Governments have a crucial part to play in the economy of their country. The government is responsible for the legal and regulatory framework for all economic activity in the country; it reallocates resources as needed and stabilises and supports the economy via its fiscal policy. The measures taken by a government can either encourage companies to invest or provide them with reasons to stay away.
The Luxembourg Government's role and impact on the national economy
According to the Executive Board of the International Monetary Fund, the Luxembourg Government has played a vital role in creating a favourable environment for businesses by providing a stable political framework, pursuing a business-friendly fiscal policy and fostering a culture of consultation and dialogue between management and labour in all industry sectors. All these efforts are regularly rewarded with "AAA" ratings by the main credit rating agencies (S&P, Moody's and Fitch).
The Luxembourg Government and the City of Luxembourg are the country's top employers, representing 7.4% of all jobs. Moreover, if we exclude these two employers, four of the country's five leading employers are partly state-owned (POST Group, ArcelorMittal Group, CFL Group and BGL BNP Paribas). Overall, the Government holds shares in 35 companies in Luxembourg – though it has no wish to interfere with the business focus of these companies.
Public investment and a public-private partnership
Luxembourg is well aware of the risks associated with a low level of economic diversification and has chosen to invest mainly in high-tech and high-added-value industries.
The priority areas for the country's diversification policy are the aerospace industry, health sciences and technology, logistics, the digital economy and environmental technologies. Two public financial organisations – the National Credit and Investment Corporation (SNCI) and the Luxembourg Export Credit Agency (ODL) – offer financial support to local companies by providing loans for investment and innovation and export credits.
Given the importance of the financial centre, which generates almost a quarter of the country's GDP, Luxembourg is constantly working to maintain its competitiveness and stability. Luxembourg for Finance, a public-private partnership between the Luxembourg Government and the Luxembourg Financial Industry Federation, was set up in 2008 to devise a coordinated strategy. Its aim is to develop the financial services industry and to identify new opportunities.
(Article written by the editorial team of the luxembourg.lu portal)