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Luxembourg (10/04)


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

Flag of Luxembourg is three equal horizontal bands of red at top, white, and light blue. 2004. 

PROFILE

OFFICIAL NAME:
Grand Duchy of Luxembourg

Geography
Area: 2,586 sq. km. (999 sq. mi.; about half the size of Rhode Island).
Cities: Capital--Luxembourg (pop.81,800). Other cities--EschAlzette, 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.

People
Nationality: Noun--Luxembourger(s). Adjective--Luxembourg.
Population (July 2004 est.): 462,690.
Annual growth rate (2004 est.): 1.28%.
Ethnic groups: Celtic base with French and German blend; also guest workers from Portugal, Italy, France, and other European countries.
Religion: Historically Roman Catholic. Luxembourg law forbids the collection of data on religious practices.
Official languages: Luxembourgish, French, and German; English is widely spoken.
Education: Years compulsory--9. Attendance--100%. Literacy--100%.
Health: Life expectancy--avg. 78 years; males 75 years, females 82 years. Infant mortality rate--4.88/1000.
Work force (2004, 293,670): Services--27%; agriculture--1%; industry--13%; government and social services--22%; financial services --28%; construction--8%.
Unemployment (September 2004 est.): 4.2%.

Government
Type: Constitutional monarchy.
Independence: 1839.
Constitution: 1868.
Branches: Executive--Grand Duke (head of state, ceremonial), Prime Minister (head of government). Legislative--unicameral parliament (Chamber of Deputies with Council of State serving as a consultative body). Judicial--Superior Court.
Political parties: Christian Socialist Party (CSV), Socialist Party (LSAP), Democratic (liberal) Party (DP), Green Party, Action Committee for Democracy and Pension Rights (ADR).
Suffrage: Universal over age of 18.
Government budget (2004): EUR 6,990 billion.

Economy
GDP (2003 est.): $25.01 billion (22.39 billion EUR)
Annual growth rate (2003): 2.9%
Per capita income (2003 est.): $55,100.
Inflation rate (September 2004): 1.9%.
Natural resources: Iron ore.
Agriculture (0.5% of GNP): Products--dairy products, corn, wine. Arable land--49%.
Services (2003): 83.1%.
Industry (16.3% of GNP): Types--chemicals, steel.
Trade (2003 est.): Exports-- $10.138 billion: steel, plastics, rubber and processed wood products. Major markets--Germany, Belgium, France, and Asia. Imports--$13.506 billion: minerals, including iron ore, coal, and petroleum products; mechanical and electrical equipment, transportation equipment, scrap metal. Major suppliers--other EU countries (esp. Belgium, France, and Germany).

HISTORY
The national language of Luxembourg is Luxembourgish, a blend of Dutch, 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.

After 400 years of domination by various European nations, Luxembourg was granted the status of Grand Duchy by the Congress of Vienna on June 9, 1815. Although Luxembourg considers 1835 (Treaty of London) to be its year of independence, it was not granted political autonomy until 1839 under King William I of the Netherlands, who also was the Grand Duke of Luxembourg. In 1867, Luxembourg was recognized as independent and guaranteed perpetual neutrality. After being occupied by Germany in both World Wars, 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.

GOVERNMENT
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'�tat" (Council of State), composed of 21 ordinary citizens appointed by the Grand Duke, advises the Chamber of Deputies in the drafting of legislation, though the Council's opinion has no binding effect. The responsibilities of the members of the Conseil d'�tat 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
Head of State--Grand Duke Henri of Luxembourg
Prime Minister, Minister of State, Minister of Finance--Jean-Claude Juncker (CSV)
Vice Prime Minister, Minister of Foreign Affairs and Immigration-Jean Asselborn (LSAP)
Minister of Justice, Treasury and Budget, and Defense-Luc Frieden (CSV)
Minister of Economy and Foreign Trade-Jeannot Krecke (LSAP)
Ambassador to the United States--Arlette Conzemius
Ambassador to the United Nations--Jean-Marc Hoscheit

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.

POLITICAL CONDITIONS
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. The LSAP (Socialist Party) regained its standing as junior coalition partner to the CSV in national elections held in June 2004.

The Socialist Party (LSAP) is a center-left party similar to most social-democratic parties in Europe. Initially founded by a worker's movement and a main defender of universal suffrage in 1919, the LSAP defends state intervention in the economy and the sustainability of the welfare system. Part of the government between 1984-1999, the LSAP includes divergent movements in its ranks and is currently dominated by politicians originally from the trade union movement. While in the opposition, the LSAP voiced considerable criticism against the war in Iraq.

