User:Dr Gangrene/History of Luxembourgish foreign relations

The De la Fontaine government tried to achieve a strong integration in the German Confederation, fearing revolutionary influences from France and Belgium. Against the wishes of public opinion, the government took an active part in German politics, and even supported the decision of the Constituent Assembly to send Luxembourgish delegates to the Diet of Frankfurt, where they debated over German unity.^[1]

Norbert Metz, who was pro-Belgian and hostile to the German Confederation, made his mark on the Willmar government's foreign policy.^[2] The turf war between the Administrator General for Finances and the director of German customs in Luxembourg irritated the Prussian authorities to the extent that they threatened not to renew the customs union (Zollverein) agreement, which was due to expire in 1854.^[2] Moreover, the government shied away from the demands of the German Confederation by refusing to send a Luxembourgish contingent against Schleswig, and compromised relations with its partner in personal union by dragging out the negotiations on Luxembourgish participation in the reimbursement of the debt of the Kingdom of the Netherlands.^[2]

The first task of the Simons government was to re-establish good relations with the governments of the Netherlands and Prussia.^[3] The treaty on the Zollverein was renewed shortly before its expiration on 26 December 1853.^[3] Charles-Mathias Simons restarted the negotiations on the Grand Duchy's participation in reimbursing the debts of the Kingdom of the Netherlands.^[3] In return, the Dutch crown guaranteed diplomatic protection for Luxembourgish subjects abroad.^[3]

In foreign affairs, the Tornaco government faced a profound crisis from 1866 to 1867, which threatened Luxembourg's independence.^[4] The German Confederation was dissolved after the Austro-Prussian war of 1866.^[4] Although Luxembourg did not join the new North German Confederation formed by Prussia, the latter continued to maintain a garrison in the fortress of Luxembourg.^[4] At the same time, France now demanded a territorial compensation for having stayed neutral during the conflict. Napoleon III proposed to the King-Grand Duke to purchase the Grand Duchy for 5 million francs.^[4] William III accepted, but the Prussian chancellor Otto von Bismarck was staunchly opposed.^[4] To resolve this crisis in which Napoleon III risked losing face, the great powers came together in London.^[4] They finally agreed that Prussia would withdraw its garrison, the fortress would be demolished, and the Grand Duchy would become neutral in perpetuity.^[4] France would renounce its territorial claims.^[4] The Tornaco government had observed a strict neutrality during the Austro-Prussian war. During the negotiations in London, the Luxembourgish delegates had adopted a "wait-and-see" attitude, almost one of resignation.^[4] The government was mainly concerned with the costs of the impending demolition of the fortifications, while the city council of Luxembourg was anxious about the loss of revenues to the city businesses and shops after the garrison's departure.^[4] The great powers signed the Treaty of London of 1867 which required Luxembourg to demolish its fortress, and declared it a neutral state. This was a solution to the Luxembourg Crisis, which had almost led to war between France and Prussia.^[5]

The Servais government had to carry out the stipulations of the treaty, and to bear its costs. Demolishing the fortifications took until 1883, and cost 1,798,000 francs.^[5]

The law of 1868 created a Luxembourgish corps des chasseurs, to maintain security and order. It was composed of 19 officers and 587 non-commissioned officers and men.^[5]

Compliance with the Treaty obligations did not shelter Luxembourg from another international crisis. In 1870, the Franco-Prussian War broke out, and several incidents threatened the country's neutrality. The population was openly on the side of the French, and the employees of the Compagnie de l'Est supplied the Thionville garrison via a train departing from Luxembourg. Though this was not approved by the government, Prussian chancellor Otto von Bismarck let it be known that the Prussian military would no longer feel bound by the Grand Duchy's neutral status. Another foreign occupation seemed imminent, and Servais vigorously refuted the Prussian allegations. In the end, after the French defeat, the newly created German Empire contented itself with control of the Luxembourgish railways. The French railways were forced to cede control of the Luxembourg railway network to the Germans. The Luxembourgish government had not been asked, and indeed was opposed to this.^[5]

Although the German Confederation's dissolution and Luxembourg's neutrality (stipulated in the Treaty of London) provided for the Grand Duchy's political independence with regards to Germany, the country was drawn more and more into the German Empire's economic orbit through the Zollverein. Despite this growing dependence, Luxembourg did not participate in the deliberations of the Zollverein, and had no influence on customs policy. The government took steps to be involved in the decision-making. Félix de Blochausen suggested to William III to propose to the German government to admit a Luxembourgish representative in the Bundesrat, with the right to vote on customs matters. Despite the apparently favourable attitude of German chancellor Otto von Bismarck, this course of action failed due to resistance from the other signatories of the Treaty of London, who saw it as incompatible with Luxembourg's neutrality.^[6]

While the country's political independence was reinforced by dynastic changes (see below), Luxembourg's economic dependence on other countries increased during the same period.^[7] Germany's "peaceful penetration" of Luxembourg took on new dimensions during the Eyschen government.^[7]

The development of a powerful steel industry in Luxembourg was made possible with German capital, skills, and labour.^[8] German immigrants as a proportion of the Luxembourg population went from 1,7% in 1875 to 8,4% in 1910, making them the largest group of foreigners in the Grand Duchy.^[8] Key posts in the economy, such as that of the director of the customs administration or the railway administration, were held by Germans.^[8] In 1902, the governments of Luxembourg and the German Empire, with an eye to the customs and railway treaty which was to expire in 1912, renewed it until 1959.^[8] Luxembourg seemed firmly anchored in the German sphere of influence for the next half-century.^[8] In their correspondence, German diplomats mentioned the deference and docility of the Luxembourgish government towards Germany, and did not hesitate to term the Grand Duchy a German "protectorate".^[8]

William III's state of health grew worse and worse from January 1889, which pointed towards a change of dynasty.^[7] William III's only child was a daughter, Wilhelmina, who later succeeded to throne of the Netherlands.^[7] However, the Grand Duchy had different inheritance laws, preventing a female ruler from coming to the throne.^{[note 1]} The legitimate heir in Luxembourg, therefore, was Adolphe, the Duke of Nassau, of the House of Nassau-Weilburg.^[7]

Félix de Blochausen was in favour of maintaining the personal union with the Netherlands, even after the death of William III.^[7] His successor Paul Eyschen on the other hand had Adolphe appointed regent as soon as William III could no longer perform his duties due to illness.^[7] Eyschen was seeking to pave the way for a change in dynasties, and avoid a "Luxembourg question" from cropping up when the king died.^[7] Adolphe exercised the regency on two occasions, in 1889 and 1890.^[7]

