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Luxembourg country brief

Overview

Australia enjoys a constructive and positive bilateral relationship with Luxembourg. Official contact with the Government of Luxembourg is focused on multilateral issues including in the United Nations (UN) Security Council, on which both countries are serving as non-permanent members for the period 2013-14, the World Trade Organisation and international disarmament negotiations. The Australian Ambassador to Belgium has non-resident accreditation to Luxembourg.

Political overview

System of government

The Grand Duchy of Luxembourg is a hereditary constitutional monarchy ruled by the Grand Duke Henri of Luxembourg. Legislative power is exercised by the unicameral Chamber of Deputies with 60 members elected for five year terms. Some legislative functions are also entrusted to the advisory State Council, with 21 members appointed for life by the Grand Duke, although decisions made by this body can be overruled by the legislature. Executive power is vested in the Grand Duke, but is normally exercised by the Council of Ministers, led by the head of the government (Prime Minister). The Grand Duke appoints ministers, but they are responsible to the legislature.

Although Luxembourg is divided into 12 counties for administrative purposes, it is subdivided differently during general elections and for the purpose of local government. During elections, Luxembourg is subdivided into four electoral districts or constituencies: Centre, East, North and South. In relation to local government, the Grand Duchy is subdivided into three administrative districts: Diekirch, Grevenmacher and Luxembourg. District Commissioners serve as intermediaries between the central Government and the 118 municipalities.

Major parties

The main political parties are the Christian Social Party (CSV – Christian Democrats), the Luxembourg Socialist Workers Party (LSAP), and the Democratic Party (PDL – Liberals). Other political parties include the Socialist Workers' Party (LSAP), Action Committee for Democracy and Pensions Justice (since 1992, the ADR), the Green Party, the Left Party and the Communist Party. The CSV has consistently been the largest party and has provided the Prime Minister for 64 out of the last 69 years.

Political developments

The political situation in Luxembourg has been traditionally stable, with the centre-right CSV party having been in government either in its own right or in coalition since 1919, except for the period 1974-1979. Until recently, the Prime Minister was Mr Jean-Paul Juncker of the ruling CSV, who served in that role for a period of nearly 18 years, thereby making him the EU's longest-serving democratically-elected European leader in recent times.

On 10 July 2013, Prime Minister Juncker resigned. Elections held in October 2013 brought to an end the domination of Luxembourg politics by the CSV.  The new Coalition Government sworn in on 4 December 2013 comprises the Democratic Party, Socialist Workers Party and the Green Party.  .The Prime Minister is Mr Xavier Bettel, and Deputy Prime Minister is Mr Etienne Schneider.  Mr Jean Asselborn has retained his portfolio of Minister for Foreign Affairs.

Foreign relations

Luxembourg is a strong supporter of multilateral organisations as they assist in the attainment of policy goals and increase its influence. Luxembourg is one of six founding members of the European Union. Luxembourg is a signatory to the Brussels Treaty providing for collective self defence between its members, a NATO member and a founding member of the Council of Europe. On 29 May 2008 Luxembourg's Parliament voted by an overwhelming majority to approve the Lisbon (EU Reform) Treaty. Luxembourg plays host to several European institutions including the Secretariat-General of the European Parliament, the European Court of Justice and the European Investment Bank. Luxembourg currently serves alongside Australia as a non-permanent member of the UN Security Council for the period 2013-14.

Economic overview

Luxembourg has a relatively open and stable economy. After near stagnation in 2012, the economy is expected to experience modest growth in 2013. At US$112,135, Luxembourg has one of the highest GDP per capita levels in the world. Luxembourg has adopted the Euro as its currency.

Although Luxembourg's economy has weathered the global economic crisis better than expected, its manufacturing industry, which exports almost the entirety of its production, experienced a downturn. Further, the expansive nature of its financial sector and the international character of its activities made it particularly sensitive to developments abroad. Highlighting the importance of the financial sector to Luxembourg's economy, the government has committed to tackling money laundering and tax evasion as well as overturning banking secrecy laws and participating in automatic exchange of tax information from January 2015, bringing the country into line with EU requirements. The government has committed to a range of measures that seek to reduce the deficit to zero by 2017.

Germany, France and Belgium, Luxembourg's nearest neighbours, account for over half of its two-way trade. Since 1921, Luxembourg has been in economic union with Belgium – the Belgium-Luxembourg Economic Union (BLEU).

Bilateral relationship

Bilateral agreements

Australia has a number of bilateral agreements with Luxembourg, covering issues such as mutual assistance on criminal matters, extradition and visas.

High level visits

Bilateral economic and trade relationship

Luxembourg's investment in Australia was valued at A$26.3 billion in 2012, up from A$7.8 billion in 2008.  Australian investment in Luxembourg was valued at A$14.4 billion in 2012, making it a significant investment destination for Australia.  In 2012-13, total merchandise trade was valued at almost A$32.5 million, heavily in Luxembourg's favour. Key imports include rubber tyres, treads and tubes.

Updated January 2014