LUXEMBOURG

Luxembourg’s status performance remains stable at rank 12.

As a small and dynamic economy largely driven by the financial sector and with a growing reliance on a workforce living in neighboring countries, Luxembourg does not face the same problems as other European states.

According to the SGI survey, Luxembourg is the most secure country in the OECD. The most significant policy deficts are found in the area of resources, especially education policy. The quality of democracy is quite stable. Highly successful economic policies yield revenues allowing for a generous social policy.

The quality of democracy in Luxembourg is close to the OECD average (rank 14).

The electoral process meets democratic standards, but the media demonstrates some political bias. Though small, the media landscape is sufficiently pluralistic thanks to a generous press subsidy.

Civil rights are effectively protected as are rights protecting freedom of expression, assembly, worship, or petition. Obvious cases of discrimination are rare.

Despite a long-standing tradition of a lawful state, citizens are too often confronted with judicial institutions that act on an ad hoc basis. Independent judicial review is, however, guaranteed and corruption virtually non-existent.

At rank 9, Luxembourg shows a mixed record on economic policy, overall improving by three ranks relative to SGI 2009.

The country owes its prosperity to the multinational companies drawn to the Grand Duchy by policy-driven advantages such as banking secrecy, low tax rates and a competitive business environment. Unemployment seems to have leveled off despite the effect of the worldwide economic crisis.

Tax policy has improved due to two 2008 laws, which respectively abolished capital duty beginning in January 2009 and reduced the corporate tax rate further.

The country is a role model within the EU from the perspective of sustainable budgets. Despite a counter-cyclical spending program, the 2009 deficit remained at just 1% of GDP.

At rank 5, Luxembourg has established high social standards.

The country’s public health system is very efficient. A recent major reform merged public health insurance funds organized by professional bodies into a single administration.

Social cohesion is seen as a pillar of competitiveness, as it ensures social stability. Child care provision has improved significantly in recent years.

Despite its extreme generosity, the public pension system faces little financial constraint in the short term, thanks to a recent sharp increase in the workforce.

Integration policy is an important issue, as 43.7% of residents were foreigners in 2009. Xenophobia is only a marginal phenomenon. Dual citizenship has been allowed since 2009.

External security is guaranteed by NATO membership. Participation in peacekeeping operations in Afghanistan, south Lebanon and other humanitarian missions is not disputed, but the plan to acquire an A400M aircraft in partnership with Belgium was highly controversial, especially among core supporters of the government’s socialist party.

Luxembourg stands out as the safest city in the world (outranking Bern, Geneva, Zurich and Helsinki). The perceived threat of crime in Luxembourg is also lower than the EU average.

Luxembourg ranks 16th in the SGI’s resources category.

Environmental policy falls short of satisfying the country’s CO2 emissions reduction commitments under the Kyoto treaty. However, sustainable governance has become a priority, and several ministries will be merged to form a new Ministry for Sustainable Development and Infrastructures.

Expenditure on public and private research is projected to rise to 3% of GNP by 2014, as part of an increased focus on R&D.

Education policy is inefficient. The expensive, multilingual school system is highly selective and discriminatory toward students with a migrant background. School reforms are underway.

Luxemburg ranks among the top ten in terms of its management performance.

The government’s steering capability is limited primarily for reasons related to the country’s small size, which precludes an elaborate domestic advisory and monitoring apparatus. Implementation is sometimes delayed due to time-consuming consensus- building processes.

Institutional learning is effective when it comes to adapting to EU legislation. The monitoring of institutional arrangements is often delegated to international actors.

The level of executive accountability is very high in Luxembourg. Citizens’ participatory competence, the high-quality of (print) media reporting and associational competence are noteworthy strengths.

Falling four places to rank 16, Luxembourg’s governmental steering capability assessment reflects significant declines in several individual measures.

The relatively small state apparatus lacks the resources to create a competent policy advisory capacity. The lack of domestic expertise often induces the government to seek advice from foreign institutes.

The Office of the Prime Minister has neither the legal authority nor the institutional resources to monitor the activities of other ministries effectively. Regulatory impact assessment is not a mandated part of the policy-making process.

Societal consultation is strong, as Luxembourg is a consensus-oriented society with some neocorporatist features. Policy communication is performed through weekly press briefings held by the prime minister.

At rank 17, Luxembourg’s policy implementation has improved marginally (+2 ranks) relative to the SGI 2009.

The government is in general able to implement its strategic objectives. However, the consensus-based policy-making process is often cumbersome.

The electoral system encourages politicians to pursue individual initiatives in order to win votes, but this rarely conflicts with the government’s overall agenda.

Local government increasingly depends on transfers from the central government. Many of the 116 municipalities, the only subnational entities, are too small to cope with rising political, administrative and technical demands. A process of territorial reform has been initiated.

Holding steady at rank 18, Luxembourg’s institutional learning capacity falls into the OECD’s lower middle ranks.

Significant progress has been made in implementing EU legislation, and the government has announced a review of its current implementation system. The country is mainly involved in international reform initiatives within the EU context.

In the absence of systematic institutional self-monitoring, the government mainly relies on external international expertise.

While not particularly dynamic, the Ministry for Public Service and Administrative Reform, created in 1995, has been responsible for a modest but steady pace of reforms.

At rank 4, executive accountability in Luxembourg is rated very highly in cross-OECD comparison.

The level of political engagement varies strongly between Luxembourgers and the foreign nationals who make up 43% of the population. The latter do not really participate in political life.

Though a lack of expert staff available to the legislature sharply reduces its oversight ability, parliamentary committees function efficiently.

Newspapers offer high-quality information on government policies, but there is only one TV program that meets professional standards. The four major parties propose plausible programs. Employers’ and business associations and trade unions participate in policy-making through neocorporatist institutions.