On 9 December 1890, he took his oath on the Constitution as the Grand Duke.^[7] This ended the Orange-Nassau rule in Luxembourg, and the personal union. The first Nassau-Weilburg rulers hardly intervened in the government of the country at all, and mostly resided outside of Luxembourg.^[7] Adolphe was 73 years old when he became Grand Duke; his successor William IV was bedridden due to illness.^[7] William had six girls and no sons, which caused the issue of succession to raise its head again.^[7] In 1907, Eyschen put a law through the legislature declaring William's eldest daughter Marie-Adélaïde the rightful successor.^[7] The new ruling family's restraint contrasted with the autocratic regime of the house of Orange-Nassau, and largely allowed the Eyschen government a free hand.^[7] Luxembourg now had a national dynasty, which was another step towards the country's political emancipation on the international stage.^[7] From now on, foreign diplomats were accredited to the Grand Ducal court and its government in Luxembourg.^[7]

At the beginning of the 20th century, international tensions mounted. The government sought refuge behind its status of neutrality, which it hoped would guarantee the country's independence.^[8] In 1899, then in 1907, Eyschen, participated in two conferences in The Hague on disarmament, where he sought to advance the cause of neutral states.^[8] It was a great shock when on 2 August 1914, the German army invaded the country, following the strategy in the Schlieffen Plan.^[8] The Luxembourg government protested against the violation of its borders, but continued to observe a policy of strict neutrality towards all belligerents.^[8] The German government gave a response that was meant to be reassuring, but the secret plans of the German army headquarters listed Luxembourg as one of the territorial aims of the war.^[8] Meanwhile, the German occupation was limited to the military sphere.^[8] Except on rare occasions, the occupying power did not intervene in the functioning of the Luxembourgish state, which continued to operate almost as before.^[8] Eyschen, for his part, continued with his policy of strict neutrality, holding back from denouncing the Zollverein.^[8] In order to preserve the population from the effects of the war as much as possible, the government opted for a policy of cohabitation with the occupiers.^[8]

After the armistice of 11 November 1918, German troops left the country, making way for the Allied armies which passed through Luxembourg to occupy the Rhineland.^[9] For six months, Allied forces were stationed in Luxembourg, in order to maintain supply lines.^[9] This military presence was to prove a useful instrument for maintaining internal order. During the revolutionary period of January 1919, the government appealed to French troops to re-establish public order.^[9]

On the international stage, the government faced hostility towards the Grand Duchess. On 23 December 1918, the French government refused to receive the Luxembourgish ministers in Paris.^[10] Émile Reuter, Auguste Liesch and Nicolas Welter returned to Luxembourg with empty hands, where the troubles continued.^[10]

Germany's defeat rendered Luxembourg's existing treaties obsolete.^[9] Under pressure from the Allies, on 19 December 1918 the Luxembourg government renounced its membership of the Zollverein, and ended German rights to its railways.^[9] As it was not capable of living in isolation for any length of time, Luxembourg had to find a new economic partner.^[9] Already in 1917, it had formed a commission to study the economic problems caused by the war and its consequences.^[9] The steel industry and farmers strongly preferred France as an economic partner.^[9] Only wine-growers were in favour of partnering with Belgium, where they could sell their products more easily.^[9] On 21 February 1919, the Reuter government started simultaneous talks with France and Belgium.^[9]

Negotiations with the Belgians were only undertaken with the intention of putting additional pressure on France, as a bargaining tool.^[9] However, negotiations with the French did not progress.^[9] The Reuter government decided to put the matter to a referendum.^[9] It was hoped that the voice of the people would make an impression, at a time when the winners of the war were re-drawing the map of Europe according to principles of Wilsonian self-determination.^[9] On 28 September 1919, 73% of Luxembourgish voters declared themselves in favour of an economic union with France.^[9]

However, the Luxembourgish government had to wait several more months before the French revealed their game.^[9] On 10 May, the French ambassador informed the Luxembourgish government that his country had no intention of forming an economic union, and advised it to turn towards Belgium.^[9] Having succeeded in concluding a military pact with Belgium, France had no further need of Luxembourg.^[9] Since the beginning of the war, the Belgian authorities had shown annexationist tendencies towards the Grand Duchy.^[9] In 1917, France renounced any ambitions with regards to Luxembourg, but kept this secret from the Luxembourgish government, in order to conceal the intentions of the French negotiators.^[9] After the war, France intended to take advantage of the Luxembourg question, by obtaining from Belgium the conclusion of a military pact.^[9][11] After the French announcement, the Luxembourgish government re-started negotiations with Belgium.^[11] These were slow-going, but resulted on 25 July 1921 in the signing of a treaty on a customs and monetary union between the two countries.^[11] The Belgium–Luxembourg Economic Union came into force in March 1922.^[11] The treaty stipulated the abolition of customs barriers between the two countries, a common external tariff, a common trade policy led by Belgium and a currency association.^[11] The Belgian franc became the common currency, while Luxembourg however retained its right to print Luxembourgish notes.^[11] The economic union was never a perfect one, as the treaty did not require the harmonisation of tax systems.^[11]

Luxembourg's exit from the customs union with Germany brought about a profound restructuring of the Luxembourgish economy.^[12] Until 1918, it was mostly German money that circulated in Luxembourg, while Luxembourgish francs only played a small role.^[12] The government took advantage of its exit from the Zollverein to create a proper national currency, a symbol of its sovereignty.^[12] The government also had the intention of creating a monetary union with Luxembourg's new economic partner.^[12] This partner's currency would be legal tender in the Grand Duchy.^[12] The question of currency occupied a central place in the negotiations which led to the Belgium–Luxembourg Economic Union.^[12] In 1921, the Grand Duchy borrowed 175 million Belgian francs.^[12]

Bound by its neutral status and solidly anchored in the German sphere of influence, Luxembourg had not led a real foreign policy before World War I.^[11] The violation of its neutrality in 1914 and the questioning of its independence during 1918-1919 showed the Luxembourgish government that it was necessary to play a role on the international stage.^[11] Luxembourg was not invited to the Paris Peace Conference and was not one of the founding members of the League of Nations established by the Treaty of Versailles.^[11] From 1919, the Reuter government took steps to have the Grand Duchy admitted to the League of Nations.^[11] Luxembourg's unarmed neutrality seemed at first to present an obstacle to its admission, as the League's charter provided for the passage of troops over member states' territory, and the participation in economic and financial sanctions against a hypothetical belligerent.^[11] At the same time, the United Kingdom considered that the small size of Luxembourg's territory was a problem.^[11] The Reuter government succeeded in overcoming these objections, partly by hinting at the possibility of a revision of the Luxembourgish Constitution.^[11] On 16 December 1920, a session of the League of Nations in Geneva voted unanimously to have Luxembourg admitted.^[11] Later, the Luxembourgish government, conscious of the population's attachment to the principle of neutrality, let the constitutional revision drag on; it would never come into force.^[11]

