The Luxembourgish Economy Introduced
Luxembourg is a small country but it is also one of the worlds wealthiest. With a per capita GDP that is amongst the highest in world the economy is in very good shape. Unemployment is basically zero since they need to import workers from other countries to meet the demand. In large part the success of Luxembourg is based on their location, they are located right between France and Germany. As member of the European Union they can trade freely with their larger neighbors. They also have the benefit of being so small that they can do things that larger countries couldn't do. For example Luxembourg s famous for its banking secrecy laws. In general larger countries can't get away with this but a small country like Luxembourg can.
Historically the economy of Luxembourg has depended on manufacturing, mainly steel. Although production of steel has declined in recent years other products have come along to take its place. This surprises most people who never would have thought of Luxembourg as a major industrial center but in fact it is. They are able to take advantage of their location and EU membership to produce products that are then sold in France and Germany.
In recent years the real boom in the economy of Luxembourg has been in the financial services sector. They have been able to take advantage of their location and their banking laws to encourage a lot of companies in Europe to do business with the local banks. They have also taken advantage of the fact that they have very low taxes in order to get a lot of companies to move their corporate offices to the country. A number of companies have done this and it is likely that this will continue in the future.
One issue that Luxembourg faces is a shortage of workers. The population of the country is very small. Fortunately since they are members of the European Union workers from other countries can easily work in Luxembourg. In fact the majority of the people who work in Luxembourg actually live in France, Germany or Belgium. This is why the country can have such a low unemployment rate, people work in Luxembourg but if they lose their jobs they are somebody else's problem.
There are a few issues that Luxembourg is going to have to deal with in the future in order for their economy to continue to grow. One issue is that they were hit hard by the recent global financial crisis. There has also been a lot of pressure on the country to change its banking secrecy and tax laws. This is because there is a fear that criminals are taking advantage of these laws to hide their ill gotten gain. The government is resisting these changes but international pressure will likely make them inevitable. This will likely hurt the economy of Luxembourg when it happens.