Your Royal Highness,
Ladies and Gentlemen,
It is a great pleasure for me to take the floor today at "Dansk Industri" where the traditional Danish sense for commerce and its spirit for innovation come together. Today I want to give you a brief overview concerning the economic performances of Luxembourg.
First let me say that Denmark and Luxembourg have a great deal in common: the Danish and Luxembourgish economies are small and open, very dependent on trade with other countries and with reduced possibilities of influencing international business conditions or central economic factors. A huge part of our exchanges is with our immediate neighbours and our EU partners. Outside Europe, Denmark, just like Luxembourg, does business mainly with the USA, China and Japan.
Like Denmark, Luxembourg has developed its trade relations with the Baltic and Central European States. We have seen growth rates in our exports exceeding 1200% for certain central European countries. Nevertheless the opportunities are not exhausted. The continual increase in the standard of living will entail a rise in the demand for consumer goods. These markets could eventually foster growth in our countries that is right now hampered by a lack of consumer confidence in the advanced economies of Europe, America and Asia.
Between our countries, we exchange goods for a total value of 82 million Euros. While Luxembourg exports have risen by 27% since 1993, your companies have sold more than double the amount of goods in 2002 than ten years go. Looking at the overall figures, I am certain that this positive trend is only a beginning: opportunities for trade between Luxembourg and Denmark remain vast and we, the political decision-makers, should encourage more intense contacts between our two countries' business communities.
Unlike Luxembourg, Denmark is still an important player in the agribusiness but has, like in my country, services are today dominant and contribute in a major way to the balance of accounts. Luxembourg, the very heart of Europe, sharing, as you know, borders with France, Belgium and Germany, is actually situated right in the middle of the so called "blue banana", which stretches from London to Milan and which represents a market of some 150 million people with the highest average income in the European Union. It is thus wrong to see only the small national market of 450.000 consumers. Luxembourg is indeed a gateway to a greater region, the Sar-Lor-Lux area, comprising a total of 11 million people. Situated in its very centre, the Grand-Duchy is the perfect platform for trade an logistics for every businessman wanting to extend his activities to this market.
Luxembourg is as cosmopolitan as it gets: indeed, more than 35% of its residents and more than 50% of its workforce are foreigners coming in their majority from EU countries. An additional 110.000 workers cross the borders every day from the neighbouring countries to their jobs in the Grand-Duchy: Luxembourg companies have at their disposal a highly qualified, flexible and multilingual workforce, with an outstanding level of productivity. Among those, there are 1990 Danes living and working in the Grand-Duchy. They are the 9th largest group of resident foreigners. Taking the larger Nordic community, there are over 4300 people from this part of Europe contributing to the development of our economy and participate actively in all aspects of life.
Language skills remain among the top assets required in order to compete successfully in the world markets. Whereas half of the Europeans do not speak any foreign language, most Luxembourg citizens are fluent in French, German and English, besides their native Luxembourgish. This situation is an exception in Europe, even in the world, and we can proudly proclaim that, when it comes to business, we deal with the customer in his own mother tongue.
To be a gateway, it is obvious that one needs an access port. As we are a landlocked country, we have developed Luxembourg into a major hub for airfreight. Luxembourg's airport boasts some of the most modern cargo handling facilities in the world, with an annual turnover of some 600.000 tonnes per year. Cargolux, with a fleet of thirteen of the most modern cargo aircraft, is the largest all cargo airline in the Europe and ranks 10th overall in the world. As Luxembourg is a door to the Greater Region's market, it serves also the companies of that area as a logistical platform for their exports to the world.
Let me make some short remarks about Luxembourg's macroeconomic performance and its economic structure.
Indeed, our rate of growth has in the past far outperformed the average EU growth rate for more than a decade. In the 1990's, Luxembourg’s economy grew regularly at rates over 5%, thus speeding ahead of its neighbouring countries, but also of the US and Japan. Although the country has not been spared by the troubles stirring the world economy and has thus seen slower growth rates recently, perspectives continue to be better than in our larger neighbouring countries, thanks to the more flexible policies a small country can adopt to weather the storm.
The state of public finances is also solid. The sustained budget surpluses coupled with a very low level of public debt made Luxembourg the first EU country to fulfil the economic criteria necessary to qualify for the "Euro".
A tax reform in 2002, which reduced the overall tax burden on companies from 37,45% to 30,38%, has helped to boost the competitiveness of our companies in the face of the current adverse conditions. The thus reduced costs have definitely helped our exporters to do better on the global marketplace than some of their international competitors.
This reform has also directly benefited the individual taxpayer: the maximum marginal tax rate has been reduced from 46 to 38%, creating extra disposable income and boosting consumer demand. Very moderate overhead costs benefit both employer and worker: labour is affordable to companies under constant pressure to cut costs and the employee conserves a high take-home salary.
Our unemployment rate, with some 3,5%, has increased from the 2% we saw in the 1990ies but is still among the very lowest in the EU. Despite this apparent deterioration, the labour market is still vigorous: job growth is still at an annual 2%.
The current account balance reflects best the transformation of my country from an industrial to a service based economy. A negative trade balance is more than offset by the growing surplus in the services sector.
Besides the service sector, we maintain a strong and very competitive industrial base mainly geared towards the production of semi-finished goods but also active in high-tech niche markets where some companies have leading positions in their markets. Mr. Henri GRETHEN, the Minister of the Economy will present you the structure of our economy more in detail.
The financial sector is doubtlessly one of the jewels of the crown of the services sector, though by no means the only one. Some 180 international banking institutions have set up in Luxembourg, among them all important Danish banks. Having started mainly as a centre for private banking, Luxembourg has over time created Europe's largest investment fund industry, totalling net assets of 944 billion Euros and second only to the United States. Overall, the financial centre ranks 8th in the world.
Its outstanding performance does not depend, as some critics sometimes pretend, on the strict Luxembourg banking secrecy rules. Such an explanation is too simplistic and does not take into account the professional skills and know-how of more than 30.000 people working today in the finance industry. Nor does it appreciate the fact that Luxembourg has actively been involved in the drafting of the European Directive on the Taxation of Savings. Banking secrecy will remain an integral part of our banking laws, since we see it as a highly important protection for each and everyone's privacy.
I would nevertheless like to underline that Luxembourg does not tolerate any abuses of its banking secrecy laws by criminal or terrorist organisations. It is very clear that the secrecy rules do not apply in cases of criminal investigations and our banks have the strict obligation to report any suspicious transactions. The legal obligation to know the customer has been reinforced in 1993 but, and I know this will destroy some clichés often found in the media, anonymous or numbered accounts are illegal in Luxembourg since 1948.
Your Royal Highness,
Ladies and Gentlemen,
I hope that I have raised your interest in my country, persuaded you of its qualities as a business partner and that commerce between our two nations will continue and even grow beyond the current dynamic trend. Both of us sharing the belief in European enlargement and having experienced the benefits of increased business opportunities with the countries of central and eastern Europe, I do strongly believe that our countries will continue to improve our already excellent relations as allies, partners and friends.
I thank you for your attention.