Luxembourg - History

The land now known as Luxembourg fell under the successive domination of the Celts, the Romans, and the Riparian Franks before its founding as the County of Luxembourg in 963 by Sigefroid, count of the Ardennes, who reconstructed a small ruined fortress called Lucilinburhuc (Little Burg) on the site of the present capital. The area tripled in size during the reign of Countess Ermesinde (1196–1247). John, count of Luxembourg (r. 1309–46) and king of Bohemia, became the national hero; although blind for many years, the inveterate knight-errant laid the foundations for a powerful dynasty before he fell in the Battle of Crécy, in northern France, during the Hundred Years' War. His son Charles (1316–78) was the second of four Luxembourg princes to become Holy Roman emperor. He made Luxembourg a duchy, but under his successors the country was ruined financially.

Luxembourg came under Burgundian rule in 1443 and remained in foreign hands for more than 400 years. Successively it passed to Spain (1506–1714, excepting 1684–97, when it was ruled by France), Austria (1714–95), and France (1795–1815). The Congress of Vienna in 1815 made Luxembourg a grand duchy and allotted it as an independent state to the king of the Netherlands, after ceding to Prussia its territory east of the Moselle, Sûre, and Our. Luxembourg lost more than half its territory to Belgium in 1839, but gained a larger measure of autonomy, although Dutch kings continued to rule as grand dukes. By the Treaty of London in 1867, Luxembourg was declared an independent and neutral state under the protection of the Great Powers, but was required to dismantle its mighty fortress. In 1890, the house of Nassau-Weilbourg, through the Grand Duke Adolphe (r. 1890–1905), became the ruling house of Luxembourg. The country was occupied by German troops in World War I. In 1919, Grand Duchess Charlotte succeeded to the throne, and on 28 September 1919, in a referendum held to decide the country's future, a plurality supported her. In 1921, Luxembourg formed an economic union with Brussels.

LOCATION: 49°26′ 52″ to 50°10′ 58″ N; 5°44′ 10″ to 6°31′ 53″ E. BOUNDARY LENGTHS: Germany, 135 kilometers (84 miles); France, 73 kilometers (45 miles); Belgium, 148 kilometers (92 miles).
LOCATION: 49°26′ 52″ to 50°10′ 58″ N ; 5°44′ 10″ to 6°31′ 53″ E. BOUNDARY LENGTHS: Germany, 135 kilometers (84 miles); France, 73 kilometers (45 miles); Belgium, 148 kilometers (92 miles).

The Germans again invaded the country in May 1940, but the grand ducal family and most members of the government escaped to safety. Under the Nazi occupation, the people suffered severely, particularly when their revolt in 1942 protesting compulsory service in the German army was savagely repressed. Luxembourg was liberated by Allied forces in September 1944.

That year, while still in exile, the government agreed to form an economic union with Belgium and the Netherlands; the first phase, the Benelux Customs Union, was effected in 1948. In February 1958, a treaty of economic union, which became effective in 1960, was signed by representatives of the three countries. During the postwar decades, Luxembourg also became an active member of NATO and the EC.

In April 1963, Luxembourg celebrated its 1,000th anniversary as an independent state. On 12 November 1964, Grand Duchess Charlotte abdicated in favor of her son, Jean. The Grand Duke announced on Christmas Day 1999 that he planned to abdicate in favor of his eldest son Prince Henri in September 2000. (Prince Henri took the throne on 7 October 2000.) Jean's reign was marked by continued prosperity, as Luxembourg's economy shifted from dependence on steel to an emphasis on services, notably finance and telecommunications. Luxembourg is now among the world's top ten financial centers and the financial sector employs approximately 10% of the workforce (20,000 people) and accounts for around one fifth of national income.

Different governments have played a key role in the diversification process and the development of a skilled workforce has been an important instrument. Equally important is the country's tax regime. Luxembourg's 0% withholding tax on crossborder savings acts as a magnet for investors. Its favorable tax law is at odds with the rest of the European Union and pressures for European-wide harmonization would diminish the sector's competitive advantage.

The country's growth rate has been among the highest in the European Union and averaged over 4% annually between 1994 and 2000. Luxembourg suffered due to the global economic downturn and the turmoil in international stock markets that began in 2001, as its small, open economy specializes in financial services. Luxembourg joined Economic and Monetary Union in 1999.

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