Luxembourg has historically experienced commercial prosperity as well as regular military incursions and occupations. Having survived the jurisdiction of the old Holy Roman Empire – three rulers of which, in the 14th and 15th centuries, were from the House of Luxembourg – Luxembourg owes its continued existence to a mixture of good fortune and good diplomacy, which have prevented it from being permanently absorbed into the territories of its larger neighbors. By the time that Luxembourg’s independence was finally confirmed in 1867, however, the Grand Duchy was left with such a
tiny territory that its people had to look across its borders for economic survival. This has resulted in a cosmopolitan attitude, which has survived to the present day and is exemplified not only by the fact that the country has the highest percentage of foreigners of any EU country, but also by the trilingual ability of its people.
Luxembourg was a founder member of the European Community (having formed close economic ties with The Netherlands and Belgium) and was host to the European Parliament until its move to a permanent site in Brussels in 1989. Luxembourg is in the mainstream on the current EU issues of monetary union, EU expansion, social policy and immigration and adopted the Euro upon its inception. Domestic politics are typical of Western European nations, with Christian Democrat and Socialist parties and a centrist
Parti Démocratique (PD) represented in the National Assembly. More recently, these have been joined by environmentalists and the right-wing Action Committee for Democracy and Pensions Justice (ADR). The present center-right Government, elected in 1999, is a coalition of the Christian Social People’s party and the PD under the leadership of Jean-Claude Juncker who has held office since 1994.
GovernmentThe Grand Duchy of Luxembourg is a hereditary and constitutional monarchy. The 60-member unicameral Chamber of Deputies has legislative power, and members are directly elected to serve a five-year term. Executive power is formally in the hands of the Grand Duke, but is in practice wielded by the Council of Ministers.
EconomyLuxembourg is one of the most prosperous countries in Western Europe. Two very different industries (banking and steel) have historically been the mainstays of the economy. The steel industry has ceased to be so dominant as other industries, notably chemicals, rubber, plastics, metal products and light manufacturing (textiles, paper, electronic equipment), have prospered.
The banking and finance sector is also in a healthy condition: companies originally attracted to Luxembourg by favorable banking secrecy laws and low taxation have prospered despite the gradual harmonization of taxes and tariffs across the EU. There is also a small but healthy agricultural sector mainly producing crops.
In 2005, growth was 4%, with inflation at 3.8%. The Luxembourgeois economy has long been linked with that of Belgium, initially through the 1921 economic union, supplemented by a further treaty in 1958 and latterly, by mutual membership of the EU. Luxembourg was an inaugural adopter of the Euro at the beginning of 1999.
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