Luxembourg (country)

Luxembourg (country),  small country in western Europe. A landlocked nation bordering France, Germany, and Belgium, Luxembourg is one of Europe’s oldest and smallest independent states. With Belgium and the Netherlands, Luxembourg forms the Low, or Benelux, Countries. The nation’s capital and largest city is called Luxembourg City (Luxembourg-Ville).

Slightly smaller in area than the state of Rhode Island, Luxembourg measures only about 89 km (55 mi) from north to south and 56 km (35 mi) from east to west. The northern region, known as the Oesling, or E’sleck, consists of the rugged uplands of the Ardennes plateau. In the south is the Bon Pays (“Good Land”), a fertile area of low, gently rolling, hills. Much of Luxembourg is crisscrossed by the broad, deep valleys of swift streams and rivers. The principal river is the Sauer (Sûre), a tributary of the Mosel. The Sauer cuts across northern Luxembourg through winding, wooded valleys and past historic towns such as Esch-sur-Sûre.

Although famous for its picturesque villages, medieval castles, and natural beauty, Luxembourg is a prosperous urban and industrialized nation. Until the 1970s, iron and steel industries dominated Luxembourg’s economy, but depleted iron-ore reserves and declining international demand prompted considerable economic diversification. Other important heavy industries, many of which are financed by foreign investment, include the production of tires, glass, and chemicals. In recent decades the growth of financial services has established Luxembourg as a tax haven and major banking center.

Despite its declaration of neutrality after 1867, Luxembourg was occupied by Germany during both World War I and World War II. After World War II, Luxembourg abandoned its neutrality in support of greater international cooperation. Luxembourg was a founding member of the North Atlantic Treaty Organization (NATO) and of the European Economic Community (EEC), a forerunner of the European Union (EU). Most Luxembourgers share a strong sense of national identity and independence, reflected in the national motto, Mir wëlle bleiwe wat mir sin (“We want to remain what we are”).

II

LAND AND RESOURCES

Luxembourg has an area of 2,586 sq km (998 sq mi). Luxembourg is part of the geological region in which the Lorraine plateau of northern France meets the hills of southwest Belgium and the Mosel (Moselle) Valley and Rhineland of western Germany.

Southern Luxembourg, the area known as the Bon Pays, is a rolling continuation of Lorraine. Northern Luxembourg is crossed by the foothills of the Ardennes to the west. Rich deposits of iron ore were once heavily mined in the southwest, although most of these have now been exhausted. The nation’s highest point is Buurgplaatz (559 m/1,834 ft), in the Ardennes plateau in the north.

The Sauer (Sûre) is Luxembourg’s most important river, rising in Belgium and flowing eastward 80 km (50 mi) to the confluence with the Our and later with the Mosel on Luxembourg’s eastern border. A tributary from the south, the Alzette, passes through Luxembourg City.

Luxembourg has a moderate climate similar to the other Low Countries to the north and west, with a mean annual temperature of 10°C (50°F). Summers are mild and winters are cool, and annual precipitation measures about 81 cm (about 32 in), some of it in the form of snow. In Luxembourg City, the average daily high temperature ranges from 2.5°C (36.5°F) in January to 22.9°C (73.2°F) in July.

III

PEOPLE

Luxembourg has been a crossroads for migrating peoples throughout European history. The heritage of modern Luxembourgers derives largely from the Celts, Franks, and other Germanic peoples who moved across the region before and after the Roman occupation (see Roman Empire). From this rich cultural heritage, Luxembourgers have developed a keen sense of national identity.

The population of Luxembourg (2008 estimate) is 486,006, giving the country an overall population density of 188 persons per sq km (487 per sq mi).

Luxembourg has one of the lowest population growth rates in Europe, creating a chronic labor shortage that must be offset by foreign workers. Most migrants are from France, Portugal, and Italy. About 30 percent of Luxembourgers are foreign-born, the highest percentage for any nation in the European Union (EU). In addition, many German, French, and Belgian citizens commute daily to Luxembourg to work. As a result, about 50 percent of Luxembourg’s current workforce is foreign-born.

