History of Luxembourg - Modern History (since 1945)

Modern History (since 1945)

After World War II Luxembourg abandoned its politics of neutrality, when it became a founding member of the North Atlantic Treaty Organization (1949) and the United Nations. It is a signatory of the Treaty of Rome, and constituted a monetary union with Belgium (Benelux Customs Union in 1948), and an economic union with Belgium and the Netherlands, the so-called BeNeLux.

Between 1945 and 2005, the economic structure of Luxembourg changed significantly. The crisis of the metallurgy sector, which began in the mid-1970s and lasted till the late 1980s, nearly pushed the country into economic recession, given the monolithic dominance of that sector. The Tripartite Coordination Committee, consisting of members of the government, management representatives, and trade union leaders, succeeded in preventing major social unrest during those years, thus creating the myth of a “Luxembourg model” characterized by social peace. Although in the early years of the 21st century Luxembourg enjoyed one of the highest GNP per capita in the world, this was mainly due to the strength of its financial sector, which gained importance at the end of the 1960s. Thirty-five years later, one-third of the tax proceeds originated from that sector. The harmonization of the tax system across Europe could, however, seriously undermine the financial situation of the grand duchy.

Luxembourg has been one of the strongest advocates of the European Union in the tradition of Robert Schuman. In 1957, Luxembourg became one of the six founding countries of the European Economic Community (later the European Union) and in 1999 it joined the euro currency area.

Encouraged by the contacts established with the Dutch and Belgian governments in exile, Luxembourg pursued a policy of presence in international organizations. It was one of the six founding members of the European Coal and Steel Community (ECSC) in 1952 and of the European Economic Community (EEC) in 1957. In the context of the Cold War, Luxembourg clearly opted for the West by joining the North Atlantic Treaty Organization (NATO) in 1949, thus renouncing its traditional neutrality, which had determined its international policy since the founding of the state. Engagement in European construction was rarely questioned subsequently, either by politicians or by the greater population. Despite its small proportions, Luxembourg often played an intermediary role between larger countries. This role of mediator, especially between the two large and often bellicose nations of Germany and France, was considered one of the main characteristics of national identity, allowing the Luxembourger not to have to choose between one of these two neighbours. The country also hosted a large number of European institutions such as the European Court of Justice. Luxembourg’s small size no longer seemed to be a challenge to the existence of the country, and the creation of the Banque Centrale du Luxembourg (1998) and of the University of Luxembourg (2003) was evidence of the continuing desire to become a “real” nation. The decision in 1985 to declare Lëtzebuergesch (Luxembourgian) the national language was also a step in the affirmation of the country’s independence. In fact, the linguistic situation in Luxembourg was characterized by trilinguilism: Lëtzebuergesch was the spoken vernacular language, German the written language, in which Luxembourgers were most fluent, and French the language of official letters and law.

In 1985, the country became victim to a mysterious bombing spree, which was targeted mostly at electrical masts and other installations.

In 1995 Luxembourg provided the President of the European Commission, former Prime Minister Jacques Santer who later had to resign over corruption accusations against other commission members.

The current Prime Minister, Jean-Claude Juncker follows this European tradition. On 10 September 2004, Mr Juncker became the semi-permanent President of the group of finance ministers from the 12 countries that share the euro, a role dubbed "Mr Euro".

The present sovereign is Grand Duke Henri. Henri's father, Jean, succeeded his mother, Charlotte, on 12 November 1964. Jean's eldest son, Prince Henri, was appointed "Lieutenant Représentant" (Hereditary Grand Duke) on 4 March 1998. On 24 December 1999, Prime Minister Juncker announced Grand Duke Jean's decision to abdicate the throne on 7 October 2000, in favour of Prince Henri who assumed the title and constitutional duties of Grand Duke.

On 10 July 2005, after threats of resignation by Prime Minister Juncker, the proposed European Constitution was approved by 56.52% of voters.