After the war, Luxembourgish railways also changed hands.^[13] After the armistice, French military authorities occupied the main network.^[13] The lines of Guillaume-Luxembourg were exploited for the benefit of the French state, as were the Chemins de fer d’Alsace et de Lorraine.^[13] On 19 December 1918, the Luxembourgish government withdrew from its railway treaty with Germany.^[13] However, Belgium was also interested in making use of the main Luxembourgish network.^[13] France agreed to withdraw if the Belgian and Luxembourgish governments reached an agreement, but continued to exploit Guillaume-Luxembourg in the meantime.^[13] The UEBL treaty stipulated that the question of railways be dealt with.^[13] In May 1924, Reuter signed a treaty with Belgium which required the unification of the Guillaume-Luxembourg and Prince-Henri networks under a Board of Directors where Belgian representatives would have a majority.^[13] On 20 January 1925, the Chamber of Deputies, moved by anti-Belgian feelings, rejected the treaty, provoking a government crisis.^[13] ARBED, which feared the influence of the Société Générale de Belgique on Luxembourgish railways, had also opposed the government's plans.^[13]

At the risk of provoking a break-up of the UEBL, Pierre Prüm sought a rapprochement with France.^[14] When he had only just taken office, the prime minister was received in Paris.^[14] On 9 October 1925, an agreement was reached with the Direction Générale des Chemins de fer d’Alsace et de Lorraine.^[14] This agreement gave France the provisional right to the Guillaume-Luxembourg network.^[14]

During the Prüm government's time in office, the Locarno Treaties were also signed.^[14] Although they came about without Luxembourgish participation, they marked an important date in the evolution of the Grand Duchy's defence policy.^[14] The fact that France and Germany guaranteed the inviolability of national borders, and agreed not to use war, consolidated Luxembourg's international situation.^[14] Pierre Prüm made use of Locarno Treaties' possibilities for international arbitration, to start talks with the Belgian and French governments.^[14] These would only conclude under the next government.^[14]

After World War I, the main priority of Luxembourgish foreign policy was to assure the security of the Grand Duchy in the new organisation of Europe.^[15] Situated as it was between the two great military powers of the continent, France and Germany, the country would risk seeing its existence endangered in the event of a new conflict between its neighbours.^[15] The warming of Franco-German relations since the Locarno Conference in 1925 was a positive sign.^[15] The Locarno Treaties provided for countries' security to be guaranteed by the development of procedures to resolve international differences peacefully.^[15] The Luxembourgish government profited from these dispositions to conclude a number of treaties of conciliation and arbitration with other countries.^[15] It signed treaties with Belgium and France in 1927; Spain and Poland in 1928; Portugal, Germany, Switzerland, the Netherlands, Czechoslovakia and the United States in 1929; Romania in 1930 and, finally, Italy and Norway in 1932.^[15]

Joseph Bech instituted a policy of maintaining a more active presence on the international scene.^[15] He regularly participated in meetings of the League of Nations in Geneva.^[15] He was present at the Conference on Disarmament in The Hague in 1932, and took part in meetings of the Oslo Alliance, which contained the smaller states, Norway, Sweden, Denmark, Finland, the Netherlands, Belgium, and Luxembourg.^[15] From 1927, the Grand Duchy ratified most of the treaties signed under the auspices of the League of Nations.^[15] The Luxembourgish government also adhered to the Pact of Paris, in which the signatory countries agreed to renounce war as an instrument of policy, and to the plan of Aristide Briand, who proposed a federal European union in 1930.^[15] In a note in 1937, Bech explained Luxembourg's interest in participating in the Concert of Nations: "Before the war, neutrality was synonymous with total abstention. Since the creation of the League of Nations, the situation has changed. The small countries have, thanks to Geneva, a podium from which their voice can be hear from afar. Whatever may be the flaws of this institution, it constitutes for the small states, whether they are armed or disarmed like us, the sole safeguard against abuses of power."^[15]

Luxembourg's active participation in the work of the League of Nations did not signify that it was abandoning neutrality, however.^[15] For the politicians of the inter-war period, maintaining this regime seemed the only means of guaranteeing the security of the country and avoiding being caught up in a war.^[15][16] Joseph Bech missed no opportunity to underline that "the collaboration which it [the Grand Duchy] may bring to the great work of Geneva shall not constitute a modification of of its constitutional and conventional policy of neutrality".^[16]

When he arrived at the Ministry of Foreign Affairs, Bech was confronted with the worrying deterioration of Belgo-Luxembourgish relations.^[16] The Belgium–Luxembourg Economic Union (UEBL), concluded in 1921, had got off to a bad start.^[16] On the Luxembourgish side, the memory of Belgian annexationism was still alive.^[16] On the Belgian side, the Prüm government's overtly displayed sympathies for the French had caused displeasure.^[16] During his whole time in office, the foreign minister tried to re-establish these relations with Belgium.^[16]

The economic fluctuations of the inter-war period sorely put the UEBL to the test.^[17] Above all, the monetary policy of the Belgian partners caused constant concerns to the Luxembourgish government.^[17] 

From 1930, the international crisis triggered by the Wall Street Crash of 1929, also affected Luxembourg and Belgium.^[18] Production and exports started to collapse.^[18] The crisis inevitably had repercussions for the functioning of the UEBL, as it provoked a return to protectionism in all countries.^[18] Belgium and Luxembourg each put in place protective measures without notifying the other: a quota for certain products, import licences, etc.^[18] An economic border was established again between the two countries.^[18] The rapid degradation of bilateral relations forced the two governments to start negotiations.^[18] On 23 May 1935, a group of treaties were signed in Brussels, which provided a solution to the deadlock.^[18] These agreements reaffirmed the principle at the root of the UEBL, namely free trade between the two countries, and instituted an administrative commission, composed in equal measure of Luxembourgers and Belgians, which became an essential instrument for Belgo-Luxembourgish cooperation.^[18] The agreements of 1935 also dealt with a number of monetary questions, and put a cap on the circulation of Luxembourgish currency in the Grand Duchy.^[18] During the negotiations, the Luxembourgish government succeeded in obtaining numerous concessions for agriculture in the Grand Duchy.^[18] Joseph Bech, who was also the Minister for Agriculture, wanted to protect this sector, which remained one of the pillars of Luxembourgish society (employing 30% of the active population in 1935) and which was the main electoral base of the Party of the Right.^[18][19] However, these protective measures were to postpone necessary structural reforms, and made it all the more difficult to adapt to the international market.^[19]

