Strategic Europe continues its series devoted to explaining the foreign and security policy ambitions of the 28 EU member states. We have asked our contributors from each capital to give a candid assessment of their country’s perception of security and strategy, with a ranking on a scale from 0 (the laggards) to 5 (the ambitious). This week, the spotlight is on Luxembourg.

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It is widely recognized that Luxembourg’s influence, especially in European affairs, exceeds its size. Indeed, the country is a good example of influence without power. It might be objected that Luxembourg is punching way above its weight. However, it could be argued that this activism has not turned out to be ill-fated for European integration but has been rather beneficial—if only for the country’s mediation skills and role as a craftsman of compromises at critical moments.

Luxembourg has learned to defend its own interests in a Europe that increasingly looks like a free-for-all. But it does so with more restraint than others.The Grand Duchy is usually complimented for its ability to set aside its own immediate interests in favor of the EU’s common interest when the country assumes the rotating presidency of the EU Council or occupies positions of high responsibility. (Jean-Claude Juncker is the third former prime minister of Luxembourg to become president of the European Commission.) Cynics will of course argue that this praise is usually based on how zealously small countries implement the desiderata of larger states.

As far as ambition goes, considering especially the unfailing enthusiasm and combativeness of its long-serving Foreign Minister Jean Asselborn, Luxembourg deserves 4 out 5 in the ranking of this series. With more than ten years in office, Asselborn is not only the European foreign minister who has held the post for longest. He is also the Middle East coordinator for the Party of European Socialists.

The profile and visibility of Luxembourg’s foreign policy increased considerably when Juncker undertook a significant change of track and gear in 2003. Until then subservient to U.S. policies, Luxembourg realigned its attitudes on major diplomatic issues to the positions taken by its neighbors France and Germany. Thus, the country joined the coalition formed by France, Germany, and Belgium against the U.S.-led military intervention in Iraq.

Luxembourg has learned to defend its own interests in a Europe that increasingly looks like a free-for-all. But it does so with more restraint than others.The leverage of Luxembourg’s influence abroad is also helped quite a lot by the country’s leadership within the regional transborder cooperation scheme known as the Grande Région, or Greater Region. (This brings together the Grand Duchy, the Belgian region of Wallonia, the German-speaking community of Belgium, the French region of Lorraine, and the German regions of Rhineland-Palatinate and Saarland.) Not only does Luxembourg gain clout when it speaks on behalf of this grouping of some 12 million inhabitants. It acts also as a regional labor market regulator by offering close to 200,000 jobs to commuters from the depressed neighboring regions.

Due to its limited personnel and financial resources, Luxembourg’s foreign policy needs to be focused on a few priorities. That policy is interest driven, owing to the strongly export-oriented nature of the country’s economy. In a dedicated effort at nation branding, foreign policy assumes a corrective function, which also addresses the image problems generated by certain dubious  business practices. LuxLeaks (a financial scandal involving tax avoidance schemes in Luxembourg and elsewhere) is the most recent illustration of the challenges the country faces.

#Luxembourg's foreign policy needs to focus on a few priorities.
 
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Luxembourg has developed remarkable resilience over the preservation of its banking secrecy. At odds with its partners, the European Commission, the G20, and Organization for Economic Cooperation and Development over fiscal matters since 1989, Luxembourg managed to play for time until 2013. Then, the country had to give in to massive pressure and accept the automatic exchange of information between fiscal administrations regarding nonresident clients of its banks.

Another illustration of Luxembourg’s interest-driven foreign policy is the country’s attitude toward the EU sanctions imposed on Russia for its interference in Ukraine. The Grand Duchy was and is lukewarm on this issue, probably because Luxembourg is—at least on paper—the third-largest foreign investor in Russia and a major financial center for Russian banks and businesses.

In such a small entity, the differences between domestic and external matters tend to become blurred. There exists an acute awareness of and a keen interest in international developments. Luxembourg’s economic success depends on its openness to the world. The oversized dimension of the economy enhances this. Parochial reflexes are not welcome.

The official credo is that small size and limited resources are not necessarily a handicap, but an opportunity. These factors, it is said, encourage rapid and flexible action and (ideally) engender greater efficiency and heightened commitment by public officials because they enjoy major responsibilities.

Luxembourg’s penchant for globalism is illustrated by its commitment to multilateralism as implemented by the UN system. The country therefore applied to become a nonpermanent member of the UN Security Council for 2013–2014, defeating Finland in the process. It is one of the very few states that live up to the UN’s Millennium Development Goals by dedicating 1 percent of their gross national income to development aid. Luxembourg’s efforts are concentrated on ten so-called target countries.

On July 1, Luxembourg will embark on its twelfth rotating EU presidency with the conviction that its ability to drive Europe forward remains intact despite limited resources and that it can rely on considerable experience. The country’s natural role as arbiter between EU member states—facilitated by its privileged geographic position between France and Germany—remains a strong asset in its European approach.

#Luxembourg remains a good pupil in the European class.
 
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Luxembourg remains a good pupil in the European class, although it has lost some of its aura as a model student. A certain dose of realism has taken over, which is a new thing in a country that has had to face the fact that idealism and abnegation do not always pay.

Over the years, Luxembourg has also learned to defend its own interests in a Europe that increasingly looks like a free-for-all. But it is doing this with a greater amount of restraint than others, and on a very restricted number of dossiers. Luxembourg is eager to preserve its role as an honest broker.

 

Mario Hirsch is a Luxembourgian political scientist and journalist.