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Economy of Luxembourg

While Luxembourg is aptly described as the "Green Heart of Europe" in tourist literature, its pastoral land coexists with a highly industrialized, export-intensive, and high-tech services 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, which was headquartered in Luxembourg. In 2005, Arcelor acquired Canada's largest steel manufacturer, Dofasco. In 2006, Arcelor merged with Mittal Steel to become ArcelorMittal, the largest steelmaker in the world. The company now produces 8% of the world's steel output. The iron and steel industry in Luxembourg comprises approximately 7% of the overall economy. During the past few decades there has been a relative decline in the steel sector, offset by Luxembourg's emergence as a major financial services and technology center. As of September 2010 there were 149 banks in Luxembourg; banks employed 26,416 people as of 2009. Political stability, good communications, easy access to other European financial centers, and skilled multilingual staff have contributed to the growth of the financial sector. German banks represent the largest number, with Belgian, French, Italian, Japanese, Swedish, Swiss, U.K., and U.S. banks also having a significant presence in the country. Government policies promote the development of Luxembourg as an audiovisual, communications, and high technology center. Radio-Television-Luxembourg (commonly known as RTL) 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 over 40 satellites. Over the past decade, Luxembourg has sought to diversify its services economy beyond the financial sector by promoting the high-tech/information technology and e-commerce sector. The government has made significant investments in infrastructure to increase broadband capacity and has become one of the leading countries in the number of high-speed Internet connections per capita. Multiple data centers were built to facilitate international network connectivity, and prices for commercial Internet usage have fallen. The Grand Duchy is seeking to position itself as a technology and e-commerce hub in Europe, with ultra-high bandwidth Internet infrastructure (fiber optic cable networks to all households) by 2013. Luxembourg was the only EU country without a full university until 2003, when the University of Luxembourg was established as a national public university. The majority of college-age Luxembourgers still study outside of the Grand Duchy, usually in neighboring EU countries or the United Kingdom. However, the University of Luxembourg continues to expand and is attracting thousands of foreign students, mainly to its finance and law programs but also to science programs which are enhanced by a collaboration with the new Integrated BioBank of Luxembourg launched in 2008 and specializing in biomedical research focusing on cancer detection. 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 Department of Commerce's Bureau of Economic Analysis reports that total U.S. direct investment in Luxembourg (on a historical cost basis) was nearly $153 billion at the end of 2008. 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, although this “tripartite” arrangement broke down in 2010 under the strain of negotiations during the economic crisis and union opposition to welfare cuts and the proposal to no longer index wage increases to inflation. Unemployment in 2009 was 7.1%, up from 5.8% in 2008. Luxembourg's small but productive agricultural sector employs 1% of the total labor force, a typical figure for a highly developed country. Most farms produce milk, meat, and foraging crops. Timber is another important sector. Luxembourg, being a part of the Moselle region, produces outstanding white wines and also Pinot Noir, a light red wine, competitive in quality with French wines. Due to its powerful financial services sector, Luxembourg maintains a favorable current account balance, with a €2.13 billion surplus in 2009 ($3.02 billion). Government finances deteriorated somewhat, with a 2009 budget deficit of €277.7 million ($394.3 million) versus a surplus of €1.13 billion in 2008 ($1.61 billion).
GDP (2009):
€38 billion ($54 billion). Currency: euro (€). Exchange rate (March 2011): €1 = U.S. $1.42. Annual growth rate (2009): -4.1% (down from 0.0% in 2008 and 6.5% in 2007). Per capita income (2009, purchasing power parity): €75,600 ($107,352). Inflation rate (2010): 2.5%. Natural resources : Iron ore, timber. Agriculture (2009: 0.3% of GDP): Dairy, wine, forestry, animal feed crops. Arable land --24%; forested land --21%. Services (2009: 69% of GDP): Banking and financial services predominate. Industry (2009: 7% of GDP): Steel, chemicals. Trade (2009): Exports --$13 billion: steel and other metallic products, chemicals, processed wood products, machinery and other manufactured equipment. Major markets --other European Union countries (esp. Germany, France, and Belgium). Imports --$19 billion: machinery and other manufactured equipment, transport equipment, raw materials, chemicals, food products. Major suppliers --other European Union countries (esp. Belgium, Germany, and France).

Geography of Luxembourg

Location: Western Europe, between France and Germany Map references: Europe Area: total area: 2,586 sq km land area: 2,586 sq km comparative area: slightly smaller than Rhode Island Land boundaries: total 359 km, Belgium 148 km, France 73 km, Germany 138 km Coastline: 0 km (landlocked) Maritime claims: none; landlocked International disputes: none Climate: modified continental with mild winters, cool summers Terrain: mostly gently rolling uplands with broad, shallow valleys; uplands to slightly mountainous in the north; steep slope down to Moselle floodplain in the southeast Natural resources: iron ore (no longer exploited) Land use: arable land: 24% permanent crops: 1% meadows and pastures: 20% forest and woodland: 21% other: 34% Irrigated land: NA sq km Environment: current issues: deforestation; air and water pollution in urban areas natural hazards: NA international agreements: party to - Air Pollution, Air Pollution-Nitrogen Oxides, Air Pollution-Sulphur 85, Air Pollution-Volatile Organic Compounds, Biodiversity, Climate Change, Endangered Species, Hazardous Wastes, Marine Dumping, Nuclear Test Ban, Ozone Layer Protection, Ship Pollution, Tropical Timber 83; signed, but not ratified - Air Pollution-Sulphur 94, Desertification, Environmental Modification, Law of the Sea Note: landlocked

