It was the middle of a heatwave when I arrived in Luxembourg on June 1, 1994, with Sarah, my then girlfriend, now wife. Back then, we knew little of Luxembourg, but we had a plan –
save enough money to return to England after two years, buy a house and settle down. It seemed like a good plan; I had already left Sarah in England to join the firm in New York which was how I had first been introduced to the Grand Duchy. I had the good fortune to do some work here and remember being impressed by two things – a friendly and charming little city (esp cf Manhattan !!) and one where they really knew about my specialism – funds. Both hold true today.
As one might imagine, life was VERY different back then. We took an old (and cheap…) apartment in Dommeldange and quickly discovered the joys of shopping (opening hours – 9-5 with a break for lunch and Saturday mornings – we couldn’t quite understand how people who worked did any shopping…); opening bank accounts (no credit for six months…) and Luxembourg cuisine (French quality, German quantity ;-))). But most of all, we discovered this amazing melting pot of people from all over the world, living and working together not only for their own benefit, but collaboratively for the success of Luxembourg.
Over the past decades, Luxembourg has proven itself to be both strategically agile and courageous in terms of focus (steel to banking to funds…) and smart enough to leverage its size, nature and position at the heart of Europe to create an international market place which goes way beyond its borders. And this has been achieved through a broad recognition that international success is good for all and a readiness and ability to work together for that success.
A rising tide…
That Luxembourg’s international positioning has benefited the country financially is without question – simply cross the border to witness the impact. What’s important to appreciate is the impact this has had for all as successive governments have prioritised a “social contract” – most clearly evidenced in times of crisis with the Tri-Party – ensuring that the wealth created has not only benefited the happy few, but that the entire ecosystem of Lux has “risen with the tide”. A few data points below to show what this has concretely meant for our country over the past three decades, in absolute terms and in comparison to others:
|1992-2022 unless otherwise indicated||Luxembourg||Belgium||France||Germany||EU average|
|Real GDP growth||156.4%||69.0%||55.0%||44.2%||68.2%|
|Real GDP per capita||55.9%||45.8%||34.8%||38.5%||21.5%|
|Healthcare expenditure per capita (1990-2020)||427.9%||222.4%||175.7%||214.9%||166.0%|
|Education expenditure per capita (1990-2020)||200.1%||19.0%||64.1%||95.6%||114.8%|
|Pension expenditure per capita (1990-2020)||284.7%||311.9%||204.5%||217.7%||145.5%|
|Public sector average annual wages in € (2018)||86,583||N/A||33,103||45,794||38,592|
|Luxembourg, in EUR||1990||2020||Growth|
|Healthcare expenditure (million)||459||3,971||765.0%|
|Healthcare expenditure per capita||1,202||6,344||427.9%|
|Education expenditure (million)||725||3,208||342.7%|
|Education expenditure per capita||1,785||5,356||200.1%|
|Pension expenditure (million)||761||4,830||535.1%|
|Pension expenditure per capita||1,992||7,662||284.7%|
|Residential property price growth (1992-2022)||672%||398%||295%||189%||266%|
|Government expenditure for housing (growth, 1990-2020)||894%||N/A||93%||419%||207%|
|Government expenditure for housing per capita (2020, in €)||85.4||93.3||249.0||226.0||137.2|
The age of disconnect
The rapid increase in prosperity and – as a result – population as shown above has brought with it the all too familiar problems we see today. Out of control property prices, congestion and increasing levels of petty crime have meant that the quality of life for all – especially native Luxembourgers not linked to international business – is getting worse not better. Whilst there is no question that – relative to virtually every other European country – life here is still enviable, the “social contract” that international success brings benefits to all is increasingly questioned. This is especially important as the vast majority of voters and of state employees remain native-born Luxembourg citizens.
As a result, we have seen in recent years an increasing level of “disconnect” – between policy makers, authorities, business and, ultimately, the population – that has led to a marked erosion of the attractiveness Luxembourg has for international business. This erosion has been masked by structural global growth in areas Luxembourg has excelled at historically – most notably in recent years in the alternative fund sector together with record tax receipts. But the erosion is real and causing increasing levels of concern for those in the business community who really care about the future of our country. To cite our recent global CEO survey, only 46% of CEOs from the financial sector believe that their business will continue to be economically viable in the Grand Duchy for more than ten years – a stark contrast to over 70% of their peers in Ireland, the United Kingdom and the United States. Most (over 90%) of these “Lux CEOs” represent international business interests in Luxembourg and if we consider that by some estimates nearly 70% of national income comes from international business, it should be clear for all that either we change this dynamic and fix the disconnect or we run a significant risk that over time Luxembourg loses its relevance on the international stage – with massive implications for all here. To be clear – without this relevance, the societal benefit of international business to all of us, summarised previously, will ultimately evaporate.
The success Luxembourg has witnessed now over many years has – in my view – been founded on two critical aspects of our country:
- strategic vision and courage to identify and develop areas where Luxembourg can differentiate itself within Europe and beyond; and
- a collaborative spirit that has pervaded all aspects of how we work together to provide solutions that work for the international community.
I have in the past often referred to the “Golden Triangle” here in Lux – a spirit of collaboration between policy makers, the institutions and business based on trust; a recognition of the different responsibilities of each; and a common goal of our success as a country. Our recent CEO survey also examined the level of collaboration felt by executives across the globe. What we saw as a result showed that – at best – Lux is at the level of other countries (and by some measures slightly worse). Put another way – a critical aspect of our past success no longer holds true. Whilst I’m wary of putting too much emphasis on a single data point, there is no doubt in my mind the gradual attrition of the effectiveness of the “Golden Triangle” to maintain our competitiveness – despite the supreme efforts of many individuals.
What is needed, therefore, is a concrete look at how we come together as the broader business community – within the Golden Triangle – and beyond to address the causes of the disconnect and to work together for our common future. I believe what’s needed is a forum which is first and foremost founded on a consensus that Luxembourg’s competitiveness is fundamental for the overall well-being of our country over the longer term. This forum should be constructed to address the disconnect we increasingly witness – i.e. comprising policy makers, authorities, business and labour – and be mandated to both provide the strategic vision for Luxembourg in the international business arena and to direct effective collaboration across the different stakeholders to ensure our international competitiveness and help to solve for the causes of disconnect. The challenges we face in ensuring all feel and appreciate the benefits of Luxembourg’s success going forward need us all to come together – in a nutshell, a form of the tri-party but broader in scope and focussed on driving our success and solving together the real issues we see today.
I have been blessed over the past 30 years to have lived and worked in this amazing country – a country that has welcomed me – a Brit who (still) barely speaks French; where I have been able to enjoy a fantastic career; and raise my family in an environment which is truly the European dream. We are at a tipping point – in a world full of uncertainties with geopolitical tensions on the rise, inflation, technological disruption and social unrest across much of the western world – where the future of Luxembourg is being determined now. Having lived here for 30 years, I am now – with my family – a proud Luxembourger, having taken citizenship, and plan to stay here for the years to come. And this is because I firmly believe this amazing country has the potential to provide a haven of stability and a promise of future prosperity for the generations to come, but for this to hold true, we need to remember how we got to where we are today and work together – radically – to build for our future. A future where My Luxembourg continues to grow and succeed for the benefit of all.