Economy of Luxembourg
Encyclopedia
The economy of Luxembourg
is largely dependent on the banking, steel
, and industrial
sectors. Luxembourgers enjoy the second highest per capita
gross domestic product
in the world (CIA 2007 est.), behind Qatar
. Luxembourg is seen as a diversified industrialized nation, contrasting the oil boom in Qatar
, the major monetary source of that nation.
Although Luxembourg in tourist
literature is aptly called the "Green Heart of Europe
", 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 2009, a budget deficit of 5% resulted from government measures to stimulate the economy, especially the banking sector, as a result of the world economic crisis. This was however reduced to 1.4% in 2010.
Banking is the largest sector in the Luxembourg economy. The country has specialised in the cross-border fund administration
business. As Luxembourg's domestic market is relatively small, the country's financial centre is predominantly international. At the end of March 2009, there were 152 banks in Luxembourg, with over 27,000 employees. Political stability, good communications, easy access to other European centres, skilled multilingual staff, a tradition of banking secrecy and cross-border financial expertise have all contributed to the growth of the financial sector. Germany
accounts for the largest-single grouping of banks, with Scandinavia
n, Japan
ese, and major U.S.
banks also heavily represented. Total assets exceeded €929 billion at the end of 2008. More than 9,000 holding companies are established in Luxembourg. The European Investment Bank
—the financial institution of the European Union
—is also located there.
Concern about Luxembourg's banking secrecy laws, and its reputation as a tax haven, led in April 2009 to it being added to a "grey list" of nations with questionable banking arrangements by the G20 [1].
metallurgy
. The refining process led to the development of the steel industry in Luxembourg and founding of the Arbed
company in 1911.
The iron and steel industry, located along the French
border, is an important 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. In 2001, through the merger with Aceralia
and Usinor
, Arbed became Arcelor
. Arcelor was taken over in 2006 by Mittal Steel to form Arcelor-Mittal, the largest steel producer in the world.
is Europe's premier private radio and television broadcaster. The government-backed Luxembourg satellite company "Société européenne 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, the 16-channel RCA 4000 Astra 1A
, was launched by Ariane Rocket
in December 1988. SES presently constitutes the world largest satellite services company in terms of revenue.
still welcomes over 900,000 visitors a year who spend an average of 2.5 nights in hotels, hostels or on camping sites. Business travel is flourishing representing 44% of overnight stays in the country and 60% in the capital, up 11% and 25% between 2009 and 2010.
The control of medium and big companies must be made by one or several independent auditors of companies, appointed by the general assembly among the members of the Institute of Independent Auditors of Companies.
The control of small companies must be made by an accountant appointed by the general assembly for definite duration.
The conclusion of the independent auditor’s report can be:
- A certificate without reserve, that is to say an approval
- A certificate with reserves, that is to say that there is approval with reserves because of discords or doubts.
- A refusal to give a certificate.
The accountants’ associations have difficulties to get organized because of the importance of the State in the accounting system.
Foreign investors often cite Luxembourg's labour relations as a primary reason for locating in the Grand Duchy. Unemployment in 1999 averaged less than 2.8% of the work force, but reached 4.4% by 2007.
Currently, Luxembourg uses imported oil and natural gas for the majority of its energy generation.
link to Paris
has led to renovation of the city's railway station
while a new passenger terminal at Luxembourg Airport
has recently been opened. There are plans to introduce tram
s in the capital and light-rail lines in adjacent areas within the next few years.
Luxembourg
Luxembourg , officially the Grand Duchy of Luxembourg , is a landlocked country in western Europe, bordered by Belgium, France, and Germany. It has two principal regions: the Oesling in the North as part of the Ardennes massif, and the Gutland in the south...
is largely dependent on the banking, steel
Steel
Steel is an alloy that consists mostly of iron and has a carbon content between 0.2% and 2.1% by weight, depending on the grade. Carbon is the most common alloying material for iron, but various other alloying elements are used, such as manganese, chromium, vanadium, and tungsten...
, and industrial
Industry
Industry refers to the production of an economic good or service within an economy.-Industrial sectors:There are four key industrial economic sectors: the primary sector, largely raw material extraction industries such as mining and farming; the secondary sector, involving refining, construction,...
sectors. Luxembourgers enjoy the second highest per capita
Per capita
Per capita is a Latin prepositional phrase: per and capita . The phrase thus means "by heads" or "for each head", i.e. per individual or per person...
gross domestic product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
in the world (CIA 2007 est.), behind Qatar
Qatar
Qatar , also known as the State of Qatar or locally Dawlat Qaṭar, is a sovereign Arab state, located in the Middle East, occupying the small Qatar Peninsula on the northeasterly coast of the much larger Arabian Peninsula. Its sole land border is with Saudi Arabia to the south, with the rest of its...
. Luxembourg is seen as a diversified industrialized nation, contrasting the oil boom in Qatar
Qatar
Qatar , also known as the State of Qatar or locally Dawlat Qaṭar, is a sovereign Arab state, located in the Middle East, occupying the small Qatar Peninsula on the northeasterly coast of the much larger Arabian Peninsula. Its sole land border is with Saudi Arabia to the south, with the rest of its...
