Background Notes - Luxembourg

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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 City (pop. 76,600). Other cities --Esch-sur-Alzette (pop. 28,200), Differdange (pop. 19,000), Dudelange (pop. 17,800).
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: Modified continental, rainy, with mild summers and moderate snowfall in winter.

People
Nationality: Noun--Luxembourger(s). Adjective--Luxembourgian
Population (2006): 459,500
Annual growth rate (2006): 0.99%
Ethnic groups: Celtic base with French and German blend; large 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--100%.
Health: Life expectancy (2000-02)--Avg. 78 years; males: 75 years, females 81 years. Infant mortality rate (2005)--3/1,000.
Labor force (2005): 311,200, of which 38% commute from neighboring countries. European Union institutions employ 8,300.
Services: (non-financial): 53%; (financial): 11%; Commerce: 14%; Industrial and manufacturing: 11% Construction: 10%; Agriculture: 1%
Unemployment rate (2005): 4.2%, up from 3.9% in 2004

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 in parliament: Christian Social Union (CSV), Socialist WorkersÌ Party (LSAP), Democratic Party (DP), Green Party, Alternative Democratic Reform Party (ADR).
Suffrage: Universal over age of 18.
Government budget (2005): $9.587 billion

Economy
GDP (2005): $36.5 billion
Currency: euro (ƒ), exchange rate (Sept. 25, 2006: ƒ1 = $1.2756)
Annual growth rate (2005): 4%
Per capita income (2005): $69,527
Inflation rate (2005): 3.8%
Natural resources: iron ore, timber
Agriculture (2003: 0.6% of GDP): Dairy, wine, forestry, animal feed crops. Arable land: 24%; Forested land: 21%
Services (2003: 78.9% of GDP): Banking and financial services predominate
Industry (2003: 20.5% of GDP): Steel, chemicals
Trade (2005): Exports: $12.97 billion: steel & other metallic products, chemicals, processed wood products, machinery & other manufactured equipment. Major markets: other European Union countries (esp. Germany, France, and Belgium).
Imports: $18.04 billion: Machinery & other manufactured equipment, raw materials, chemicals, food products. Major suppliers: other European Union countries (esp. Belgium, Germany, and France).

HISTORY
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.

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 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'Ötat" (Council of State), composed of 21 ordinary citizens appointed by the Grand Duke, advises the Chamber of Deputies in the drafting of legislation. The CouncilÌs 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. 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
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 Kreck» (LSAP)
Minister of Defense--Jean-Louis Schiltz (CSV)
Minister of Interior--Jean-Marie Halsdorf (CSV)
Ambassador to the United States--Joseph Weyland
Ambassador to the United Nations--Jean-Marc Hoscheit

The Embassy of the Grand Duchy of Luxembourg in the United States is located at 2200 Massachusetts Avenue NW, Washington, DC 20008 (tel. 202-265-4171) www.luxembourg-usa.org.

Consulates of Luxembourg are located in Atlanta, Boston, Chicago, Cleveland, Dallas, Detroit, Indianapolis, Kansas City, Los Angeles, Miami, New Orleans, New York, Portland, San Francisco, and Seattle.

POLITICAL CONDITIONS
LuxembourgÌs political system has a strong local focus. National politicians very often begin their careers and establish their 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.

Since the end of World War II the Christian Social Union (CSV) has been part of the governing coalitions 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 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 workerÌs 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 but regained it in the 2004 elections. While in the opposition, the LSAP voiced opposition to U.S. action in Iraq.

The Democratic Party (DP) is a center-right party, drawing support from civil servants, the professions, 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 overcame the LSAP to claim the role of junior partner in the government from 1999-2004. It is currently again in the opposition. 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, but it has shown some openness to peacekeeping missions.

National elections are held at least every five years and municipal elections every six years. In the June 2004 parliamentary elections the CSV won 24 seats, the LSAP 14, the DP 10, the Greens 7, and the ADR 5. The ADR (Alternative Democratic Reform Party) when elected was known as the Action Committee for Democracy and Pension Rights. It now has only four members in the parliament after one member recently left the party and declared himself an independent.

ECONOMY
While 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 worldÌs second-largest steel producer, which is headquartered in Luxembourg. The iron and steel industry comprises a little less than 10.6% of the overall economy.

During the past few decades there has been a relative decline in the steel sector, offset by LuxembourgÌs emergence as a major financial services center. The overall services sector in 2005 comprised 78.9% of LuxembourgÌs GDP with it employing, in terms of percentage of workers, 64% of the labor force. The financial sector in 2005 continued to grow and made up 11% of LuxembourgÌs total labor force making it identical in size to the industrial labor force. In December 2005 there were 155 banks in Luxembourg employing 23,244 people. Political stability, good communications, easy access to other European financial centers, skilled multilingual staff, and a tradition of banking secrecy have contributed to the growth of the financial sector. German banks represent the largest number, with Italian, French, Swiss, Belgian, American, and Japanese banks also heavily represented. Total banking assets in 2005 were $1 trillion. The funds industry is the second largest in the world after the U.S. with $2.158 trillion in domiciled funds.

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 12 satellites. ASTRA 1H is an advanced satellite with a return channel capacity in the Ka band frequency range enabling two-way satellite communications directly to usersÌ 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 $72 billion at the end of 2005. 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.

Unemployment in 2005 was 4.2%, up from 3.9% a year earlier. LuxembourgÌs 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.