The remilitarisation of the Rhineland, from 1936, reduced the safety buffer between France and Germany to the small territory of Luxembourg.^[20] The presence of foreign troops in the Grand Duchy in case of a Franco-German war once again became a probability.^[20] The other Western neighbour of Germany, Belgium, reacted by pulling out from the military agreement with France, and by adopting a "policy of free hands".^[20] The Luxembourgish government also sought safety in a policy of neutrality.^[20] To consolidate the international position of Luxembourg, the Minister of Foreign Affairs, Joseph Bech, imagined a diplomatic operation: the signatory states to the Treaty of London of 1867 were to reaffirm the perpetual neutrality of Luxembourg by a common declaration.^[20] However, Belgium and the United Kingdom equivocated.^[20] In the absence of a multilateral agreement, Bech tried to obtain a simultaneous undertaking from France and Germany.^[20] While Germany had no problem in expressing towards Luxembourg all the promises that had been requested, France hesitated to commit itself.^[20] The French headquarters wanted to retain a right of passage across the Grand Duchy in case of German aggression.^[20] Thus, in spring 1939, with the spectre of war hovering over Europe, the government did not succeed in obtaining any formal guarantees.^[20] A surprise invasion without a reaction from the other powers became probable.^[20]

In this context, the commemoration of the centenary of independence, in which the whole of Luxembourgish society participated, became a reaction against the German threat.^[21] In 1939, the government skilfully used the commemoration festivities to demonstrate to European public opinion the country's desire for independence.^[21] The commemoration succeeded in reconciling Luxembourgish society after it had been divided by the referendum of 1937, and reinforced national sentiments in the face of the external threat.^[21]

The outbreak of World War II on 1 September 1939 and the ensuing Phoney War indicated that Luxembourg's neutrality would likely be violated. The government decided it would depart into exile if the country was completely occupied by German forces. While the departure of the Grand Duchess and her ministers was the result of a decision taken in advance, it was not well-prepared. The government left no written declaration explaining the reasons for its departure to a distressed population, nor any instructions for the civil service commission charged with provisionally administering the country. The government established itself first in Paris, then when a French defeat was imminent, fled to Portugal.

In the meantime, in Luxembourg, an Administrative Commission composed of government counsellors and headed by Albert Wehrer started operating. It tried to come to an arrangement with the German military authorities; it and the Chamber of Deputies also appealed to the Grand Duchess to return to Luxembourg. The Luxembourgish authorities in the country still hoped that the Grand Duchy could retain its independence in the new European order dominated by Nazi Germany. In Lisbon, while Dupong and the Grand Duchess leaned towards returning, Bech was reluctant. Germany's de facto annexation of Luxembourg put an end to hesitations. On 29 July 1940, Gustav Simon, Gauleiter of the Gau Koblenz-Trier, was named Chef der Zivilverwaltung in Luxembourg. All the institutions of the Luxembourgish state were abolished. The Grand Duchess and the government decided to definitively join the Allied side, and opted for a dual seat. The Grand Ducal family and part of the government established themselves in Montréal in Canada, a Francophone city close to the United States. The other ministers remained in London, which was the seat of several other governments in exile, such as those of Belgium and the Netherlands.

The first reaction of the government in exile was to protest against the German violation of its independence and neutrality, and appeal for French and British help. In choosing to go into exile, first in France and later in Britain and Canada, the Luxembourgish government abandoned its traditional policy of neutrality and joined the camp of those fighting the Axis powers. Despite its small size, Luxembourg was a party to the great agreements which brought together the Allied war effort and laid foundations for the post-war period. Thus, Luxembourg signed the declaration of St James’s Palace (12 June 1941) and the Declaration by United Nations (Washington, 1 January 1942), adhered to the Atlantic Charter (14 August 1941) and participated in the Bretton Woods Conference (July 1944) which put in place a new international monetary system.

The government had drawn lessons from the First World War, and directed all diplomatic efforts towards the goals of assuring the country's survival, preventing a "Luxembourg question" from arising after the war, and gaining recognition as a full member of the Allies despite its weak military capability. In 1944, the government succeeded in furnishing a modest contribution to the Allied military effort by creating the Luxembourg Battery, composed of Luxembourgish volunteers and integrated in the Belgian Brigade Piron. During the course of the war, the government developed a policy of very active communication intended to make the Luxembourgish voice heard within the United Nations and to support the morale of the Luxembourgish population. It published a Grey Book, placed articles in the English-speaking press, and obtained Luxembourgish-language broadcasts from the BBC. Luxembourg's cause also benefited greatly from the Grand Duchess's prestige with US President Franklin D. Roosevelt. The Grand Ducal family was invited to the White House several times during their exile.

The war brought Belgium and Luxembourg closer together. The Belgium–Luxembourg Economic Union (UEBL) had undergone several crises between the wars. Henceforth, faced with a common danger, strong economic and monetary links were created again between the two countries. The Luxembourg state lacked any funds since its gold reserves, entrusted to the National Bank of Belgium in 1938-1939, had fallen into German hands. Belgium therefore used its resources from the Congo to provide the Luxembourgish government with financial assistance. When the Liberation was announced, the two governments prepared to re-establish the UEBL. On 31 August 1944 in London, they agreed to an additional clause which restored parity of the Belgian franc and the Luxembourgish franc. The two partners even aimed to increase their ties by signing the Benelux Treaty with the Netherlands, on 5 September 1944. 

By choosing exile and actively taking the Allied side, the Luxembourgish government had broken with its traditional security policy based on neutrality.^[22] After Liberation, it followed through with a reorientation of its foreign policy.^[22] On 26 June 1945, the Grand Duchy signed the United Nations Charter in San Francisco, becoming a founding member of the new organisation.^[22] This was a highly symbolic act, as it reflected the government's wish to participate in international politics.^[22] It was also this desire to assume international responsibilities which made the government introduce obligatory military service by decree of 30 November 1944.^[22] The gradual creation of an army with the help of the British would allow Luxembourg to participate in the occupation of Germany, and to be a party to the military agreements of the post-war period.^[22] In 1944, in the euphoria of the Liberation, the introduction of conscription encountered wide support among the population.^[22]

In an international political climate marked by the beginning of the Cold War, the Luxembourg government aligned itself definitively with the Western powers.^[23] It participated in different initiatives which put in place a system of military alliances between the countries of the West.^[23] On 17 March 1948, Luxembourg agreed to the pact of Brussels, in which France, the United Kingdom and the Benelux countries agreed to offer mutual assistance in case they were attacked.^[23] On 4 April 1949, Luxembourg signed the North Atlantic Treaty, which gave rise to NATO.^[23] These decisions were supported by the three major parties of the country, but not by the Communist Party.^[23]