A

Principal Cities

The principal cities of Luxembourg are centers of industrial production and the growing service economy. The capital and largest city is Luxembourg City, also known as Luxembourg-Ville, with a population (2007) of 83,800. Located at the confluence of the Alzette and Pétrusse rivers, the city is a manufacturing, banking, and administrative center. It is also the seat of several important institutions of the European Union (EU), including the European Investment Bank and the European Court of Justice.

The city of Esch-sur-Alzette is Luxembourg’s second largest (population, 2004 estimate, 27,900). Located in the southwest, Esch-sur-Alzette is the center of Luxembourg’s steel industry. Other important cities are Differdange (18,900) and Dudelange (17,500).

B

Language and Religion

Luxembourg has three official languages: Luxembourgisch (Letzeburgesch), French, and German. Luxembourgisch, a Germanic dialect that borrows many words from French, is spoken by much of the population. Standard German is the main language used in commerce and by the press. French is the language generally used in government administration, although other languages, including German and Portuguese—the language of many migrant workers—are also commonly used. Both French and German are taught in elementary schools. English is frequently taught in secondary schools.

Roman Catholicism is the dominant religion in Luxembourg, with 94 percent of the population professing adherence to the Catholic faith. Luxembourg is also home to small communities of Protestants and Jews (see Judaism).

C

Education

Education in Luxembourg is compulsory for all children between the ages of 6 and 15, and illiteracy is almost nonexistent. The University Center of Luxembourg (1848) is located in Luxembourg City. In addition, the country is home to the Higher Institute of Technology (1979) and the International University Institute of Luxembourg (1958).

D

Environmental Issues

Despite Luxembourg’s small size and population, it consumes large amounts of electricity, petroleum, and coal. As a result, Luxembourg produces high levels of carbon dioxide and sulfur dioxide emissions, among other harmful chemicals. These contribute to the poor air quality and pollution that characterize much of Europe’s industrial heartland. Acid rain in Luxembourg is common, causing defoliation and degradation of the nation’s water sources. Urban areas suffer from air pollution and water pollution. Controlling the harmful effects of pollution remains an important challenge for Luxembourg.

IV

ECONOMY

Luxembourg is a highly industrialized and prosperous nation; its citizens consistently enjoy a per capita income that ranks among the world’s highest. Banking and other financial services, manufacturing, and tourism are the most important economic activities. In 2006 Luxembourg’s gross national product (GDP) was $41.5 billion, or $89,778.80 per person. The national budget in 2006 included revenue of $15.7 billion and expenditure totaling $14.8 billion.

Luxembourg’s prosperity was originally founded on the production of iron and steel, which was developed after the 1880s and based on the rich iron-ore deposits found in the southwest (see Iron and Steel Manufacture). Although most of these deposits are now exhausted, iron and steel production remains important. Since the 1970s, Luxembourg’s prosperity has largely depended on the vigorous growth of financial services, complemented by diversification into other manufacturing industries such as rubber and plastic products, metal and machinery, paper and printed goods, food processing, and chemicals.

Agriculture contributed just 0.4 percent to Luxembourg’s GDP in 2006, with livestock—particularly cattle, hogs, and fowl (poultry)—accounting for the bulk of agricultural output. Potatoes are grown widely, and wheat and barley are the main cereal crops. Grapes for wine production are grown in the idyllic Mosel Valley, which forms Luxembourg’s southeastern border with Germany. Most of the dry white and sparkling wines produced in the region are consumed locally.

The monetary unit of Luxembourg is the single currency of the European Union (EU), the euro. Luxembourg was among the first group of EU member states to adopt the euro, which entered use for accounting purposes and financial transfers beginning in 1999. On January 1, 2002, euro-denominated coins and bills went into circulation, and the Luxembourg franc, the old national currency, ceased to be legal tender.