Due to its powerful services sector, Luxembourg maintains a favorable current account balance, with a $3.852 billion surplus in 2005. Government finances have deteriorated over the past few years, with a 2005 budget deficit of $703 million, representing 2.1% of LuxembourgÌs GNI.

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 held the EU Presidency in the first half of 2005.

Luxembourg budgeted $291 million for official development assistance (ODA), or about 0.84% of its GNI. This places Luxembourg among the top three donor nations in the world, if calculated by percentage of GNI; Luxembourg has stated that it has a goal of eventually reaching 1% of GNI for its ODA.

DEFENSE
The Luxembourg Army is under civilian control. The country has no navy or air force. A 1967 law made the army an all-volunteer force with current strength of approximately 430 professional soldiers, about 340 enlisted recruits, and 110 civilians. A 2002 law now allows EU citizens, under certain conditions, to join the Luxembourg Army.

In 2005 Luxembourg spent approximately $310 million on defense, or about 0.85% of GDP. Luxembourg has participated in the European Corps (EUROCORPS) since 1994 and has contributed troops to UNPROFOR, IFOR, SFOR, and KFOR missions in the former Yugoslavia. Presently Luxembourg has one officer serving in Bosnia with SFOR and a 26-person reconnaissance platoon deployed in Kosovo as its contribution to KFOR. Luxembourg also has nine soldiers in Afghanistan integrated into the Belgian forces deployed there. Luxembourg continues to take part in EU and NATO sponsored missions in Africa. Luxembourg has committed to sending a team of de-mining experts to participate in UNIFIL in Lebanon. Defense had a budget of $252,142,300 in 2004. 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. Luxembourg 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
Luxemburgers are deeply appreciative of the sacrifices made by Americans, leading to the countryÌs liberation in the two World Wars of the 20th century. More than 5,000 American soldiers, including Gen. George S. Patton, are buried at the American Military Cemetery near the capital, and there are monuments in many towns to American liberators. The strong U.S.-Luxembourg relationship is 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).

Principal U.S. Officials
Ambassador--Ann Wagner
Deputy Chief of Mission--Steve Kraft
Management Officer--Jay Parker
Political/Economic Chief--Tom Boughter
Public Affairs Officer--Anthony Clare
Regional Security Officer--Jeff Rusinek
Economic Officer--Jason Chiodi
Vice-Consul/Political Officer--Caroline Savage
Commercial Assistant--Carla Rosen-Vacher

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

TRAVEL AND BUSINESS INFORMATION
The U.S. Department of State's Consular Information Program advises Americans traveling and residing abroad through Consular Information Sheets, Public Announcements, and Travel Warnings. Consular Information Sheets exist for all countries and include information on entry and exit requirements, currency regulations, health conditions, safety and security, crime, political disturbances, and the addresses of the U.S. embassies and consulates abroad. Public Announcements are issued to disseminate information quickly about terrorist threats and other relatively short-term conditions overseas that pose significant risks to the security of American travelers. Travel Warnings are issued when the State Department recommends that Americans avoid travel to a certain country because the situation is dangerous or unstable.

For the latest security information, Americans living and traveling abroad should regularly monitor the Department's Bureau of Consular Affairs Internet web site at http://www.travel.state.gov, where the current Worldwide Caution, Public Announcements, and Travel Warnings can be found. Consular Affairs Publications, which contain information on obtaining passports and planning a safe trip abroad, are also available at http://www.travel.state.gov. For additional information on international travel, see http://www.usa.gov/Citizen/Topics/Travel/International.shtml.

The Department of State encourages all U.S citizens traveling or residing abroad to register via the State Department's travel registration website or at the nearest U.S. embassy or consulate abroad. Registration will make your presence and whereabouts known in case it is necessary to contact you in an emergency and will enable you to receive up-to-date information on security conditions.

Emergency information concerning Americans traveling abroad may be obtained by calling 1-888-407-4747 toll free in the U.S. and Canada or the regular toll line 1-202-501-4444 for callers outside the U.S. and Canada.

The National Passport Information Center (NPIC) is the U.S. Department of State's single, centralized public contact center for U.S. passport information. Telephone: 1-877-4USA-PPT (1-877-487-2778). Customer service representatives and operators for TDD/TTY are available Monday-Friday, 7:00 a.m. to 12:00 midnight, Eastern Time, excluding federal holidays.

Travelers can check the latest health information with the U.S. Centers for Disease Control and Prevention in Atlanta, Georgia. A hotline at 877-FYI-TRIP (877-394-8747) and a web site at http://www.cdc.gov/travel/index.htm give the most recent health advisories, immunization recommendations or requirements, and advice on food and drinking water safety for regions and countries. A booklet entitled "Health Information for International Travel" (HHS publication number CDC-95-8280) is available from the U.S. Government Printing Office, Washington, DC 20402, tel. (202) 512-1800.

Further Electronic Information
Department of State Web Site. Available on the Internet at http://www.state.gov, the Department of State web site provides timely, global access to official U.S. foreign policy information, including Background Notes and daily press briefings along with the directory of key officers of Foreign Service posts and more. The Overseas Security Advisory Council (OSAC) provides security information and regional news that impact U.S. companies working abroad through its website http://www.osac.gov

Export.gov provides a portal to all export-related assistance and market information offered by the federal government and provides trade leads, free export counseling, help with the export process, and more.
STAT-USA/Internet, a service of the U.S. Department of Commerce, provides authoritative economic, business, and international trade information from the Federal government. The site includes current and historical trade-related releases, international market research, trade opportunities, and country analysis and provides access to the National Trade Data Bank.