Luxembourg also participated in the negotiations for putting the Marshall Plan into effect, through the framework of the Organisation for European Economic Co-operation (OEEC).^[23] It was one of the 16 European governments that met in Paris on 12 July 1947 to respond to the American Secretary of State's offer of aid.^[23] American aid was granted to the UEBL, within which it was then divided up in proportion to size of population and economic capacity.^[23][24]

At the same time as Luxembourg was integrating itself in the ECSC, the government was confronted with another European project, that of the European Defence Community (EDC) which was to provide a framework for Germany's rearmament.^[25] In the course of the negotiations, the government succeeded in gaining full representation for Luxembourg: one of the nine commissioners in the EDC would be Luxembourgish.^[25] However, the country's small population did not allow it to fulfil its military obligations.^[25] Again, the government managed to obtain special treatment for the case of Luxembourg.^[25] On 27 May 1952, the treaty establishing the EDC was signed in Paris.^[25] The treaty was never to come into effect, as the French National Assembly refused to ratify the EDC in 1954.^[25]

The Werner-Schaus government (1959-1964) was committed to a structural reform of the Luxembourg Army. From November 1959, the Minister for the Armed Forces Eugène Schaus undertook consultations with the military authorities of NATO about reducing military service to nine months.^[26] However, its partners in the Atlantic alliance showed little enthusiasm for the restructuring plans of the Luxembourgish minister.^[26] They insisted that Luxembourg fulfil its international obligations: as a NATO member, it was expected to provide a direct contribution to NATO and participate in common defence.^[26] The government's military policy in the 1960s consisted of reconciling Luxembourg's international engagements with a public opinion that was increasingly hostile to compulsory military service.^[26][27]

As a NATO member, Luxembourg participated in the search for a solution to the wars in the former Yugoslavia. The Luxembourgish government supported the NATO military intervention in Kosovo, and set up reception facilities to take in refugees and granted 1 billion Luxembourgish francs of emergency aid for the reconstruction of areas devastated by the conflict.

Luxembourg, following the lead of the Allies, also normalised its relations with Germany.^[23] In 1949, it renounced its territorial claims, retaining only a forest near Vianden, the Kammerwald, as payment for war reparations.^[23]

On 10 July 1958, it signed an agreement with the German Land Rhineland-Palatinate on the development of a pumping station on the Our, near Vianden.^[28] This allowed construction to start on the hydroelectric plant, which started working in 1963.^[28]

In the 1950s the first Werner-Schaus government also pursued negotiations with the Federal Republic of Germany, started under Joseph Bech.^[27] 15 years after the war, it was felt that relations between the two countries should be normalised.^[27] On 11 July 1959, their respective foreign ministers signed a treaty dealing with various Germano-Luxembourgish disputes, and establishing compensation for the victims of the occupation.^[27] This agreement, criticised as the "treaty of shame", was attacked by those Luxembourgers who had been forcibly conscripted into the Wehrmacht in World War II, and felt discriminated compared to the members of the Resistance.^[27] The treaty of 1959 was not ratified until 1961, after bitter debates in the Chamber of Deputies and a protest on the Place Guillaume that attracted 10,000 members of the Federation of Forcibly Conscripted Victims of Nazism.^[27]

When Robert Schuman launched his plan to create a common European market for coal and steel, Luxembourg was a party to this.^[24] On 18 April 1951, the Luxembourgish Minister for Foreign Affairs, Joseph Bech, signed the treaty setting up the European Coal and Steel Community, with his French, German, Italian, Belgian and Dutch colleagues.^[24] Although the French ambassador at the time had remarked that "Luxembourg could not not join" due to its lack of political clout on the international scene, the government did not agree lightly to a scheme that put the country's main industry under a supranational authority.^[24] The steel industry remained the driving force of the Luxembourgish economy after the war.^[24] During the negotiations, the Luxembourgish government succeeded in establishing the principle of the juridical equality of all the states, even the smallest, and in having Luxembourg being directly represented in the institutions of the ECSC, namely the High Authority and the Common Assembly.^[24]

Luxembourg's foreign policy in the 1950s was dominated by the question of European construction.^[29] European unification constituted an existential challenge for such a small country.^[29] Joseph Bech, the master of Luxembourgish diplomacy, liked to quote a saying to justify his government's reserves with regards to the abandoning of sovereignty that the European cause required: "While a fat man grows thin, a thin man dies."^[29]

The French National Assembly's refusal on 30 August 1954 to ratify the treaty establishing the European Defence Community seemed initially to block the process of integration.^[29] However, the danger that after the failure of the EDC, France and Germany would lead their own policy caused the Benelux countries to retake the initiative in the European project.^[29] At the Messina Conference (1-3 June 1955) they submitted a memorandum in which they proposed a common market.^[29] Luxembourg played only a minor role in the Messina initiative.^[29] The memorandum was mostly the work of his Belgian and Dutch colleagues, Paul-Henri Spaak and Johan Willem Beyen.^[29] Bech was worried about the extension of supranationality, and was wary of the prospect of totally free circulation of goods and persons.^[29] At the negotiations at the Château of Val-Duchesse, which prepared the path for the Treaty of Rome, the Luxembourgish government sent a small delegation led by the former minister Lambert Schaus.^[29]

Luxembourg found itself in a vulnerable position.^[29] It brought little to a common market of 150 million people, as its main industry, the steel industry, was already integrated in the European Coal and Steel Community.^[29] Its small population and the backwardness of its farming industry led it to demand special treatment which provoked the irritation of other countries.^[29] Luxembourg feared that in a common market, Luxembourgish agriculture, which had benefited from protectionist measures since the Zollverein, would be devastated by foreign competition.^[29] In addition, the free circulation of people inside the European Community risked increasing in an uncontrolled manner the number of foreigners in Luxembourg, who already constituted 11% of the population and 27% of the workforce in 1956.^[29][30] Luxembourg finally obtained two exception clauses in an annex to the treaty of the common market.^[30] The first stipulated that during a transition period of 12 to 15 years, the Grand Duchy could limit the import of certain agricultural products.^[30] Nevertheless, the Luxembourgish government had to pledge to take “all structural, technical and economic measures to enable the progressive integration of Luxembourgish agriculture in the common market”.^[30] The other clause required that the Commission's regulations concerning free circulation of workers take the “particular demographic situation” of Luxembourg into account.^[30]

In terms of the political organisation of the EEC, the government had constantly opposed being represented by Belgium and insisted that Luxembourg join the common market as a sovereign state.^[30] It finally received what it wanted: it would be fully represented in the Commission, and received one of the nine seats there.^[30] The Luxembourgish negotiators were convinced that the interests of the Grand Duchy as a sovereign state were best protected by the Council of Ministers.^[30] In these meetings of six, Luxembourg was more able to have its voice heard.^[30] They also argued for strengthening the Council's powers at the expense of the supranational organs.^[30] Luxembourg had only received its recognition as a sovereign state, as a full member of the international community, in the course of the Second World War and at the cost of heavy sacrifice, which explains the government's reticence in renouncing part of its national prerogatives.^[30]