, the major monetary source of that nation.
Although Luxembourg in tourist
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
literature is aptly called the "Green Heart of Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
", its pastoral land coexists with a highly industrialized and export-intensive economy. Luxembourg enjoys a degree of economic prosperity almost unique among industrialized democracies
Democracy
Democracy is generally defined as a form of government in which all adult citizens have an equal say in the decisions that affect their lives. Ideally, this includes equal participation in the proposal, development and passage of legislation into law...
.
In 2009, a budget deficit of 5% resulted from government measures to stimulate the economy, especially the banking sector, as a result of the world economic crisis. This was however reduced to 1.4% in 2010.
Banking
Fund administration
Fund administration is the name given to the set of activities that are carried out in support of the actual process of running a collective investment scheme, whether the scheme is a traditional mutual fund, a hedge fund, Pension fund, unit trust or something in between.Managers of funds often...
business. As Luxembourg's domestic market is relatively small, the country's financial centre is predominantly international. At the end of March 2009, there were 152 banks in Luxembourg, with over 27,000 employees. Political stability, good communications, easy access to other European centres, skilled multilingual staff, a tradition of banking secrecy and cross-border financial expertise have all contributed to the growth of the financial sector. Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
accounts for the largest-single grouping of banks, with Scandinavia
Scandinavia
Scandinavia is a cultural, historical and ethno-linguistic region in northern Europe that includes the three kingdoms of Denmark, Norway and Sweden, characterized by their common ethno-cultural heritage and language. Modern Norway and Sweden proper are situated on the Scandinavian Peninsula,...
n, Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
ese, and major U.S.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
banks also heavily represented. Total assets exceeded €929 billion at the end of 2008. More than 9,000 holding companies are established in Luxembourg. The European Investment Bank
European Investment Bank
The European Investment Bank is the European Union's long-term lending institution established in 1958 under the Treaty of Rome. A policy-driven bank, the EIB supports the EU’s priority objectives, especially European integration and the development of economically weak regions...
—the financial institution of the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
—is also located there.
Concern about Luxembourg's banking secrecy laws, and its reputation as a tax haven, led in April 2009 to it being added to a "grey list" of nations with questionable banking arrangements by the G20 [1].
Steel
A key event in the economic history of Luxembourg was the 1876 introduction of EnglishEngland
England is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...
metallurgy
Metallurgy
Metallurgy is a domain of materials science that studies the physical and chemical behavior of metallic elements, their intermetallic compounds, and their mixtures, which are called alloys. It is also the technology of metals: the way in which science is applied to their practical use...
. The refining process led to the development of the steel industry in Luxembourg and founding of the Arbed
Arbed
ARBED was a major Luxembourg-based steel and iron producing company. Created in 1911 after the merger of three steel producing companies, ARBED was a major actor in the economic history of the Grand-Duchy until it merged in 2002 with two other European steel companies to create Arcelor.- Origins ...
company in 1911.
The iron and steel industry, located along the French
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
border, is an important 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
Arbed
ARBED was a major Luxembourg-based steel and iron producing company. Created in 1911 after the merger of three steel producing companies, ARBED was a major actor in the economic history of the Grand-Duchy until it merged in 2002 with two other European steel companies to create Arcelor.- Origins ...
(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. In 2001, through the merger with Aceralia
Aceralia
Aceralia was a large Spanish steel producer formed in 1997 by restructuring of a group formed from earlier mergers of the steel producers ENSIDESA and Altos Hornos de Vizcaya....
and Usinor
Usinor
Usinor was a French steel making group formed in 1948. The group was merged with Sacilor in 1986, becoming Usinor-Sacilor and was privatised in 1995, and renamed Usinor in 1997....
, Arbed became Arcelor
Arcelor
Arcelor S.A. was the world's largest steel producer in terms of turnover and the second largest in terms of steel output, with a turnover of €30.2 billion and shipments of 45 million metric tons of steel in 2004...
. Arcelor was taken over in 2006 by Mittal Steel to form Arcelor-Mittal, the largest steel producer in the world.
Telecommunications
Government policies promote the development of Luxembourg as an audiovisual and communications center. Radio-Television-LuxembourgRTL Group
RTL Group is Europe's largest TV, radio and production company, and is majority-owned by German media conglomerate Bertelsmann. It has 45 television and 32 radio stations in 11 countries...
is Europe's premier private radio and television broadcaster. The government-backed Luxembourg satellite company "Société européenne 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
SES Astra
Astra is the name for the geostationary communication satellites, both individually and as a group, which are owned and operated by SES S.A., a global satellite operator based in Betzdorf, in eastern Luxembourg. The name is sometimes also used to describe the channels broadcasting from these...
satellite, the 16-channel RCA 4000 Astra 1A
Astra 1A
Astra 1A was the first satellite launched and operated by SES . During its early days, it was often referred to as the Astra Satellite, as SES only operated one satellite originally....
