Luxembourg: country overview
02 July 2012by Ina Dimireva -- last modified 25 January 2017
The Grand Duchy of Luxembourg was one of the six founding countries of the European Economic Community (later the European Union), and in 1999 it joined the euro currency area. The most important sectors of Luxembourg's economy in 2015 were the financial and insurance activities (28.4 %), wholesale and retail trade, transport, accommodation and food services (16.6 %) and public administration, defence, education, human health and social work activities (15.6 %). Luxembourg's main export partners are Germany, France and Belgium, while its main import partners are Belgium, Germany and China.
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Capital: Luxembourg
Geographical size: 2 586 km2
Population: 562 958 (2015)
Population as % of total EU: 0.1 % (2015)
Gross domestic product (GDP): € 52.112 billion (2015)
Official EU language(s): French, German
Political system: parliamentary constitutional monarchy
EU member country since: 1 January 1958
Seats in the European Parliament: 6
Currency: Euro. Member of the eurozone since 1 January 1999
Schengen area member? Yes, Schengen Area member since 26 March 1995.
Presidency of the Council: Luxembourg has held the revolving presidency of the Council of the EU 12 times between 1960 and 2015.
Country overview
The Grand Duchy of Luxembourg is a small country surrounded by Belgium, France and Germany, and its history has been inextricably linked with that of its larger neighbours. It is largely made up of rolling hills and forests.
Luxembourg has been under the control of many states and ruling houses in its long history, but it has been a separate, if not always autonomous, political unit since the 10th century. Today, Luxembourg is a hereditary Grand Duchy with a unicameral parliamentary system.
Luxembourgish, the national language, is akin to German. German is the first foreign language for most Luxembourgers and is used in the media. French is the administrative language.
The economic structure of Luxembourg is based mainly in banking, insurance, and the steel industry. Agriculture and wine production are also important.
Many of Luxembourg's speciality dishes are of the type one would expect in a forested country. They include jugged hare and Ardennes ham. Trout and pike, fresh from the country's rivers, also feature regularly on menus here.
Luxembourg shares the Moselle valley with Germany and the local white wines are well known and popular. Like other northern European countries, Luxembourg also produces popular brands of beer.
Economy overview
This small, stable, high-income economy has historically featured solid growth, low inflation, and low unemployment. The industrial sector, initially dominated by steel, has become increasingly diversified to include chemicals, machinery and equipment, rubber, automotive components, and other products. The financial sector, which accounts for about 36% of GDP, is the leading sector in the economy. The economy depends on foreign and cross-border workers for about 39% of its labor force.
Luxembourg experienced uneven economic growth in the aftermath of the global economic crisis that began in late 2008. Luxembourg's GDP contracted 3.6% in 2009, rebounded in 2010-12, fell again in 2013-14, but recovered in 2015. Unemployment has remained below the EU average despite having increased from a historically low rate of 4% in the 2000s to 7.1% in 2014.
The country continues to enjoy an extraordinarily high standard of living - GDP per capita ranks among the highest in the world and is the highest in the euro zone. Luxembourg has one of the highest current account surpluses as a share of GDP in the euro zone, and it maintains a healthy budgetary position and the lowest public debt level in the region.
Luxembourg has lost some of its advantage as a favourable tax location because of OECD and EU pressure. In 2015, the government's compliance with EU requirements to implement automatic exchange of tax information on savings accounts - thus ending banking secrecy - has depressed banking activity and dampened GDP growth. Likewise, changes to the way EU members collect taxes from e-commerce has cut Luxembourg's tax revenues, requiring the government to raise additional levies and to reduce some direct social benefits.
Useful links
The Commission's Representation in Luxembourg
European Parliament office in Luxembourg
Source: European Commission, CIA - The World Factbook
