Luxembourg Strives to Maintain Competitive Edge Amid Challenges from Ireland and France
Luxembourg—With competitiveness as the main focus, the Luxembourg government is dedicated to sustaining the health of its financial center in response to challenges from Ireland and France.
The financial sector is not an exclusive domain, but it is the heart of the economy. This sector alone contributes a quarter of Luxembourg's added value, a significant factor that places it alongside global financial “specialists” like Hong Kong and Dubai, while also benefiting the broader Luxembourg economy. From business services to commerce, various sectors gain from the high degree of specialization in the financial center. This valuable asset must be preserved. Recognizing the challenges and fierce competition, the Luxembourg government has clearly stated its commitment to safeguarding the competitiveness of the private sector, thereby maintaining the financial center’s leading position.
The Financial Center Gains Importance
According to the latest data from the Idea Foundation, Luxembourg’s financial center has steadily gained importance within the European Union: its share of added value in the financial sector increased from 2.3% in 2012 to 2.8% in 2022, and its activities have further diversified. However, with the global economy continuously evolving, Luxembourg’s dependence on the European continent has also grown.
The export of Luxembourg’s financial services dropped from 22.5% in 2012 to 18.1% in 2023. Although Luxembourg has performed well in maintaining its leadership in the investment fund sector, competition from Ireland intensified after Brexit, and Luxembourg was not the only country to benefit from the United Kingdom’s exit from the European Union.
The Importance of Technological Transformation
In addition to addressing competition from other countries, technological transformation is seen as key to consolidating Luxembourg’s leadership in the financial sector. The Idea Foundation points out that Luxembourg must seize this opportunity to address challenges from the tech sector, and future regulatory adjustments will be necessary. The approach to handling cryptocurrencies is a prime example of this issue.
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