Brussels, 27/03/2013 (Agence Europe) - On Wednesday 27 March 2013, the government of Luxembourg expressed official concern at statements about the financial system being inflated in some eurozone countries, comments made after agreement was reached on a controversial bailout of Cyprus (see separate article).
Convinced of the importance of a properly functioning single market, Luxembourg has issued a press release, saying it is concerned at recent statements made against the backdrop of the Cypriot crisis and exacerbated by comparisons between various eurozone countries' financial industries and comments about the size of the financial industry in some countries compared with the countries' gross domestic product and the alleged risks that this poses to economic and budget sustainability. Luxembourg points out the fundamentally international nature of its financial industry as an important point of entry for investors in the eurozone that contributes to the general competitiveness of all the member states. The government adds that the right size of a financial industry is not calculated by the size of the economy where it is located but rather by both the quality and stability of the financial sector and its size in comparison with the eurozone and the single market.
The financial industry in Cyprus is seven or eight times the size of the country's economy, but it will now be slashed back, some even suggesting it will be reduced to the EU average of 3.5 times GDP.
Luxembourg has the top credit rating, AAA, at all the Big Three credit rating agencies and is one of the rare EU nations that is not subject to excessive deficit proceedings. The European Commission forecasts that it will have a deficit of just 1.5% of GDP in 2012 and 0.9% in 2013, and a public debt of 20.5% of GDP in 2013 and 22.2% in 2013 (see EUROPE 10792). (MB/transl.fl)