Leader lights the way

PUBLISHED : Wednesday, 23 June, 2004, 12:00am
UPDATED : Wednesday, 23 June, 2004, 12:00am

Luxembourg Prime Minister Jean-Claude Juncker will serve a landmark third five-year term after winning his bid for re-election by a landslide. That makes him the longest-serving head of state in Europe - and probably the most popular.

The June 13 elections, won by the centre-right Christian People's Party, also saw some shifts in power. The liberal Democratic Party lost some seats in parliament while the Luxembourg Socialist Workers Party, after five years in opposition, has become the second strongest party in the legislature.

Traditionally, the top two parties form a coalition, but just how the Socialists, who blame Mr Juncker for the country's ills, are going to work with his party remains to be seen.

However, James Kung Ziang-mien, Honorary Consul of Luxembourg in Hong Kong and chairman of Chekiang First Bank, is confident things will stay the same.

'Prime Minister Juncker will have the choice to either [retain the present] coalition or form a new coalition with the Socialists,' Mr Kung said.

'The Democrats and the Socialists have been junior partners with the Christian Party in successive Luxembourg governments since 1984, and there are sure to be no major changes on fundamental political, economical and social issues in government policy.'

Many in the country see Mr Juncker and his party as a strong leading force that will protect the interests of the 450,000-strong population of the grand duchy, the smallest nation among the 25 members of the recently expanded European Union.

Whatever the coalition, it will be tested with the many challenges ahead. Last year, the country was hard-hit by the global economic crisis and, for the first time, reported an economic growth of less than 2 per cent.

The growth projection for this year is about 3 per cent, but public spending has been estimated to have grown 10 per cent. The central bank said Luxembourg was living beyond its means.

Unemployment is also rising. Another concern is that Luxembourg's banking system may lose out to Switzerland - which is not a member of the EU - due to regulatory constraints.

The banking industry employs about 11 per cent of the workforce in Luxembourg and contributes 25 per cent to the gross domestic product of one of the world's richest countries.

However, according to Leo Kung Lin-cheng, Foreign Trade Counsellor of Luxembourg in Hong Kong and director and deputy chief manager of Chekiang First Bank, all is not lost in the duchy's banking industry.

'It is a bigger pie after the expansion of the union. There is additional economic potential. The expansion should help everyone,' Mr Kung said.

The business potential brought in by the 10 new members would even out the compromises Luxembourg has had to make as part of the EU.

Long before the expansion, Luxembourg companies had already secured a notable presence in eastern Europe, particularly in Poland and the Czech Republic. Such foresight is not surprising in a country that has transformed its economy from being dependent on a declining steel industry to thriving on international banking.

In his last state of the nation address, Mr Juncker told his country that, despite recent setbacks, his government had the budget under control. The country, it would seem, believed him.

Under Mr Juncker's leadership, Luxembourg's reserves have grown from Euro1.7 billion (HK$16.09 billion) to Euro3 billion. In his previous term, 58 foreign firms established operations in the country, creating 1,920 jobs. He promised he would tackle rising unemployment among low-skilled workers and the red tape faced by small businesses.

Luxembourgers also admire Mr Juncker's strength on the international stage. In recent years, the country has managed to perform an amazing balancing act defending its own interests while keeping its role vital in an EU which it helped found with six steel-mining European countries in 1957.

Luxembourg has won approval from the EU to keep its banking industry's secrecy rules intact so it can continue to compete with Switzerland. In return, the country will impose a withholding tax on foreigners' bank and bond incomes.

Mr Juncker has also secured an agreement between the EU and Switzerland that will make Swiss banks impose a similar tax.

On sensitive matters, Luxembourg has handled issues with ease and grace.

At the dawn of the United States-led war on Iraq, Luxembourg was able to find neutral ground while its powerful neighbours and close trading partners such as France and Germany were critical of US President George W. Bush.

By focusing on achieving agreements on policy and the fulfilment of treaty obligations, Luxembourg has shown the world its unwavering principles and maintained good relationships.

Many EU members were keen on persuading Mr Juncker to become EU commissioner after Romano Prodi, a former Italian premier who stepped down this autumn after holding the office for five years.

The head of the union is a pivotal figure, leading a body that proposes legislation affecting the whole continent and managing a budget of US$120 billion.

A fit candidate for the job must be fluent in English and French, the two most widely used languages in the EU, and preferably German as well. The candidate must also be a welcome personality in all the 25 capitals of the members and the US. Mr Juncker fits that profile.

However, in a sign of his commitment to his countrymen, Mr Juncker turned down the offer and chose to focus on the affairs of Luxembourg. Still, with his country due to take up the EU presidency in the first half of next year, it seems he will be able to exert influence on the world's largest coalition. For now, he is in a win-win situation.