Group, whose goal is the free movement of citizens among member states. At the same time, Luxembourgers have consistently recognized that European unity makes sense only in the context of a dynamic, transatlantic relationship and have traditionally pursued a pro-NATO, pro-U.S. foreign policy.

Luxembourg is the site of the European Court of Justice, the European Court of Auditors, and other vital EU organs. The Secretariat of the European Parliament is located in Luxembourg, but the Parliament usually meets in nearby Strasbourg.

The Luxembourg army is under civilian control. Responsibility for defense matters is vested in the Minister of Cooperation, Humanitarian Action and Defense under the Ministry of Foreign Affairs, Trade, Cooperation and Defense. Luxembourg has no navy or air force. A 1967 law made the army an all-volunteer force with current strength of approximately 450 professional soldiers, about 340 enlisted recruits and 100 civilians, and a total budget of $131 million. Luxembourg has participated in the European Corps (EUROCORPS) since 1994, has contributed troops to the UNPROFOR and IFOR missions in former Yugoslavia, and participated with a small contingent in the NATO SFOR mission in Bosnia. The Luxembourg Army is integrated into the Multinational Belurokas Force under Belgian command. Luxembourg has financially supported international peacekeeping missions during the 1991 Gulf War, in Rwanda and Albania. The army also has participated in humanitarian relief missions such as setting up refugee camps for Kurds and providing emergency supplies to Albania.

Bilateral relations between the United States and Luxembourg are excellent, both historically and through common membership in the Organization for Cooperation and Economic Development (OECD), OSCE, and NATO. More than 5,000 American soldiers, including Gen. George S. Patton, are buried at the American Military Cemetery near the capital.

Principal U.S. Officials
Ambassador--Peter Terpeluk, Jr.
Deputy Chief of Mission--Gerald Loftus
Political/Economic Officer--Vin Carver
Commercial Counselor (based in Brussels)--George Knowles
Administrative Officer--Barbara A. Hibben
Vice Consul--Carol Cox
Public Diplomacy--Steven Weston

The U.S. Embassy in Luxembourg is located at 22 Boulevard Emmanuel Servais, L-2535 Luxembourg City (tel. 352-460-123).

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