LUXEMBOURG – (dpa) – Luxembourg’s booming economy has long been cause for envy and admiration from its neighbours – but the current global recession is having a marked impact on economic growth rates.
“A small ship is more at the mercy of heavy seas than a large steamer,” analyst Ferdy Adam of Luxembourg’s STATEC office of statistics says.Whereas real economic growth in the grand duchy stood at 7.5 per cent in 2000, it is expected to come in at around 4.0 per cent for 2001 and is estimated at only 3.0 per cent this year.The rise in bankruptcies among small and medium-sized companies is causing concern.A decline in foreign trade, a fall in recruitment in the normally booming financial sector, following the September 11 terror attacks in the United States, and declining industrial production are all having their effect.Nevertheless concerns expressed by the country’s citizens following the years of plenty appear to be mainly of a psychological nature and focused on the future than based on real warning signs.Director of the FEDIL industrial federation Nicolas Soisson bemoans a sharp decline in industry during the second half of 2001 and predicts an even more marked fall for 2002.The situation in foreign markets is to blame for the problems of Luxembourg’s industrial sector, he believes.Pierre Bley, general secretary of the UEL chamber of business, also says that strategic decisions taken by foreign concerns is behind the closure of plants in Luxembourg.“Investors have become more cautious,” says Bley, whose association has 34,000 members.Luxembourg’s unemployment rate stood at a relatively low 2.7 per cent – equivalent to 5,368 people – in November last year, just 0.1 percentage points up on the level of a year earlier.By comparison, across the border in the Trier region of Germany, 7.5 per cent of the workforce is without a job. Moreover, the grand duchy still welcomes trained workers, with more than a third of the 284,000 people in employment coming from France, Belgium or Germany.“The rate of unemployment in Luxembourg is rising slightly, and we need to be careful,” according to Economy Minister Henri Grethen of the liberal democrats.Grethen advocates better training of school leavers and more occupational training for workers in this small European Union country of 450,000 inhabitants. Luxembourg aims to grow to 700,000 inhabitants, using its economy based on banking and services as a motor rather than industry.The government is cutting taxes once more this year to persuade companies already here to stay and others to come into the country, “because the state’s coffers are full and we do not need to take more money out of people’s pockets than is required”, as Grethen says.Through a decline in total taxes from 37.45 per cent to 30.38 per cent of the economy, companies are having their tax burden cut by around 404 million euros.As a result of the tax reform initiated at the beginning of 2001, private tax payers will be paying 669 million euros less in tax by the end of this year by comparison with 2000. The top marginal rate of income tax has been cut to 38 per cent from 42 per cent.“The days when we bought in new companies, like detergent in a supermarket are over,” Grethen says, adding that each investor now considers exactly how to invest his money.Luxembourg’s ministers have long travelled the world to market their country, and even Grand Duke Henri has recently joined them. They are extending their feelers to eastern Europe and even Israel.Luxembourg’s representatives highlight the number of languages spoken and also promise tailor-made solutions for individual concerns, as Grethen says.Business appears happy with the way the politicians run things. The E.U’s. smallest country is even taking its place in space exploration as the site of the world’s largest satellite concern, SES, which manages the Astra satellites.Last year the grand duchy was also chosen as the headquarters of Arcelor, the world’s largest steel company.