In 1966, the Luxembourgish government was called on to play an active role in the resolution of the empty chair crisis, which put the European Community to the test.^[31] From 30 June 1965, France stopped participating in the work of the Community following a disagreement over the financing of the Common Agricultural Policy.^[31] In January 1966, Pierre Werner chaired two sessions of the Council of Ministers, which were held in Luxembourg and in which France participated again after a seven month absence.^[31] In the course of these meetings, termed the “reunion of Luxembourg”, a compromise took the Community out of its stalemate.^[31] The Luxembourgish representative had been able to shine in his role as an “honest broker”, whose good relations with all parties had facilitated the negotiations.^[31]

In the period 1969-1974, Luxembourg continued to play an important role in Europe thanks to ideas on monetary integration developed by its Prime Minister. In January 1968, invited to a congress of the CDU in Germany, Pierre Werner had presented a five-point plan of for European Economic and Monetary Union. Provoking the interest of the other member states of the EEC, Werner was invited to elaborate his views before the conference of ministers of finance in Rotterdam in September 1968, then at the European summit of The Hague in December 1969. At this meeting, the governments declared their intention to elaborate a plan for creating an economic and monetary union. Currency was going to be the motor for European construction. In March 1970, Pierre Werner was made the head of a study group that would report to the commission. In its final report, the commission of experts gave priority to the coordination of economic policies, the necessity for common decision-making instances, the centralisation of monetary policy by the creation of a committee of central bank governors, the limitation in variation of exchange rates and the creation of a European fund to sustain exchange rates. The “Werner plan” was well-received, but the difficulties of the dollar and the pound sterling, the oil crisis and stagflation put a halt on its realisation. However, the European Monetary System, which came into force in 1979, made use of several of its elements, such as the European Monetary Cooperation Fund and the snake in the tunnel.

The Santer-Poos government (1984-1989) was active in the project of European integration, while attempting to safeguard Luxembourg's interests. For six months from 1 July 1985, Luxembourg held the presidency of the European Community.

During this period, important decisions were taken to drive forward the process of European integration. The European Council of Milan, on 28-29 June 1985, laid the foundations for the future Single European Act, which aimed to dismantle internal barriers between the member states of the European Community and introduce the free circulation of goods, capital and services.

In the European integration process, Luxembourg saw itself as both a mediator and a builder. When the Single Market came into force on 1 January 1993, this opened new perspectives for the Luxembourgish economy, which depended almost entirely on foreign markets. However, economic integration also presented dangers. During EC negotiations, the Luxembourgish government opposed a harmonisation of indirect taxation, which would have been harmful to cross-border trade; and also opposed a withholding tax, which would have seen capital flee from the Luxembourg financial centre. 

Apart from European integration, the key elements of the government's foreign policy were promotion of foreign trade, attracting investments, and development aid.  

The Santer-Poos III government's (1994-1995) policy was marked by the implementation of the Maastricht Treaty and the enlargement and deepening of the European Union. It aimed to reaffirm Luxembourg's place in a united Europe that was respectful of differences. Luxembourg wanted to be a full partner, while preserving its identity and specificity.  

In the European sphere, the Juncker-Poos government (1995-1999) gave priority to questions of employment, tax harmonisation, and the introduction of the single currency. When it came to employment, it advocated the idea that all European countries should enact a minimum wage. In terms of the harmonisation and coordination of fiscal policies, the Luxembourgish authorities were not opposed to a regulation at the level of all European states of the question of the withholding tax. But this had to take into account the interests of all member states. A minimal taxation of capital revenues had to go hand in hand with progress in the area of taxation of businesses. The most spectacular performance of the European Union during this period was certainly the introduction of the euro on 1 January 1999. During the Luxembourgish presidency of the Council of the European Union in 1997, significant advances were achieved in the long process of creating a common currency. In 1996, Luxembourg, along with other member states of the European Union, had concluded the growth and stability pact which was to guarantee the stability of the future single currency.  

European questions continued to dominate Luxembourg's foreign policy. The period from 1999 to 2004 was devoted to enlargement of the European Union and institutional reforms that went with it. On 16 April 2003 in Athens, 10 new member states signed the treaty of accession. Their admission came into force on 1 May 2004. The European Union now counted 455 million residents. This evolution confirmed the government's conviction that despite its small size, Luxembourg had to make all the more efforts to impose its presence on the international scene as the European Union grew.  

Luxembourgish diplomacy intensified its work not only in the old member states, but also in the new member states. Luxembourg supported an EU policy aimed at reinforcing the European institutions and their decision-making capacities. Luxembourgish representatives participated in the Convention on the future of the European Union which resulted in the proposed Constitution for Europe. From 27 June 2003, the government took the decision to proceed with the ratification of the future European Constitution – once signed by the 25 heads of state or government – by a national referendum. But at the same time, Luxembourg did not intend to surrender important rights such as the right to a Commissioner, the right to the presidency of the Council of Ministers and an adequate representation in the European Parliament. While it did not deny the necessity for a weighting by population size, it defended the principle of equality between member states. At the Council of Nice, in December 2000, the Union came to an agreement which was also satisfactory for Luxembourg. The Treaty of Nice, signed on 26 February 2001, maintained one Commissioner per member state. Following the new distribution of votes, Luxembourg now had four votes in the Council of Ministers and continued to send six members to the European Parliament.  

At the European Council of 17 to 18 June 2004, the 25 EU member states reached agreement on the Treaty establishing a Constitution for the European Union. This agreement made Europe more efficient and transparent, reducing the number of decision-making instruments in European institutions, and more democratic through an increase in the powers of the European Parliament. At the same time, the new text respected the equality between member states, while consecrating the principle of demographic difference. Finally, the constitutional treaty allowed Luxembourg to retain its six European Parliament members. 

European politics during the period was marked by efforts to achieve a reorganisation of the institutional architecture of the Union, made necessary by the successive enlargements. On 29 October 2004 in Rome, Luxembourgish representatives signed the Treaty establishing a Constitution for Europe. This treaty should have come into force in 2006 after being ratified by all signatory states, which ended up not taking place. Several countries, including Luxembourg, decided to ratify it through a national referendum. While the Luxembourgish electors voted with 56,52% in favour of the Constitution in the referendum on 10 July 2005, France and the Netherlands rejected it. To remedy this failure, an intergovernmental meeting prepared a new agreement, the Treaty of Lisbon, which was signed on 13 December 2007 by the 27 member states of the EU. On 29 May 2008, the Chamber of Deputies ratified the simplified text without a new referendum.

