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Luxembourg Modern History

In the early 1900s, Luxembourg developed from a poor agricultural nation to an industrial nation with the steel as its base. During the second half of the century, the country was transformed into one of the world's most important financial centers with very high standards of living. From the end of the war in 1945 to the end of 2013, the Christian Democrats led all but one government.

After the Second World War (1939-1945), Luxembourg abandoned the neutrality policy of 1867. Instead, the cooperation with other Western Europe was deepened. Long before, as early as 1921, however, Belgium and Luxembourg had decided on an economic union with a single currency (UEBL, introduced in 1922). In 1948 came the Benelux Union, which also includes the Netherlands. It gradually developed into a customs union, which was fully implemented in 1970.

  • ABBREVIATIONFINDER: List of most commonly used acronyms containing Luxembourg. Also includes historical, economical and political aspects of the country.

In 1949, Luxembourg was a member of the NATO Alliance and founded the defense alliance, and the country was initially involved in the cooperation that eventually became the EU.

The Christian Socialist Party (CSV) was the largest party and dominated all government formation except 1974-1979, when socialists and liberals formed a coalition. Otherwise, CSV generally ruled with the Socialist Workers' Party (LSAP). On a few occasions, most recently 1999-2004, the government partner was instead the Liberal Democratic Party (DP).

Political stability was also evident on the personal front. Christian Democrat Pierre Werner was prime minister for a quarter of a century from 1959, with the exception of the five-year period when the CSV stood outside the government. Jacques Santer, who became head of government in 1984, sat down until he resigned to become EU Commission President in 1995. Santer was succeeded by Jean-Claude Juncker, who came to hold the post for nearly two decades.

Contemporary History of LuxembourgGrand Duchess Charlotte, who abdicated in 1964 in favor of her son Jean, had sat on the throne for 45 years. When Jean in turn abdicated in 2000, in favor of his son Henri, he had been head of state for 35 years.

Luxembourg as a financial center is questioned

Luxembourg's position as a financial center with far-reaching banking secrecy towards the end of the 20th century increasingly led to political disputes. Critics have argued that such secrecy can be exploited by both tax refugees and terrorists and drug dealers who want to launder money. Many EU citizens had interest income from accounts in Luxembourg, without transparency for their own tax authorities.

When the EU introduced automatic exchange of information on foreign EU citizens' interest income on savings accounts in 2005, Luxembourg, along with Belgium and Austria, had been granted exemption rules. When the so-called Savings Directive came into force, the three countries instead imposed a withholding tax on non-resident EU citizens' interest income and sent part of the income to their home country. It was seen as a great success especially for Luxembourg.

In the first referendum since the 1930s, the Luxembourg citizens in July 2005 agreed to the proposal for a new EU constitution, despite the fact that it was already stopped in practice by referendums in France and the Netherlands. Prime Minister Juncker had threatened to resign at a no. Jasidan received a modest 56 percent of the vote, even though all major parties supported the proposal.

Constitutional crisis

In 2008, when Parliament adopted a contentious proposal that legalized euthanasia, euthanasia, (see Social Conditions), a constitutional crisis arose. The head of state, the deeply religious Grand Duke Henri, refused to approve the law. According to the current constitution, his approval was required for the law to apply. The Christian Democrats were also against the law, but Juncker explained that a law passed by Parliament must come into force. The solution was to change the constitution so that the monarch no longer approved new laws.

The global financial crisis that erupted in 2008 prompted the government to present a stability plan. The main objective was to reduce government spending, achieve budgetary balance and maintain the country's competitiveness. A number of other reforms were also promised, regarding, among other things, the right to abortion and marriage for gays (see Social conditions), as well as changes in primary education, student loans and the health care system.

After the June 2009 elections, CSV and LSAP formed a new government. Juncker began his fourth term as prime minister but resigned from the post of finance minister, which he held since 1989.

Luxembourg emerged from the recession until the end of 2009. The crisis in the euro zone that escalated in 2011 again led to increased concern, although Luxembourg continued to be regarded as one of the richest countries in the world. The credit rating agency Moody's warned in the summer of 2012 that Luxembourg was at risk of having its credit rating lowered from the top AAA listing, which had previously appeared unthinkable.

Juncker leaves

In July 2013, a government crisis occurred after a serious scandal involving the SREL security service was revealed. It turned out that SREL had engaged in illegal telephone interception on a large scale - by politicians, among others - and also committed corruption. There were also suspicions that SREL had been involved in a series of unresolved explosions in the 1980s, which were aimed at public targets.

A parliamentary committee investigating the scandal accused Juncker of having failed the supervision and lost control of SREL, whose business rests directly under the prime minister. SREL turned out to have also intercepted Juncker himself. The scandal caused LSAP to threaten with a vote of no confidence and demand new elections. As a result, Juncker was forced to step down, after nearly 19 years as head of government. He continued to lead an expedition ministry.

Criticism had also been directed at Juncker, who many considered devoted too much time to his EU missions, and too little to domestic policy issues. At his departure, Juncker had been sitting longer than any other democratically elected head of government in the world. However, in early 2013, he had left the post of the euro group's first permanent chairman, a post he held for eight years.

 
 

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