June 9, 1815, after 400 years of domination by various European nations, Luxembourg was made a grand duchy by the Congress of Vienna. It was granted political autonomy in 1838 under King William I of the Netherlands, who also was the Grand Duke of Luxembourg. The country considers 1835 to be its year of independence. In 1867, Luxembourg was recognized as independent and guaranteed perpetual neutrality. After being occupied by Germany in both World Wars, however, Luxembourg abandoned neutrality and became a charter member of the North Atlantic Treaty Organization (NATO) in 1949.
The present sovereign, Grand Duke Jean, succeeded his mother, Grand Duchess Charlotte, on November 12, 1964. Grand Duke Jean's eldest son, Prince Henri, was appointed "Lieutenant Représentant" (Hereditary Grand Duke) on March 4, 1998. On December 24, 1999, Prime Minister Juncker announced Grand Duke Jean's decision to abdicate the throne in September 2000, in favor of Prince Henri who assumed the title and constitutional duties of Grand Duke.
Legislative power is vested in the Chamber of Deputies, elected directly to 5-year terms. A second body, the "Conseil d'Etat" (Council of State), composed of 21 ordinary citizens appointed by the Grand Duke, advises the Chamber of Deputies in the drafting of legislation. The responsibilities of the members of the Conseil d'Etat are extracurricular 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.
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.
The DP is a center party, drawing support from the professions, merchants, 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 since 1984, the DP had been a partner in the three previous consecutive coalition governments.
The Communist Party (PCL), which received 10%-18% of the vote in national elections from World War II to the 1960s, won only two seats in the 1984 elections, one in 1989, and none in 1994. Its small remaining support lies in the "steel belt" of the industrialized south.
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, including its membership in NATO.
National elections are held at least every 5 years and municipal elections every 6 years. In the June 1999 parliamentary elections, the CSV won 19, the DP 15, the LSAP 13, the ADR (a single-issue party that emerged from the LSAP focused on pension rights) 6, the "Greens" 5, and the PCL 1. Hence, for the first time since 1974, the Socialists (LSAP) ceded their junior coalition position with the long-reigning Christian Socialist (CSV) majority to the Liberal Democrats. Jean-Claude Juncker (CSV) remained for a second 5-year term as Prime Minister, and Lydie Polfer (DP), the former Luxembourg City mayor, was named Vice Prime Minister and Foreign Minister.
Somewhat unexpectedly, the Socialists gained ground in the October 10, 1999 municipal elections, with candidates taking 34% of municipal seats nationwide, including seven town mayorships. In Luxembourg City, the Grand Duchy's largest municipality, the electorate followed its postwar voting pattern and chose Liberal Democrat Paul Helminger, who had been named to finish Lydie Polfer's term when she became Foreign Minister.
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 -- now the second-largest steel producer in Europe. The iron and steel industry, located along the French border, is the most important single sector of the economy. Steel accounts for 29% of all exports (excluding services), 1.8% of GDP, 22% of industrial employment, and 3.9% of the work force.
The restructuring of the industry and increasing government ownership in Arbed (31%) began as early as 1974. As a result of timely modernization of facilities, cutbacks in production and employment, government assumption of portions of Arbed's debt, and recent cyclical recovery of the international demand for steel, the company is again profitable. Its productivity is among the highest in the world. U.S. markets account for about 6% of Arbed's output. The company specializes in production of large architectural steel beams and specialized value-added products.
There has been, however, a relative decline in the steel sector, offset by Luxembourg's emergence as a financial center. Banking is especially important. In 1997, there were 215 banks in Luxembourg, with 21,000 employees. Political stability, good communications, easy access to other European centers, skilled multilingual staff, and a tradition of banking secrecy have all contributed to the growth of the financial sector. Germany accounts for the largest-single grouping of banks, with Scandinavian, Japanese, and major U.S. banks also heavily represented. Total assets exceeded $200 billion at the end of 1996, of which some 81% was denominated in foreign currencies, primarily U.S. dollars and German marks. More than 9,000 holding companies are established in Luxembourg. The European Investment Bank -- the financial institution of the European Union -- also is located there.
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 "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 five satellites with two more to be launched before the year 2000.
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 current value of U.S. direct investment is almost $1.4 billion, on a per capita basis -- the highest level of U.S. direct investment outside of North America.
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.
Foreign investors often cite Luxembourg's labor relations as a primary reason for locating in the Grand Duchy. Unemployment in 1999 averaged less than 2.8% of the work force.
Luxembourg's small but productive agricultural sector provides employment for about 1%-3% of the work force. Most farmers are engaged in dairy and meat production. Vineyards in the Moselle Valley annually produce about 15 million liters of dry white wine, most of which is consumed locally.
Luxembourg's trade account has run a persistent deficit over the last decade, but the country enjoys an overall balance-of-payment surplus, due to revenues from financial services. Government finances are strong, and budgets are normally in surplus.
Luxembourg is the site of the European Court of Justice, the European Court of Auditors, and other vital EU organs. The Secretariat of the European Parliament is located in Luxembourg, but the Parliament usually meets in nearby Strasbourg.
The U.S. Embassy in Luxembourg is located at 22 Boulevard Emmanuel Servais, L-2535 Luxembourg City (tel. 352-460-123).
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