, was launched by Ariane Rocket
Ariane (rocket)
Ariane is a series of a European civilian expendable launch vehicles for space launch use. The name comes from the French spelling of the mythological character Ariadne....
in December 1988. SES presently constitutes the world largest satellite services company in terms of revenue.
Tourism
Tourism is an important component of the national economy, representing about 8.3% of GDP in 2009 and employing some 25,000 people or 11.7% of the working population. Despite the current crisis, the Grand DuchyLuxembourg
Luxembourg , officially the Grand Duchy of Luxembourg , is a landlocked country in western Europe, bordered by Belgium, France, and Germany. It has two principal regions: the Oesling in the North as part of the Ardennes massif, and the Gutland in the south...
still welcomes over 900,000 visitors a year who spend an average of 2.5 nights in hotels, hostels or on camping sites. Business travel is flourishing representing 44% of overnight stays in the country and 60% in the capital, up 11% and 25% between 2009 and 2010.
Agriculture
Luxembourg's small but productive agricultural sector is highly subsidized, mainly by the EU and the government. It employs 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 litres of dry white wine, most of which is consumed within Luxembourg and also in Germany, France, and Belgium on a lesser scale.Accounting principles
Establishing accounts depends on the size of companies, and referring to three criteria: total of the balance sheet (total of assets without losses of the accounting year), the net amount of the turnover (net, such as it appears on the profit and loss account) and the average number of the workforce.The control of medium and big companies must be made by one or several independent auditors of companies, appointed by the general assembly among the members of the Institute of Independent Auditors of Companies.
The control of small companies must be made by an accountant appointed by the general assembly for definite duration.
The conclusion of the independent auditor’s report can be:
- A certificate without reserve, that is to say an approval
- A certificate with reserves, that is to say that there is approval with reserves because of discords or doubts.
- A refusal to give a certificate.
The accountants’ associations have difficulties to get organized because of the importance of the State in the accounting system.
Labour relations
Labour 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 labour negotiations.Foreign investors often cite Luxembourg's labour relations as a primary reason for locating in the Grand Duchy. Unemployment in 1999 averaged less than 2.8% of the work force, but reached 4.4% by 2007.
Energy
In 1978, Luxembourg tried to build a 1,200 MW nuclear reactor but dropped the plans after threats of major protests.Currently, Luxembourg uses imported oil and natural gas for the majority of its energy generation.
Transportation
Luxembourg has efficient road, rail and air transport facilities and services. The road network has been significantly modernised in recent years with 147 km of motorways connecting the capital to adjacent countries. The advent of the high-speed TGVTGV
The TGV is France's high-speed rail service, currently operated by SNCF Voyages, the long-distance rail branch of SNCF, the French national rail operator....
link to Paris
Paris
Paris is the capital and largest city in France, situated on the river Seine, in northern France, at the heart of the Île-de-France region...
has led to renovation of the city's railway station
Luxembourg railway station
Luxembourg railway station is the main railway station serving Luxembourg City, in southern Luxembourg. It is operated by Chemins de Fer Luxembourgeois, the state-owned railway company....
while a new passenger terminal at Luxembourg Airport
Luxembourg-Findel International Airport
Findel Airport is the main airport in Luxembourg.It is Luxembourg's only international airport and is the only airport in the country with a paved runway. It is located away from Luxembourg City....
has recently been opened. There are plans to introduce tram
Tram
A tram is a passenger rail vehicle which runs on tracks along public urban streets and also sometimes on separate rights of way. It may also run between cities and/or towns , and/or partially grade separated even in the cities...
s in the capital and light-rail lines in adjacent areas within the next few years.
Prospects
According to a recent note from the Luxembourg statistical agency, the Luxembourg economy is set to grow 4.0% in 2011. The economic situation was particularly dynamic in late 2010 and early 2011 but there are now signs of a slowdown, both in the international economic environment and in terms of national indicators. GDP growth is set to slow slightly in 2012, to about 3.8%.See also
- OECD's Luxembourg country Web site and OECD Economic Survey of Luxembourg
- Economy of EuropeEconomy of EuropeThe economy of Europe comprises more than 731 million people in 48 different states. Like other continents, the wealth of Europe's states varies, although the poorest are well above the poorest states of other continents in terms of GDP and living standards. The difference in wealth across...
- The Integrated Traffic and Landscape Concept for the Grand Duchy of LuxembourgThe Integrated Traffic and Landscape Concept for the Grand Duchy of LuxembourgThe integrated traffic and landscape concept is a spatial development plan which has been created in order to improve the spatial situation in terms of housing, economy, landscape and traffic in Luxembourg. It was introduced in the year 2004 and has a long term perspective with a horizon of 2020...
- LuxembourgLuxembourgLuxembourg , officially the Grand Duchy of Luxembourg , is a landlocked country in western Europe, bordered by Belgium, France, and Germany. It has two principal regions: the Oesling in the North as part of the Ardennes massif, and the Gutland in the south...
External links
- Government statistics http://www.statistiques.public.lu
- CIA World Factbook—Luxembourg https://www.cia.gov/library/publications/the-world-factbook/geos/lu.html