Equatus Luxemburg

Some fields of intervention

------------------------------Luxembourg

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Official Dénomination : Grand Duchy of Luxembourg.

Government : Constitutional Monarchy with parliament democracy government

Head of State: S.A.R. The Grand-Duc Henri.

Head of Government : Jean-Claude Juncker, Prime Minister.

National Langage : Luxembourgish.

Administratives Langages : French, German and Luxembourgish

Money : EURO

Capital : Luxembourg.

Administratives Subdivisions: 3 districts (Luxembourg, Diekirch, Grevenmacher),
12 cantons, 118 communes

Key figures of économie:(1)

Year	1985/2008	2008	2009 (f)	2010 (f)	2011(f)
Growth GDP (%)	5,2	-0,9	-4,0	1,0
Growth Employment (%)	3,4	4,7	1,0	-0,7
Unemployment (%)	3,0	4,8	5,9	7,0
Inflation %	2,2	3,4	0,4	1,9

(f): forecast

Luxembourg is a free economy. It is therefore wide open to trade and international competition.

This high degree of openness is also to be found in the Luxembourg employment market as 3/5^ths of the workforce are not from Luxembourg and 2/5^ths commute from France, Belgium and Germany. The buoyancy of the Luxembourg economy between 1985 and 2008 kept unemployment rates amongst the lowest in the whole of Europe at between 3-4 %.

The openness of the economy and foreign investment were also amongst the key factors that made Luxembourg companies dynamic and competitive, which contributed to exceptional average growth of 5% per annum between 1985 and 2008.

Despite the strong growth, prices remained relatively stable during the same period. Luxembourg inflation was therefore in line with that of its main commercial partners. Due to productivity growth, the economy was able to retain a high level of competitiveness.

The developments of these parameters over the past 15 years means that generally Luxembourg performs well in the multilateral supervision exercises carried out by the OECD, the IMF, the European Commission, or standardisation exercises conducted by private bodies (IMD).

The table below shows the development of the Luxembourg economy over recent years and the predictions for the coming years using some key figures. Further information is to be found on the Service central de la statistique et des études économiques (STATEC, Luxembourg Statistical Institute) website and the Economic and social portrait of Luxembourg website.

Per capita wealth:

The absolute level of the GDP and the per capita GDP are often considered to indicate the wealth of the country and its inhabitants. In order to make a proper comparison obviously it is necessary to take account of the differences in price levels and consumption habits from country to country by adjusting them to reflect purchasing power parities. The per capita GDP is therefore expressed as the “purchasing power standard” (PPS**). In Luxembourg we need to add the cross-border, non-resident workforce, which accounts for over one-third of the jobs in the Luxembourg economy, contributes to forming value-added and is in receipt of wages but is not taken into account in the per capita GDP ratio denominator. So it is better to base comparisons on the "Gross National Revenue" (GNR), which includes the flows of factors between Luxembourg and other countries (particularly the “exported” earnings of cross-border commuters).

Since 1960 Luxembourg has had one of the best performances in terms of GNR per inhabitant (expressed as PPS**). With a PPS** of 1,329, the Grand Duchy is only surpassed by the United States with a PPS of 1,509 and Switzerland with 1,579. Nevertheless, it was not until the beginning of the 1980s that Luxembourg broke away from other industrial countries and the gap widened. In 2001 the Luxembourg per capita GNR was around 34,000 PPS compared with 29,000 PPS for the United States that was in second place on this scale.

Nevertheless, neither the “per capita gross domestic product" nor the “per capita gross national revenue” reflect the structure of the GDP which may be characterised by divergent influences from country to country, the proportions of gross fixed capital formation, Government consumption expenditure and household consumption expenditure. A comparison of household consumption expenditure levels or actual individual consumption (in PPS) per country, which is relatively low in Luxembourg compared with other European countries (expressed as a percentage of the GDP), can give a more realistic view of the inhabitants' standard of living. This indicator is used to compare differences in wealth in terms of the purchasing power of the residents of different countries but does not take account of the reinvested revenues that contribute to future wealth. By using this method - level of consumption per inhabitant - we arrive at the conclusion that although the purchasing power of Luxembourg residents exceeds the average purchasing power of the European Union by over 42 percent in 2001, the gap compared with countries such as Austria, the UK, Norway, Switzerland, Denmark and Germany is much lower than would have been expected from just looking at the per capita GDP or per capita GNR.

