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12/03/2006 20:57 Local Time 
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Head of State
 Grand Duke Henri
Head of Government Prime Minister Jean-Claude Juncker
Foreign Minister Lydie Polfer
Area 2,586 km2
Population 460,000 (2001)
Capital Luxembourg
Language Luxembourgish (national language), French (official, administrative and legal language), German (most common language in trade and commerce)
Currency Euro
Per capita GNP € 42,738 (2000)
GNP growth 3.5% (2001)

Constitution - Domestic politics

Luxembourg is a representative democracy in the form of a constitutional monarchy. The Grand Duke is the Head of State but has no political power. Legislative power is based on the joint action of the Chamber of Deputies and the Council of State. The principal function of the Chamber of Deputies, composed of 60 deputies elected for 5 years, is to vote on proposed laws. These drafts are presented by the government to the Chamber of Deputies after consultation with the 21-member Council of State.

The two biggest parties traditionally form the government in Luxembourg, which has had non-Socialist leadership for more than 50 years. Although the Christian Social Party (PCS) remains the largest party, voters have given it ever decreasing support in the past three elections.


Luxembourg is a welfare state with extensive social benefits financed by social insurance schemes. Salary/pension levels are high and Luxembourg enjoys a degree of economic prosperity almost unique among industrialised democracies. The standard of living is among the highest in the world.
The key to the country’s economic strength is the financial sector and – to a lesser extent – transport and communications (media) and the steel industry. A high level of diversification is evident within the financial sector and the business sector in general. Belgium, Germany and France together account for 68% of Luxembourg’s foreign trade.

Luxembourg offers a very favourable climate for foreign investment. Successive governments have effectively attracted new investments, providing incentives relating to taxes, construction, and plant equipment. Labour relations have been peaceful since the 1930s, which is often cited by foreign investors as a primary reason for setting up business in the Grand Duchy.

Foreign policy

Luxembourg’s foreign policy is based on the principle that the country’s economic and political independence is best secured through highly developed international co-operation. This is ensured primarily through European economic, political and security policy within the framework of EU and NATO membership, as well as through the continuation of the Benelux cooperation. Luxembourg has long been a prominent supporter of European political and economic integration.
Luxembourg is among the few countries in the world to have reached the UN goal of international aid for the developing countries amounting to 0.7% of GDP. Luxembourg wishes to maintain the principle that EU institutions should be located in the country, among which are the European Court of Justice, the European Court of Auditors and the European Investment Bank, as well as administrative units of the Commission and the European Parliament.

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European Council, Thessaloniki 2003
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