A

Banking and Financial Services

Favorable laws ensuring banking secrecy and low taxation have encouraged Luxembourg’s transformation in recent decades into a leading international financial center. Luxembourg is home to more than 150 international banks, with strong representation from Germany, Japan, the United States, and the Scandinavian nations of northern Europe. In addition, some 14,000 multinational firms have established holding companies in Luxembourg. In 2002 the Organization for Economic Cooperation and Development (OECD) failed to convince Luxembourg, among other countries, to sign an international agreement aimed at reducing tax evasion.

B

Commerce and Trade

Most of Luxembourg’s foreign trade takes place with Belgium, Germany, France, and the Netherlands, which together take about 60 percent of its exports and provide almost 80 percent of its imports. With its small economy and dependence on imported raw materials, Luxembourg has been at the forefront in supporting greater economic integration of Europe since World War II. In 1922 Luxembourg entered into a customs and currency union with Belgium; in 1948 they formed the Benelux Customs Union (now the Benelux Economic Union) with the Netherlands. The Benelux Economic Union, which went into effect in 1960, established the free movement of labor, capital, and services between the three nations.

In 1951 Luxembourg became a founding member of the European Coal and Steel Community (ECSC), and six years later it was one of the original signatories of the European Economic Community (EEC, often referred to as the Common Market), a forerunner of the European Union (EU). During the 1980s, Luxembourg helped broker the Maastricht Treaty (or Treaty on European Union) aimed at forging greater European integration. Luxembourg was the first EU member state to meet all of the economic, financial, and legal requirements set out by the Maastricht Treaty.

C

Communications

Despite its small size, Luxembourg operates a range of highly influential media services. The Luxembourg-based media group RTL has long offered radio and television services to domestic audiences as well as those in countries such as France, Germany, and the United Kingdom. Today, Luxembourg operates Europe’s largest satellite broadcasting network, the Sociéte Européenne des Satellites (SES). Significant growth in the media and communications industries in recent years have been an important element of Luxembourg’s expanding service sector.

Luxembourg’s principal daily newspapers are the Lëtzebuerger Journal, Luxemburger Wort/La Voix du Luxembourg, Le Républicain Lorrain, and Zeitung vum Letzeburger Vollek, all published in Luxembourg City, and the Tageblatt/Zeitung fir Letzebuerg, printed in Esch-sur-Alzette.

V

GOVERNMENT

Luxembourg is a constitutional monarchy and is officially called the Grand Duchy of Luxembourg (Grand-Duché de Luxembourg). A hereditary grand duke or grand duchess of the house of Nassau serves as the monarch and head of state. The constitution, proclaimed in 1868 and later amended, provides for a democratic government, with legislative power vested in a unicameral (single house) national legislature called the Chamber of Deputies (Chambre des Députés). The 60 members of the Chamber of Deputies are elected by proportional representation to five-year terms by citizens aged 18 and older. In addition, there is a Council of State (Conseil de l’Etat), composed of 21 members appointed for life by the monarch. The Council of State is primarily an advisory body; its opinions can be overruled by the Chamber of Deputies.

Executive authority is exercised by the monarch (the grand duke or grand duchess) and by the prime minister and his cabinet. The prime minister is the leader of the party or coalition of parties with a majority of seats in the Chamber of Deputies. Ministers are appointed by the monarch, but they are responsible to the Chamber of Deputies.

The highest court is the Superior Court, which acts as a court of appeals and also appoints a court of assizes to hear criminal cases. The three major political parties are the Christian Social People’s Party (CSV), the Luxembourg Socialist Workers’ Party (LSAP), and the Democratic Party (DP). Luxembourg is divided into 12 cantons, each of which is subdivided into communes.

A founding member of the North Atlantic Treaty Organization (NATO), Luxembourg maintains a small volunteer army consisting of about 900 members. Compulsory military service was abolished in 1967.

In addition to NATO, Luxembourg is a member of the United Nations (UN), the European Union (EU), the Western European Union (WEU), the Benelux Economic Union, the Organization for Security and Cooperation in Europe (OSCE), the Council of Europe (CE), the World Trade Organization (WTO), and the Organization for Economic Cooperation and Development (OECD).