In addition the wealth production of the country can also be assessed by looking at the GDP per job or GDP per hour worked ratios, which are in fact summary measurements of the productivity of an economy. In 1999 the GDP per hour worked in Luxembourg amounted to 142.1 on the basis of an index of 100 for the whole of the European Union. The same index was 124.4 in Denmark and 117.4 in Belgium.

The measurement of a country's wealth therefore depends largely on the measurement methods applied. Also in Luxembourg, which is the size of a region in big countries, the “regional centre” aspect also plays a role. Therefore a comparison with other regions can also provide additional useful lessons. In the graph of the GDP by region we see the wealthiest regions, the poorest regions of the EU as well as the neighbouring regions of Luxembourg.

GDP and consumption per capita in 2001 (index 100 for the European Union)
	GDP		Effective individual Consumption *		Index of price level

	in current euros	standard of purchasing power (SPP)	in current euros	standard of purchasing power (SPP)	GDP	Individual Consimption
Belgium	106	108	103	103	98	99
Danemark	144	116	132	105	124	126
Germany	108	103	108	105	105	103
Greece	51	64	54	69	80	78
Spain	70	84	67	83	83	81
France	104	103	101	102	101	99
Irland	127	117	100	91	109	110
Italy	90	102	91	100	88	91
Luxembourg	206	188	154	142	110	108
Netherlands	115	115	100	104	100	96
Austria	112	111	109	109	101	100
Portugal	53	71	54	72	74	75
Finland	113	104	101	88	108	115
Sweden	118	102	112	93	116	120
United Kindom	116	103	128	112	113	114
Total	100	100	100	100	100	100
Norway	179	143	145	108	125	134
Switherland	163	117	157	108	139	145
Source: EUROSTAT N.B.: résultats provisoires pour 2001. * Effective individual consumption = final Consumer expenditure of the households and the non-profit-making institutions to the service of households (ISBLSM) + goods and services for individual consumption provided by the government on a purely free basis and at cut prices, such as teaching and health.

Although Luxembourg ranks amongst the regions with the highest per capita GDP, it does, however, lose the top position it occupied in comparison with other countries to the Inner London and Brussels regions and barely exceeds the Hamburg region. In this context it should also noted that the per capita GDP in the regions that neighbour Luxembourg (Lorraine, Belgian province of Luxembourg, Trèves, Sarre) are, to varying degrees, below the average per capita GDP in the European Union and that the gap compared with Luxembourg is sizeable. Luxembourg as a part of a larger geographical area is a dynamic entity comparable to other regional centres or conurbations in Europe with the obvious particularity that it is a sovereign country that conducts its own economic, financial and social policy.

In reality the GDP per inhabitant only provides an accounting and partial viewpoint of the well-being of the inhabitants of a country or region. International and scientific organisations have therefore tried to introduce development indicators to reflect the social, health, educational and environmental aspects. The most well-known of these indicators is called the human development index (HDI), which the United Nations Development Programme (UNDP) has published each year since 1990. This is a summary indicator established on the basis of partial indicators on health (indicator: life expectancy at birth), education (indicator: school enrolment rate, literacy rate) and economic performance (per capita GDP). In the HDI rankings for 2002, Luxembourg only comes in sixth place. This can be explained firstly by the life expectancy at birth rate - taken as an indicator of public health - which is 77.4 years in Luxembourg compared with 81 in Japan, 79.7 in Sweden and 78.5 in Norway for example. Secondly, the result reflects a methodological issue regarding the school enrolment rate, which in Luxembourg does not include students of Luxembourg nationality who attend foreign universities in the absence of a full university course in Luxembourg. The HDI can therefore be criticised from the methodological point of view, particularly as regards the weighting of indicators and the choice of variables but has the merit of expanding the perspective on well-being beyond economic performance in terms of per capita GDP.

** Standard of purchasing power

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