How to brand Luxembourg when the country is changing?
By Stephen Evans
“Luxembourg is famous for two things: its steel industry and its rose cultivation industry.”
This was how an Italian tourist guide from the 1930s summarised the Luxembourg economy.
Pierre Gramegna, the Minister of Finance highlighted this quaint observation in a recent speech to illustrate the difficulties the country faces in its on-going nation-branding exercise.
Not only does little Luxembourg face difficulties getting its voice heard, but the message it wants to communicate keeps changing.
Mr Gramegna was speaking at the 10th anniversary conference of the Luxembourg Directors' Association (ILA) held in Mondorf on June 17.
The Grand Duchy hosts hundreds of subsidiary companies belonging to international groups, at it is the responsibility of locally-based directors to make sure these off-shoots are run well and in an ethical fashion.
If they don't, it is bad news for investors and customers, but (as has been the case occasionally in recent decades) a high profile bankruptcy can harm Luxembourg's international image.
Mr Gramegna said it was tricky to present this country as a financial centre given the way perceptions of banks have change so profoundly since the 2007/8 crash.
Before then, everyone from the International Monetary Fund downwards “knew” that lightly regulated banks were creating exciting new products that were eliminating risk from the financial centre.
Now we know for sure that was rubbish, are we sure that the current obsession of more and deeper regulation is also the right thing to do?
This change in the international landscape is why the country had to abolish banking screcy, a policy which took effect from the start of this year.
The criticism had just become too great. “We need a coherent message and that was not the case...and this led us to being attacked,” Mr Gramegna explained.
“Now we have reformed, and this helps us shape priorities in the EU and this is compatible with the image we want to project.”
Similarly, the laws governing the Freeport at the airport will be tougher than required by international rules regarding anti money-laundering. The Freeport is a place where valuable items can be stored, processed or transited without leaving the airport, so avoiding the triggering of taxation.
It's perfectly legal but the risks to reputation if something dodgy happens are clear. Not least since members of the management have recently been accused of illegal activity.
Despite these changes, the country is still attacked, but this time from a position that is easier to defend. Moreover, the change has, coincidentally, happened during a boom in the financial sector, with banks, funds and insurance all doing well.
Mr Gramegna added that having the EU presidency in the second half of this year will be a chance for the country to polish its image further.
There is more work to do and it remains a difficult task but he is satisfied that: “we are working in the right direction, geared towards openness and efficiency.”
Do not miss the news - sign up to receive thewort.lu newsletter in Englishdelivered to your inbox six days a week.