Luxembourg shares borders with the industrial regions of Germany, France, and Belgium, and has the highest per capita income in the EU. Making up part of the plateau of the Ardennes, its countryside is undulating and forested. Its prosperity was once based on steel; before World War II it produced more per capita than the USA. Today, it is known as a tax haven and banking center, and as the headquarters of key EU institutions.

Nearly a third of its residents and half of Luxembourg's workers are foreigners. Integration has been straightforward; most are fellow western Europeans and Roman Catholics, mainly from Italy and Portugal. Life in Luxembourg is comfortable. Salaries are high, unemployment very low, and social tensions few.

Strengths

Site of EU institutions. Banking secrecy and expertise make the capital home to around 1000 investment funds and over 200 banks – more than in any other city in the world.

Weaknesses

International service industries account for 65% of GDP, making Luxembourg vulnerable to changing conditions overseas. Downturn in steel market.

There is remarkable political consensus, and governments are characterized by coalitions and long-serving prime ministers; the grand duke's role is mostly ceremonial. The main issues relate to European integration.

Luxembourg has long been the keenest member of the EU. It was during its EU presidency that the Maastricht agreement for closer European union was brokered; Luxembourg was not only the first member state to meet all the economic, financial, and legal requirements of union under Maastricht, but did so a year early. This commitment to the EU reflects the tremendous benefits Luxembourg has gained from membership. It is home to both the Secretariat of the European Parliament and the Court of Justice. In 1995, Prime Minister Jacques Santer left office to become president of the European Commission, but had to resign in 1999 amid allegations of corruption in the Commission.

The army numbers around 900 full-time soldiers. Spending has fallen slightly in recent years.

Most energy is imported; Luxembourg produces only a small amount of hydroelectricity. Arbed is part of the world's largest steel producing company.

Acid rain from European industry has affected 20% of Luxembourg's trees and, in the worst cases, 30% of trees in mature stands. Luxembourg is a member of an international committee on reducing pollution of the Rhine.

There is an excellent road network, though congestion is a problem. Rail and bus services are integrated.

There are no private commercial hospitals in Luxembourg; they are run either by the state or by nuns. Patients' fees are refunded from the state sickness fund.

Teaching is mainly in German at primary and French at secondary level. Higher education is limited and many students go to universities in other European countries. Training given by Luxembourg banks is reputed to be the best in Europe.

Luxembourg's banking secrecy rules have provoked international criticism, as they can provide a cover for both tax evasion and fraud. Violent crime remains uncommon.

With the highest per capita income in the world, Luxembourgers enjoy a comfortable lifestyle. Recent strong economic performance has allowed them to benefit both from lower taxes and increased spending on social security. Low unemployment has led to the recruitment of foreign workers, mainly from neighboring countries or from other EU countries such as Portugal and Italy, to take less well-paid jobs. As elsewhere in western Europe, financing care of the aging population is likely to be a burden in the future.

Key attractions are the mountains and forests, 76 castles, and the Benedictine abbey at Echternach. Foreign hotel workers learn about the history, language, and culture of the duchy under a government initiative.

Until 1867, Luxembourg was ruled by a succession of neighboring European powers.

• 1890 Link with Dutch throne ends.
• 1921 Economic union with Belgium. End of German ties.
• 1940–1944 German occupation.
• 1948 Benelux treaty (1944) creating a customs union comes into effect.
• 1957 Signs Treaty of Rome as one of six founding members of EEC.
• 1995 Premier Jacques Santer is president of European Commission.
• 1999 Santer resigns amid corruption allegations. Socialist losses in general election.
• 2000 Grand Duke Jean abdicates in favor of his son, Henri.
• 2002 Euro fully adopted.