Luxembourg EMU


Country Analysis


The probability of Luxembourg joining EMU at the start date remains quite high. Luxembourg easily meets all five criteria for EMU and undoubtedly will make the first cut to be considered as a founding member. Luxembourg has continued to display real economic growth of 1% over and above the EU as a whole. Budget surpluses continue to be posted and Luxembourg’s debt/GDP ratio is by far the best in the entire EU. The currency currently remains within a monetary union with the Belgian franc. As a whole, Luxembourg’s currency has maintained relative stability within the ERM – something which most currencies cannot claim. Still, Luxembourg is the smallest state within the EU and its currency has not been the target of speculation either pro or con at this stage in the game.Politically, Luxembourg remains committed to the European Union and will continue to strive towards accomplishing full integration. EMU does not appear to be a political question in Luxembourg and despite upcoming elections in June 1999, there does not appear to be a viable opposition to EMU at this point in time.

1995 1996e 1997f
ERM Member Y Y Y
Inflation 1.9 1.3 1.6
Budget Deficit / GDP -1.5 -0.9 -0.6
Debt / GDP 6.0 7.8 7.5
10Y Bond Yields 7.5 6.5 6.1
f=forecast e=estimate

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