In his speech on the state of the nation in 2007, Jean-Claude Juncker stated that "only the European Union gives Luxembourg the means to exercise influence on events abroad; it is important for Luxembourg to influence the development of Europe". The European community remained the preferred field of action for Luxembourgish diplomacy. Several times in the past, the Grand Duchy's political representatives had been appointed to posts of high responsibility in the Union. On 10 September 2004, the Prime Minister and Minister for Finances, Jean-Claude Juncker, was elected by his European colleagues to president of the Eurogroup, the informal group for finance ministers of the members of the Eurozone. His mandate was renewed in 2006 and in 2008, for two years each time. The Eurogroup, although an informal organisation, played an important role in coordinating the budget policies of the Eurozone member states. The function of the Eurogroup's president allowed Juncker to regularly join in meetings of the G7 and of the International Monetary Fund to assure a unified representation of the Eurozone within international bodies.

The Luxembourgish presidency of the Council of the European Union in the first half of 2005 constituted a highlight in the area of foreign policy. Luxembourg became during this time the host of numerous ministerial meetings and preparatory sessions. The most important advances of the Luxembourgish Presidency were the relaunch of the Lisbon Strategy and the reform of the Stability and Growth Pact.

The Lisbon Strategy formulated in 2000 aimed to make the European Union the most competitive and dynamic knowledge economy of the world by 2010, which would at the same time be able to respond to the social and environmental expectations of its citizens. In 2005, it became possible to undertake a reorientation. In order to make the governments more responsible to their European partners, each member state had to submit a national programme of of reform to the European Commission for the years 2005-2008.

The Luxembourgish government advocated an integrated approach aiming not only at competitiveness, but also at "an increased social cohesion and a more harmoniously balanced environment".

A second large project that the Luxembourgish Presidency managed to conclude with success was the reform of the Stability and Growth Pact. Adopted in 1996, this formed the cornerstone of the Economic and Monetary Union. Imposing rigorous budgetary discipline, it was to guarantee the stability of the Euro. The challenge consisted of finding a formula allowing a more relaxed application of the Pact, which would take economic realities into account without at the same time allowing budgetary laisser-faire. The requirement to keep the deficit under 3% and public debt under 60% of GDP was maintained. The reform which came into force in late July 2005 allowed the member states to escape a too restrictive deficit policy in the case of a recession and after examining a certain number of "pertinent factors".

After the signature of the Treaty of Paris on 18 April 1951, creating the European Coal and Steel Community, the question of the location of the new institution arose.^[32] From 23 to 25 July 1952, the foreign ministers of the six member states met in Paris to find a solution.^[32] Several cities including Luxembourg advanced their candidature, with none of them receiving unanimous support.^[32] The High Authority and the Court of Justice were in danger of not being able to start their work, due to not having a headquarters.^[32] During this impasse, the Luxembourgish Minister of Foreign Affairs, Joseph Bech, probably inspired by Konrad Adenauer, undertook a diplomatic manoeuvre that determined the European future of the Grand Duchy.^[32] Bech withdrew the candidacy of Luxembourg, and then suggested the country's capital as a provisional place of work.^[32] The other countries accepted this solution, which postponed the decision over the definitive headquarters of the European institutions to an undefined future date.^[32] On 10 August 1952, the High Authority had its first meeting in the city hall in Luxembourg, presided by Jean Monnet.^[32]

The signature of the Treaty of Rome in March 1957 also raised the question of the headquarters of the new Communities.^[30] The attitude of the Luxembourgish government may be surprising today.^[30] It did not immediately demand that all common market and Euratom institutions be located in Luxembourg.^[30] It only suggested its capital as a last resort.^[30] Instead, it argued for the solution of a split headquarters, which would put the organs of the ECSC in Luxembourg and gave Brussels the new institutions.^[30] The government had probably given way to the influence of certain groups who feared the country would be overrun by the European bureaucracy and would lose its identity.^[30] It is not clear if it missed a historic opportunity, since in opting for decentralisation, it was better able to defend its status as the location of the ECSC in the face of Brussels's and Strasbourg's candidacies, while obtaining compensation for the loss of parts that were integrated in the new common market.^[30]

The government's main concern in foreign policy was to defend Luxembourg's position as a European headquarters.^[31] Since 1958, three communities were working in parallel: the European Coal and Steel Community, the Common Market, and Euratom, each with their own executive body.^[31] In 1961, negotiations were started to merge the three executives.^[31] This unification brought the risk that the European institutions would leave Luxembourg, and be situated in a sole headquarters.^[31] Eugène Schaus, the Minister for Foreign Affairs in the previous government, had suggested that Luxembourg host the European Parliament, to compensate a possible loss of the High Authority and the Court of Justice.^[31] But this proposition encountered French opposition.^[31] After the general elections of June 1964, Pierre Werner, the new Foreign Minister, participated in the negotiations which resulted on 8 April 1965 in the signing of a treaty establishing one Council and one Commission for the European Communities.^[31] On 2 March 1965, the Council of Ministers of the EEC published a document specifying that "Luxembourg, Brussels and Strasbourg remain the provisional working places of the institutions of the Communities".^[31] This agreement provided to locate the Community's financial and judicial institutions in Luxembourg.^[31] This led to a specialisation of headquarters. The secretariat of the European Parliament and the Court of Justice remained in Luxembourg.^[31] Sessions of the Council of Ministers were held there periodically.^[31] The European Investment Bank and various other services such as the Court of Auditors, the Office of Statistics and the Office of Publications were established in Luxembourg.^[31]

The other recurring issue was that of the seat of the European Parliament. A growing number of MEPs expressed more and more openly their preference for Brussels, and demanded a single and definitive seat for their institution.^[33] On 7 July 1981, the European Parliament adopted a resolution aimed at revising the functioning of the secretariat and technical services.^[33] This resolution seemed to point towards their eventual transfer to Brussels.^[33] However, such a decision was contrary to the treaty of the merging of the executives of 1965 which, in its appendix, stipulated that "the secretariat and its services remain installed in Luxembourg".^[33] The Luxembourgish government lodged a complaint at the European Court of Justice, where it prevailed.^[33] The government's diplomatic action was aimed at making the heads of government aware of the question of the work places of the Communities.^[33] On 23 and 24 March 1981, the European Council meeting in Maastricht decided to maintain the status quo with regards to the Communities' working locations.^[33]

The question of the seat of European institutions played a major role in the essential interests of the Grand-Duchy. In the decision of Edinburgh on 12 December 1992, the government succeeded in making permanent the establishment in Luxembourg of those organs and services which had until then been there provisionally. It also managed to obtain the headquarters of the Translation Centre for the Bodies of the European Union, and that of the Court of First Instance.

