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Luxembourg report
by Euro Reporter
2013-11-10 13:20:03
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Juncker party wins but loses seats

The centre-right Christian Democrat party of Luxembourg Prime Minister Jean-Claude Juncker has won snap elections but has lost three seats. His CSV party polled 33.7% of the votes, a fall of 5% since the last elections in 2009. The CSV appeared to lose most ground to the third-placed Liberal DP opposition which gained four seats. Mr Juncker's coalition collapsed in July amid claims he had failed to stop illegal security agency activities. The prime minister has denied any wrongdoing.  Mr Juncker is the longest-serving elected leader in Europe, having headed the government since 1995. Final results from Sunday's poll gave the CSV 33.68%, meaning 23 seats in the 60-seat parliament, down from 26. The next two parties - each taking 13 seats - were Mr Juncker's socialist LSAP coalition partners with 20.28% of the vote and the Liberals (DP) 18.25%. The Greens took 6 seats.

"I am satisfied with the results as far as my party remains the number one party in Luxembourg, with a huge distance between my party and the two other main political parties," Mr Juncker said.  "We should be entitled to form the next government." But he said it was too early to begin coalition talks. DP President and Luxembourg City Mayor Xavier Bettel said the party was ready to take on responsibility: "There is one party of the main parties that is the big winner tonight and that is the Democratic Party." Socialist supporter Lores Spene told the Associated Press: "We were expecting a bigger change but unfortunately not everybody was thinking like we do."

The coalition government of Mr Juncker's centre-right Christian Social People's Party and the Socialists unravelled in July.  It followed claims that he failed to stop illegal security agency activity such as phone-taps and corruption. Critics at home also accused him of failing to focus on pressing domestic issues. Earlier this year, the parliament reviewed a report alleging the allegations against the SREL security agency, which Mr Juncker oversees.  It included claims of illegal bugging of politicians, the purchase of cars for private use and payments in exchange for access to local officials.


Could Luxembourg form the centre of a superstate?

It was Sir Graham Watson, a Liberal Democrat MEP, who broke the story this week. “Great news,” he proclaimed on Twitter. “Our liberal Democratic Party friends in Luxembourg election upped their vote from 15 to 19 per cent! Boost for new leader Xavier Bettel!” Wow. A boost indeed. Alas, I hadn’t heard of Mr Bettel. In fact, I wasn’t terribly familiar with Sir Graham Watson – “a local champion with an international reputation”, as he modestly describes himself. But I wanted to know more about Mr Bettel’s triumph. I’d assumed that Luxembourg politics were deliciously inconsequential; the shriek marks in Sir Graham’s tweet suggested otherwise. And so it proved. There has been high drama in the 999-square-mile Grand Duchy. Last month, scandal hit the government, a coalition of the Christian Social People’s Party (the CSV, bog-standard Christian Democrats) and the Luxembourg Socialist Workers’ Party (LSAP). Odd bedfellows, you might think – but the LSAP are not whippet-faced Dave Sparts selling mad newspapers in the rain. They’re about as radical as Roy Jenkins after an agreeable supper at his club. This year Luxembourg’s secret service, the SREL, was accused of phone tapping and “the purchase of cars for private use”. The SREL – think the CIA but with really long lunch breaks – was the responsibility of Jean-Claude Juncker of the CSV, who’d been pootling along as prime minister since 1995. The LSAP stubbed out their cigars and brought down the coalition.

The result? As Sir Graham excitedly reported, Mr Bettel, aged 40 and openly gay, is the next big thing. Perhaps he’ll be prime minister himself – in about 15 years, when Mr Juncker retires, because he comfortably won enough votes to hold on to power. Boring? Not to me. For some reason I find myself gripped with curiosity about the Grand Duchy. For example, I’ve learnt that most of its inhabitants speak Luxembourgish – a High German language with French loan words. In 1946 a new orthography excised the German “ä” and “ö” and banned Germanic capitalisation of nouns. It was so unpopular that it had to be torn up and new rules adopted. Meanwhile, English arrived: when asked how they are, Luxembourgers are apt to say tiptop or net sou gutt. But the real thrill was discovering a Luxembourg conspiracy theory, courtesy of historical geographer Frank Jacobs blogging in The New York Times. Why are the European Court of Justice, European Statistical Office and Secretariat of the European Parliament all based in this tiny country? Maybe because Luxembourgers have not forgotten that their lands used to be much bigger, taking in tranches of France, Belgium and Germany. Today there’s something called the Greater Region of Luxembourg, covering more than 25,000 square miles. It’s ostensibly a forum to discuss economic and cultural affairs but possibly – says Jacobs – it’s also part of a sneaky plan to reinstate the medieval “Middle Francia” should the EU fail. This supranational state would be a third way between France and Germany, with trilingual Luxembourger bankers and bureaucrats pulling the strings. That sounds fine to me, because – by definition – Britain would be left out of such an arrangement. Our contact with Middle Francia would be limited to trade and cultural exchanges, though even here I’d advise caution. In 1968 the English-speaking Radio Luxembourg signed up a young newsreader whose career took off from there. His name was Noel Ernest Edmonds. I don’t want to be rude, but the phrase net sou gutt comes to mind.


