September 24, 2010

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

PROFILE

Geography
Area: 2,586 sq. km. (999 sq. mi.; about the size of Rhode Island).
Cities: Capital--Luxembourg City (pop. 91,000). Other cities--Esch-sur-Alzette (pop. 30,000), Differdange (pop. 22,000), Dudelange (pop. 19,000). (2010 figures from National Statistical Institute of Luxembourg--STATEC)
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, Luxembourgish.
Population (2010): 502,066.
Annual 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 (2008): 348,700, of which 146,300 commuted from neighboring countries. European Union institutions employ nearly 10,000. Financial--28%, trade--26%, industry--11%, construction--11%, agriculture--1.5%, other (including government, education, and healthcare)--22%.
Unemployment rate (2009): 6.1%, up from 4.5% in 2006.

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 Workers' Party (LSAP), Democratic Party (DP), Green Party, Alternative Democratic Reform Party (ADR).
Suffrage: Universal over age of 18.
Government budget (2009): €9.265 billion ($12.91 billion).

Economy
GDP (2008): €36.7 billion ($54 billion).
Currency: euro (€). Exchange rate (September 2010): €1 = U.S. $1.269.
Annual growth rate (2009): -4.1% (down from 6.5% in 2007).
Per capita income (2009, purchasing power parity): $74,430.
Inflation rate (2010): 2.5%.
Natural resources: Iron ore, timber.
Agriculture (2008: 0.4% of GDP): Dairy, wine, forestry, animal feed crops. Arable land--24%; forested land--21%.
Services (2008: 83.3% of GDP): Banking and financial services predominate.
Industry (2008: 8.6% of GDP): Steel, chemicals.
Trade (2008): Exports--$15 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--$24.22 billion: Machinery and 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 (EU), 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 high schools. Most Luxembourgers, as a result, speak at least some English.

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'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.

Principal Government Officials
Head of State--Grand Duke Henri
Prime Minister--Jean-Claude Juncker (CSV)
Vice-Prime Minister, Minister of Foreign Affairs--Jean Asselborn (LSAP)
Minister of Finance--Luc Frieden (CSV)
Minister of Economy and Foreign Trade--Jeannot Krecke (LSAP)
Minister of Justice, Civil Service and Administrative Reform, Higher Education and Research, Communications and Media, Religious Affairs--Francois Biltgen (CSV)
Minister of Family and Integration; Minister of Cooperation and Humanitarian Affairs--Marie-Josee Jacobs (CSV)
Minister of Interior and Defense--Jean-Marie Halsdorf (CSV)
Ambassador to the United States--Jean-Paul Senninger
Ambassador to the United Nations--Sylvie Lucas
Consul General, San Francisco--Georges Schmit
Consul General, New York--Francois Knaff

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), http://washington.mae.lu/en.

Consulates of Luxembourg are located in New York and San Francisco, with honorary consuls in several other cities.

POLITICAL CONDITIONS
Luxembourg's 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. 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 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 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. 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. The ADR (Alternative Democratic Reform Party) when elected in 2004 was known as the Action Committee for Democracy and Pension Rights.

ECONOMY
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 10% 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 August 2010 there were 149 banks in Luxembourg; banks employed 26,420 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 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 20 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 users' terminals.

Over the past decade, Luxembourg has sought to diversify its services economy beyond the very successful financial sector through exponential growth of 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 high-speed Internet connection. 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.

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.

Unemployment in 2009 was 6.1%, up from 4.5% in 2006. 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.

Due to its powerful services sector, Luxembourg maintains a favorable current account balance, with a €2.02 billion surplus in 2008 ($2.97 billion). Government finances continued to deteriorate over the past few years, with a 2008 budget deficit of €277.7 million ($408.9 million).

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. The EU stability fund created in response to effects of the international financial crisis is based in Luxembourg. The country held the EU Presidency in the first half of 2005.

Luxembourg’s official development assistance (ODA) in 2009 reached €298 million ($415 million), or about 1.04% of its gross national income. This reportedly is the third-highest level of any country. Luxembourg reportedly ranks 16th among the top world donors of development aid to Afghanistan, with total aid of $1,488,399,000 as of 2010. In 2010 it donated $700,280 to the Afghanistan program, as well as $123,305 to Afghanistan toward improving maternal and infant health in Kabul and Kandahar. It also donated to help the flood victims of the tragedy in Pakistan in summer 2010 by allocating $650,000.

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 allows citizens of other EU countries, under certain conditions, to join the Luxembourg Army.

In 2008 Luxembourg spent approximately €158 million ($232 million) on defense, or about 0.43% of GDP. It has participated in the European Corps (EUROCORPS) since 1994 and has contributed troops to UNPROFOR, IFOR, SFOR, and KFOR missions in the former Yugoslavia. Luxembourg has had one officer serving in Bosnia and Herzegovina with the European Union's ALTHEA mission and, as of February 2008, had a 23-person contingent in Kosovo as its contribution to KFOR. Luxembourg participates in the NATO ISAF mission in Afghanistan. Luxembourg takes part in EU- and NATO-sponsored missions in Africa, including an EU consultancy and assistance mission to reform the security forces in the Republic of the Congo. It committed to sending a team of de-mining experts to participate in UNIFIL in Lebanon, and it sent 9 soldiers to Pakistan to provide assistance following the devastating floods there. Luxembourg financially supported international peacekeeping missions during the 1991 Gulf War and in Rwanda and Albania and provided humanitarian aid to Iraq. The army also participated in humanitarian relief missions such as setting up refugee camps for Kurds and providing emergency supplies to Albania.

U.S. RELATIONS
Luxembourgers are deeply appreciative of the sacrifices made by Americans, leading to the country's 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--Cynthia Stroum
Deputy Chief of Mission--vacant
Political-Economic Chief--D. Ashley Bagwell
Public Affairs Officer--Kareen Thorpe
Management Officer--Jonathan S. Fischer
General Services Officer--Alexandra Aiken
Regional Security Officer--Kirby W. Rosenbluth
Consular Chief--Carla T. Nadeau
Defense Attache--Colonel Brendan B. McAloon (based in Brussels)
Legal Attache--Robert F. Clifford (based in Brussels)
Office of Defense Cooperation--Colonel Mark E. Carter (based in Brussels)

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

[This is a mobile copy of Luxembourg (09/24/10)]