VI

HISTORY

In ancient times the area of Luxembourg was inhabited by the Treveri, one of the tribes of Gaul. Later, under Roman rule, Luxembourg was included in the province of Belgica Prima (see Roman Empire). The Franks invaded Luxembourg in the 5th century AD, and in the 9th century it became a part of Charlemagne’s empire.

In the 10th century, Siegfried, Count of Ardennes, reconstructed a ruined fortress on the site of present-day Luxembourg City. A small town grew up around the stronghold. In 1060 the region came under the control of Count Conrad, founder of the house of Luxembourg, which provided the Holy Roman Empire with four emperors in the 14th and early 15th centuries before being superseded in 1437 by the Habsburg dynasty. For the next four centuries, Spain and Austria alternately dominated Luxembourg.

A

Grand Duchy

At the close of the Napoleonic Wars in 1815, Luxembourg was established as a grand duchy by the Congress of Vienna and placed under the rule of William I, king of the Netherlands. However, Luxembourg was simultaneously placed within the German Confederation, and Prussia was permitted to garrison troops in Luxembourg City.

In 1830 the Belgian provinces of the Netherlands revolted. The grand duchy—apart from Luxembourg City—joined them. By the end of that year, Belgium had become an autonomous kingdom, and Luxembourg remained a part of the new country until 1839, when its western portion was ceded to Belgium. Luxembourg, greatly reduced in size, gained more independence, although the Dutch king retained nominal authority as grand duke.

Lacking significant economic ties to the Netherlands, Luxembourg became a member of the Prussian-led German customs union called the Zollverein in 1842. For the next quarter-century the grand duchy was under Prussian domination. With the dissolution of the German confederation in 1866, the continued presence of Prussian troops in Luxembourg City became a source of concern to France. Napoleon III, emperor of France, opened negotiations in 1866 with William III, king of the Netherlands, for the purchase of Luxembourg. The proposal provoked a dangerous crisis in Franco-Prussian relations. War was averted by an international conference held in London, England, in May 1867, that produced a treaty guaranteeing the independence of the grand duchy and providing for its perpetual neutrality.

When William III died in 1890 without a male heir, the grand ducal crown passed to Adolf of the German house of Nassau. In 1912 the Frankish Salic law, which barred female succession to the throne, was repealed and Marie Adélaide became Luxembourg’s first grand duchess.

B

World War I and Economic Union

In August 1914 German military forces violated Luxembourg’s neutrality at the outbreak of World War I and occupied the country as they marched into Belgium. Germany retained control of Luxembourg for the duration of the war.

With the return of independence in 1918, a number of changes took place in Luxembourg. In January 1919 Marie Adélaide abdicated in favor of her sister, largely because of Marie’s close association with Germany during the occupation. Charlotte, the new ruler, won overwhelming support in a 1919 referendum to decide whether Luxembourg would remain a grand duchy under the house of Nassau. At the same time, constitutional reforms were initiated giving the duchy a more democratic government, including the extension of suffrage to women.

The grand duchy joined the League of Nations in 1920. In 1922 Luxembourg and Belgium formed an economic union that called for the gradual abolition of all customs barriers between the two countries. In the same year, Belgian currency became legal tender in Luxembourg. As a consequence of the economic union, the grand duchy’s iron and steel industry gained a larger market and access to the Belgian port of Antwerp.

C

World War II

Early in World War II (1939-1945), Luxembourg was again seized by Germany when its military forces smashed through the Low Countries in May 1940. The reigning grand duchess, Charlotte, and members of the cabinet fled to France. After France fell to Germany they transferred their government-in-exile to London. In August 1942 the Germans proclaimed the grand duchy a part of German leader Adolf Hitler’s Third Reich. The population called a general strike, and the Germans retaliated with the mass deportation of 30,000 Luxembourgers, or about 10 percent of the duchy’s total population.

Allied military forces took control of Luxembourg in September 1944, and civilian rule was restored. Luxembourg City served as United States general Omar Bradley’s headquarters during the Battle of the Bulge that winter. The northern regions of Luxembourg were engulfed by the German offensive in the Ardennes, but the duchy’s liberation was complete by January 1945.