The Democratic Party (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 from 1984 to 1999, the DP had been a junior partner in the previous 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, but has shown some openness to peacekeeping missions.

National elections are held at least every 5 years and municipal elections every 6 years. In the June 2004 parliamentary elections, the CSV won 24 seats, the DP 10, the LSAP 14, the ADR (a single-issue party that emerged from the LSAP focused on pension rights) 5, and the "Greens" 7. Hence, the DP ceded their junior coalition position back to the LSAP, which had been the junior coalition member from 1984-1999. Jean-Claude Juncker (CSV) has remained for a third 5-year term as Prime Minister. In July 2004, Prime Minister Juncker announced the new government and appointed Jean Asselborn (LSAP) as the Vice Prime Minister and Minister of Foreign Affairs and Immigration.

ECONOMY
Although Luxembourg is aptly described as the "Green Heart of Europe" in tourist literature, 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. In 2001, Arbed merged with Aceralia and Usinor to form Arcelor, the world's largest steel producer, which is headquartered in Luxembourg. The iron and steel industry, located along the French border, is the most important single sector of the economy. In 2002 steel accounted for 27% of all exports (excluding services), 30% of industrial employment, and 3.8% of the work force.

There has been a relative decline in the steel sector, offset by Luxembourg's emergence as a financial center. The financial sector in 2002 made up more than 35% of Luxembourg's gross domestic product. Banking is especially important. In 2004 (October), there were 167 banks in Luxembourg, with 23,300 employees. Political stability, good communications, easy access to other European centers, skilled multilingual staff, and a tradition of banking secrecy have 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 banking assets exceeded $676 billion at the end of August 2004. Approximately 14,000 holding companies are established in Luxembourg.

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 Soci�t� Europ�enne 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. ASTRA 1H is the most advanced satellite with a return channel capacity in the Ka band frequency range enabling two-way satellite communications directly to users' terminals.

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. The recent European Union (EU) directive on services supplied electronically has caused a number of companies to look to Luxembourg, with its relatively low value-added tax (VAT) rates, as a possible location for directing their European operations. 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 Department of Commerce's Bureau of Economic Analysis reports that total U.S. direct investment in Luxembourg (on a historical cost basis) was nearly $67 billion at the end of 2003. Foreign direct investment (FDI) data for Luxembourg must be interpreted cautiously, however, because of Luxembourg's role in financial intermediation, particularly involving Luxembourg-based holding companies.

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 2004 has averaged approximately 4.2%.

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.

FOREIGN RELATIONS
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, European Investment Bank, and other vital EU organs. The Secretariat of the European Parliament is located in Luxembourg, but the Parliament usually meets in nearby Strasbourg. Luxembourg will hold the EU Presidency in the first half of 2005.

DEFENSE
The Luxembourg Army is under civilian control. Responsibility for defense matters is vested in the Minister who is also the Minister of Budget and Treasury, Minister of Justice and the Minister in charge of the police, a regrouping of portfolios that was meant to reflect the new NATO requirements. The Defense had a budget of $238,634,816 in 2003. 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. A 2002 law now allows EU citizens, under certain conditions, to join the Luxembourg Army. Luxembourg has participated in the European Corps (EUROCORPS) since 1994, and has contributed troops to the UNPROFOR, IFOR, and KFOR missions in the former Yugoslavia. It has also participated with a small contingent in the NATO SFOR mission in Bosnia and currently participates in the NATO ISAF mission in Afghanistan. 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 and in Rwanda and Albania, and has provided humanitarian aid to Iraq. The army also has participated in humanitarian relief missions such as setting up refugee camps for Kurds and providing emergency supplies to Albania.

U.S. RELATIONS
The United States and Luxembourg have traditionally enjoyed a strong relationship, expressed both bilaterally and through common membership in NATO, the Organization for Economic Cooperation and Development (OECD) and the Organization for Security and Cooperation in Europe (OSCE). 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--Daniel Piccuta
Political/Economic Chief--Sara Rosenberry
Economic Officer-Lorelei Snyder
Commercial Officer (based in Brussels)-Christopher Quinlivan
Management Officer--Daniel Foote
Vice Consul--Lorelei Snyder (Acting)
Public Diplomacy--Matthew Long

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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