The project of European construction had modified the relations between Luxembourg and its neighbouring countries from the 1950s, especially Belgium.^[26] The creation of a common European market had repercussions for the structures of the Belgium–Luxembourg Economic Union (UEBL), and made it necessary to revise the convention of 1921, long before it was due to expire in 1972.^[26] In the late 1950s, the two partners started negotiations to re-examine the UEBL.^[26] On 29 January 1963, three protocols were signed to adapt the UEBL to the new international situation.^[26] The agreements were intended to harmonise the two countries' economic policies, especially with regards to agricultural trade and excise duties; to redefine the currency regime and increase the volume of notes printed by the Luxembourgish authorities; and finally to introduce a "Committee of Ministers" similar to the Council of Ministers of the EEC.^[26] Through the agreements of 1963, the two partners showed their desire to treat each other as equals within the UEBL.^[26]

In 1972, after 50 years of existence, the Belgium-Luxembourg Economic Union was due to expire. The two governments decided to renew it every 10 years. Every renewal was the occasion for new negotiations. At the renewal of 1972, the question on the sharing of excise rights on petrol, cigarettes and alcohol was at the centre of negotiations. While the treaty of 1921 had established population size as the criterion for dividing up income from excise, the Luxembourgish government demanded a different method of dividing it up, which took more account of the economic realities. A protocol signed on 27 October 1971 tried to satisfy Luxembourgish demands in establishing at regular intervals, a new distribution of excise income.

In 1968, the Luxembourgish government had for the first time to defend a vital interest of the Grand Duchy which would be contested more than once by its partners.^[34] This was the financial centre.^[34] This had been developing since the early 1960s thanks to advantageous banking and tax laws.^[34] However, since their 1968 meetings, the finance ministers of the EEC were considering a plan to harmonise the taxation of movements of capital.^[34] This proposition encountered vehement opposition from Pierre Werner.^[34] Conscious of the danger that the levelling of tax conditions posed to the fledgling financial centre, the Minister of Finances proposed instead to give priority to monetary harmonisation.^[34] In the event, the difficulties of the pound sterling and the French franc would turn the attention of European finance ministers' away from the Luxembourgish financial centre, and put monetary questions on the back-burner.^[34]

The question of tax harmonisation touched on a vital interest of the Grand Duchy. Wealth management remained the principal activity of the financial centre, even though other sectors such as management of investment funds were developing. However, considerations of confidentiality constituted the life of private banking. In negotiations on the European level, the Luxembourgish government demanded the maintenance of banking secrecy as long as its principal financial-service competitors maintained it as well. But this confidentiality should not be used for criminal activities. This was why the previous government had put through anti-money laundering legislation. The Juncker-Polfer government extended these measures to improve the effectiveness of the fight against fraud and economic and financial crime. In terms of tax harmonisation, the European summit of Feira in June 2000 was a way towards a compromise. An action plan with a deadline of 2010 was agreed. In January 2003 in Brussels. in an "Economic and Financial affairs" council meeting, the European Ministers for Finances and the Economy finally reached an agreement on the taxation of revenue from savings. The agreement stipulated that EU member states could choose between two models: information exchanges between tax administrations, or the introduction of a withholding tax with a progressive increase in the rate of revenue which, after a transition period, would reach 35% from 1 January 2011. The move to the generalised automatic exchange of information was coupled to a similar action by third-party countries, including Switzerland.

The Luxembourgish government having decided not to build a power plant at Remerschen, France planned to install two additional units in Cattenom, bringing the plant's total capacity to 5,2 MGW.^[33] This extraordinary concentration in proximity to the border caused concern among Luxembourgish political circles, as well as the wider public.^[33] On 3 December 1979, at a Franco-Germano-Luxembourgish meeting in Bonn, the German and Luxembourgish delegations requested that France reconsider its construction plans; this, however, proved to be in vain.^[33] All the later steps taken by the government were hampered by the French authorities' refusal to reverse their decision to build Cattenom.^[33]

From the 1980s, development aid gradually became an important component of Luxembourg's foreign policy.^[33] The law of 13 July 1982 on overseas development aid officially inaugurated the direct public development aid of the Grand Duchy.^[35] It regulated the status of Luxembourgish citizens active in developing countries as agents of development aid.^[35] For a small state, development aid constituted an expedient means to assert itself at the international level and to give itself a positive image in the world.^[35]

Apart from Europe, developing countries became an important target of Luxembourg's foreign policy. From 1984, the secretary of state for foreign trade and cooperation, Robert Goebbels, presented three bills which organised Luxembourgish development aid in a coherent manner, created the Fund for Development Cooperation (Fonds de la coopération au développement), regulated state subsidies to Luxembourgish non-governmental organisations, and introduced new fiscal measures to encourage philanthropy.

The government had given itself the objective of guaranteeing "the future of a small country in a growing Europe, in an increasingly complicated world". But it was in the framework of development aid that Luxembourg was probably best able to affirm its role on the international scene. Overseas aid, which in previous governments had been under a secretary of state, was now under a fully-fledged minister. Public development aid, which had increased constantly, reached 0,8% of gross national income in 2003. With this number, Luxembourg was in 4th place globally. The Luxembourgish effort was now concentrated geographically on a certain number of target countries, and content-wise, on eradicating poverty, social structures, education, health, and equality of opportunities between men and women.

Apart from European affairs, an important part of foreign policy consisted of the promotion of Luxembourgish industries and the financial centre abroad. The Luxembourgish government increased the number of economic missions especially in Asian countries (China, India, Japan, South Korea, Vietnam, United Arab Emirates, Jordan, Saudi Arabia, Dubai, Turkey, Kuwait, Qatar), but also in North and South America (United States, Canada, Mexico, Peru) and some European countries (Russia, Sweden, Finland).The goal of these visits was to make itself known in these regions with high potential for growth and to support Luxembourgish businesses in their search for new markets. In order to encourage efforts to internationalise the Luxembourgish economy, the government created in 2007 two promotion agencies: Luxembourg for Business and Luxembourg for Finance.

After the financial crisis of 2008, international pressure on countries which continued to practise banking secrecy grew. Luxembourg, like Switzerland or Austria, was also blamed. The Grand Duchy found itself on a "grey list" established by the Organisation for Economic Co-operation and Development (OECD). The Luxembourgish government protested against being likened to a tax haven and undertook efforts to counter the image of the financial centre. On 13 March 2009, Luxembourg decided to conform to the standards of the OECD and committed itself to the exchange of information on demand in the framework of bilateral accords with third parties. In several months, the Luxembourgish government signed twenty agreements of non-double taxation which implemented the rules of the OECD. On 8 July 2009, Luxembourg was the first financial centre to be removed from the "grey list" of the OECD.  

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