D

Postwar Luxembourg

In June 1945 Luxembourg became an original member of the United Nations. An agreement establishing the Benelux Customs Union (now the Benelux Economic Union) among Belgium, the Netherlands, and Luxembourg took effect on January 1, 1948.

Under the terms of a constitutional amendment adopted later in 1948, Luxembourg abolished its neutral status. Luxembourg joined the North Atlantic Treaty Organization (NATO) in 1949. During the 1950s Luxembourg vigorously pursued greater European cooperation and economic integration. In 1952 Luxembourg became a member of the European Coal and Steel Community, which established its headquarters in Luxembourg City, and in 1957 it became a founding member of the European Economic Community (EEC, a forerunner of the European Union).

On May 4, 1961, Prince Jean, the heir apparent, was sworn in as governor by his mother, Grand Duchess Charlotte. The duchess abdicated on November 12, 1964. Immediately afterward, Jean became grand duke.

E

Economic Developments

By the mid-1970s, the economic prosperity enjoyed by Luxembourg since World War II began to falter. Luxembourg’s once-rich deposits of iron ore and coal approached exhaustion, forcing the duchy to rely on imports of more expensive raw materials. Luxembourg’s heavy industry declined steadily, especially its steel industry, which was one of the most important in Europe. Unemployment, virtually unknown before 1975, became a problem. By 1979 Luxembourg had entered a period of prolonged economic recession.

In response to these developments, Luxembourg actively encouraged diversification of its economy through tax incentives and other measures. Luxembourg’s history of peaceful labor relations since the 1930s also proved appealing to foreign investors. By the mid-1980s, multinational companies had established or expanded a number of industries in the duchy, including the manufacture of tires, chemicals, and fabricated metal. At the same time, Luxembourg greatly expanded its financial services sector, especially banking services. The nation’s political stability, accessible location, multilingual workers, and banking secrecy laws all contributed to Luxembourg’s emergence as an important financial center. By 2002 the citizens of Luxembourg enjoyed the highest gross domestic product (GDP) per capita in the world.

F

Political Developments

Luxembourg’s post-1945 politics have been characterized by consensus, coalitions, and long-serving prime ministers. Pierre Werner was prime minister from 1959 until 1974, heading coalition governments between his own Christian Social People’s Party and the Democratic Party (1959-1964; 1968-1974) and the Luxembourg Socialist Workers’ Party (1964-1968). In the May 1974 general election the Christian Social People’s Party fared poorly and was forced out of government for the first time since 1919. A center-left coalition of the Democratic Party and the Luxembourg Socialist Workers’ Party took power, with Gaston Thorn, a Democrat, as prime minister. Werner and the Christian Social People’s Party regained their traditional dominance in 1979, forming a coalition with the Democratic Party. A painful recession forced the government to introduce an economic austerity program.

Werner retired before the 1984 elections, to be succeeded by Jacques Santer as Christian Social People’s Party leader. Popular reaction against the recession and government-backed austerity measures allowed the Luxembourg Socialist Workers’ Party to make strong gains in the 1984 elections. A Christian Social-Socialist Worker coalition led by Santer took office. The coalition retained power after the elections of June 1989 and June 1994, albeit with reduced majorities.

Luxembourg’s Chamber of Deputies ratified the Maastricht Treaty in July 1992, opening the way for Luxembourg’s admission to the European Union (EU). Clauses in the treaty relating to foreigners’ electoral rights and monetary union required amendments to Luxembourg’s constitution. Santer resigned as prime minister in January 1995 to take up an appointment as president of the EU’s European Commission (the organization’s highest administrative body), and Jean-Claude Juncker was appointed to replace him. Juncker was re-elected in 1999 and 2004.

In March 1998 Luxembourg’s monarch, Grand Duke Jean, conferred broad constitutional powers on his son and heir, Prince Henri, in preparation for Henri’s succession to the throne. In October 2000 Jean abdicated, and Prince Henri became grand duke of Luxembourg.