Luxembourg bankers shocked by loss of Jean-Claude Juncker

A week after parliamentary elections spelt the end of Jean-Claude Juncker’s 18-year rule as prime minister of Luxembourg, the Grand Duchy’s banking elite gathered for a glittering reception at the Royal Hotel, the country’s finest. Many of the 300 or so guests, including Paul Mousel, an influential lawyer, said they had experienced a mild panic when they heard the result. Mr Juncker, the EU’s longest-serving prime minister and one of its wiliest operators, had done much to promote Luxembourg’s financial services boom – and to fend off attempts by the rest

of the EU to rein in its favourable tax system, regulatory regime and bank secrecy.  “It was a bit of a shock at first . . . A few of us had to take a double scotch to digest the news,” said Mr Mousel, a founding partner of the Arendt & Medernach law firm.  “We weren’t sure what it would mean for the financial sector, which has relied on the support of Mr Juncker’s party. Would the new government start taxing the sector?”

But just as the festivities marking the opening of China Construction Bank’s European headquarters got under way, a murmur went through the crowd: the man appointed by the Grand Duke to succeed Mr Juncker – Xavier Bettel of the liberal Democratic party – had unexpectedly put in an appearance. Mr Bettel made a brief but highly symbolic pressing of the flesh with champagne-quaffing bankers, a move many of them viewed as a clear indication the 40-year-old was keener to gain their trust than raise their taxes. “It was a smart move to come here,” said Ernst “Bill” Contzen, chairman of the Luxembourg Bankers’ Association and a Deutsche Bank veteran. “Anybody coming to power in Luxembourg knows how important the financial sector is to the country’s economy.” Mr Bettel is a political neophyte with no EU experience and only two years as mayor of Luxembourg City under his belt. He will lead a coalition with a centre-left majority, breaking 50 years of centre-right dominance. As Luxembourg prime minister and head from 2005 until last January of the group of eurozone finance ministers, Mr Juncker played a central role in the highs and lows of the single currency, using his good humour and vast experience to help broker countless late-night deals.

He is still mentioned as a potential head of the European Council, which comprises the EU’s 28 government leaders, but his blunt speaking and penchant for wine-fuelled dinners could count against him. It is in Luxembourg where his departure will be most keenly felt. During his 18-year premiership, he brought banks, foreign investment and EU institutions to his small country, turning it into the wealthiest in Europe. Luxembourg’s financial sector grew from virtually nothing in the 1980s into a €3tn business, which contributes about 30 per cent of the country’s overall tax revenues and employs almost a fifth of its 500,000 population, according to official data.  Mr Juncker’s greatest achievement was pleasing bankers with low tax rates, as much as the working classes by providing generous social welfare, says Philippe Poirier, a politics lecturer at the University of Luxembourg. “Juncker was not a friend of the bankers – he was their ally . . . His heart was closer to the people,” said Mr Poirier. “He needed the banks because they generated enough tax revenues so he could support the social welfare and keep the unions happy.”

Danièle Fonck, editor of the left-leaning Tageblatt news daily, says the 59-year-old leader was more of a Christian Socialist than a conventional centre-right conservative was. “You need to remember that he is the son of a steelworker,” said Ms Fonck. “He could talk to the common man. That’s why even people on the left liked him at the end of the day.”  However, the eurozone crisis changed everything. The banking sector’s profits fell sharply, reducing overall tax revenues. As national economic growth dropped to almost zero from an average 4.5 per cent between 1985 and 2011, Mr Juncker’s perfect equation of high profits for the banks and generous social security for the rest stopped working, says Mr Poirier. Jean-Claude Reding, chairman of Luxembourg’s largest leftist trade union, says that before the economic crisis in 2009 it was still possible to talk to and reach a compromise with Mr Juncker. But as the country’s public finances deteriorated, it became harder. “Juncker simply stopped talking. He closed himself, spent most of the week abroad and did not want to compromise on anything . . . That was the end for us,” said Mr Reding, who has negotiated numerous agreements with governments led by Mr Juncker’s Christian Social People’s party. For the younger generations of Luxembourgeoise, they idea of not having Mr Juncker around is slightly destabilising, as for anyone born in the 1980s there was “no other king than him”, says Gilles Reiland, a young law student.

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