Government of Luxembourg

Luxembourg has a parliamentary form of government with a constitutional monarchy. Under the constitution of 1868, as amended, executive power is exercised by the Grand Duke and the Council of Government (cabinet), which includes the prime minister, who serves as head of government. The prime minister is the leader of the political party or coalition of parties having the most seats in parliament, known as the Chamber of Deputies. Legislative power is vested in the Chamber of Deputies, the members of which are elected directly to 5-year terms. A second body, the "Conseil d'Etat" (Council of State), composed of 21 citizens appointed by the Grand Duke, advises the Chamber of Deputies in the drafting of legislation. The Council's opinions have no binding effect, and the responsibilities of its members are in addition to their normal professional duties. Luxembourg law is a composite of local practice, legal tradition, and French, Belgian, and German systems, as well as European Union law. The apex of the judicial system is the Superior Court, whose judges are appointed by the Grand Duke. POLITICAL CONDITIONS Luxembourg's political system has a strong local focus. National politicians very often begin their careers and establish a political base serving as mayors, and members of the Chamber of Deputies are elected from one of four regions. The political culture favors consensus, and the parties coexist within the context of broad agreement on key issues, including the value of deep European integration. National elections are held at least every 5 years and municipal elections every 6 years. Elections for the Chamber of Deputies were held in June 2009. Since the end of World War II the Christian Social People’s Party (CSV) has been part of the governing coalition and usually the dominant party. The only exception was from 1974-1979 when the CSV was in opposition to a governing coalition led by the center-right Democratic Party (DP). The CSV resembles Christian democratic parties in other west European countries and enjoys broad popular support. Its leader, Prime Minister Jean-Claude Juncker, in power since 1995, is the longest-serving head of government in the European Union. The Socialist Party (LSAP) is a center-left party similar to most social democratic parties in Europe. Initially founded by a workers’ 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 from 1984 to 1999, it lost its junior coalition status to the Democratic Party only to regain it in the 2004 elections. The center-right Democratic Party (DP) draws much of its support from civil servants, the professions, and urban middle class. Like other West European liberal (i.e., libertarian) 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 overcame the LSAP to claim the role of junior partner in the government from 1999-2004. It is currently again in the opposition. Other notable parties include the Green Party, which 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. The Greens generally oppose Luxembourg's military policies, but the party has shown some openness to peacekeeping missions. The ADR (Alternative Democratic Reform Party) when elected in 2004 was known as the Action Committee for Democracy and Pension Rights. The Left (former communist) party has one seat in the 60-member Chamber of Deputies. Principal Government Officials Head of State--Grand Duke Henri Prime Minister, Minister of Finance--Jean-Claude Juncker (CSV) Vice-Prime Minister, Minister of Foreign Affairs--Jean Asselborn (LSAP) Minister of Justice, Minister of Treasury and Budget--Luc Frieden (CSV) Minister of Economy and Foreign Trade--Jeannot Krecké (LSAP) Minister of Defense--Jean-Louis Schiltz (CSV) Minister of Interior--Jean-Marie Halsdorf (CSV) Ambassador to the United States--Jean-Paul Senninger Ambassador to the United Nations--Sylvie Lucas 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. 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 in parliament: Christian Social Union (CSV), Socialist Workers' Party (LSAP), Democratic Party (DP), Green Party, Alternative Democratic Reform Party (ADR). Suffrage: Universal over age of 18. Government budget (2006): $19.07 billion

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History of Luxembourg

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. It is also one of the six original members of the European Union, formed in 1951 as the European Coal and Steel Community (ECSC). 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. 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. In addition, English is taught in the local high schools. Most Luxembourgers, as a result, speak English with some level of fluency.

People of Luxembourg

Nationality: Noun --Luxembourger(s). Adjective --Luxembourgian, Luxembourgish. Population (2010): 502,066. Annual population growth rate (2009): 2%. Ethnic groups: Celtic base with French and German blend; significant communities of ethnic Portuguese, Italians, French, Belgians, and Germans. Religion: Historically and predominantly Roman Catholic. However, Luxembourgian 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 --99%. Health: Life expectancy (2010)--avg. 79.03 years; males 77.6 years; females 82.7 years. Infant mortality rate (2010)--2.5/1,000. Labor force (2009): 352,100, of which 147,800 commuted from neighboring countries. European Union institutions employ nearly 10,000. Financial --28.7%, trade --25.7%, industry --10.4%, construction --10.9%, agriculture --1.5%, other (including government, education, and healthcare) --22.8%. Unemployment rate (2009): 7.1%, up from 5.8% in 2008.