12/02/08
For How Long Will Luxembourg Withstand the Financial Tsunami?
The subprime mortgage crisis has devastating effects on the
financial markets. Luxembourg managed to escape so far.
Since the beginning of the year, we are witnessing the collapse of
the stock exchange markets and the crisis, far from improving,
gaining all the financial marketplaces. Will Luxembourg, whose
economy depends heavily on the banking sector (banks and insurance
companies contribute to 40% of national wealth), escape from the
crisis in the financial markets?
Faced with the crisis in the American real estate market, the
government lowered on October 10th last year its expected growth
forecast for the 2008 Gross Domestic Product at 4.5% instead of 5%.
While Jean-Claude Juncker, Prime Minister and Finance Minister of
the Grand Duchy, predicted “a slowdown in the expansion of the
financial sector” for 2008, Luxembourg continues to display public
accounts that arouse envy. Mr Juncker has presented the 2008 budget
with a surplus of 0.8% of GDP and a public debt limited to 7% of GDP
(far from the European limit of 60% of GDP set by the Stability
Pact).
Thibault Adès, recruitment consultant with the Luxembourg branch of
Michael Page, said that Luxembourg is Europe’s centre for back
office and management where all the transactions are recorded.
Moreover, the number of transactions does not go down, far from
that. That is why Luxembourg has so far been spared by the storm
that shakes global financial markets. The general mood in Luxembourg
is rather optimistic, trusting the financial solidity of banks in
Luxembourg.
What about the job market?
Jean-Jacques Rommes, director of the Luxembourg Bankers’ Association
(ABBL), shows himself reassuring. He maintains that for the moment,
“the Luxembourgish financial players are desperate to hire and not
the opposite”, such as the French bank BNP Paribas, which has hired
some 300 people during the year 2007. Data from the quarterly
national accounts confirm this trend; the average annual growth rate
for the national workforce was 4.1% over the first nine months of
2007.
At the international level, the investment bank is more affected
than other banking activities. In Luxembourg, while fund management
jobs at present are not much affected by the crisis, the private
banking and the unit trust business are on the alert.
Finally, the statistical office Statec said that the impact of the
financial crisis on Luxembourg and its financial sector is still
difficult to assess at this stage. Caution continues to be
important…
Sophie Sellier
English version: Robert Mouris
Sources: STATEC, ABBL
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