Luc Frieden, Luxembourg's finance minister, yesterday sought to assure GCC investors the grand duchy was a haven of stability from strife in other parts of the euro zone.
Luxembourg a haven of stability in euro zone, minister says
Luc Frieden, Luxembourg's finance minister, yesterday sought to assure GCC investors that the grand duchy was a haven of stability from strife in other parts of the euro zone.
Mr Frieden was speaking in Dubai as he leads a financial mission to both the emirate and Riyadh of more than 60 representatives from his country's public and private financial sector.
"We can offer a safe environment, confidentiality and stability," he said at a press briefing. "That's something a lot of people around the world appreciate and that's something Luxembourg can offer."
The visit comes against a backdrop of continuing weakness in many parts of the euro zone. Yesterday provided fresh evidence of the malaise, with Markit's euro zone composite purchasing managers' index - which gauges activity across thousands of companies - registering last month again below the 50 level separating growth from contraction. Despite a pickup from 46.5 the previous month to 46.9, the reading has been in negative territory for more than a year.
Luxembourg has remained in better shape than other parts of the single currency area, with the country's large financial system remaining resistant to the problems afflicting Cyprus - another small euro-zone member with financial sector assets far above its economic output. Luxembourg, which Mr Frieden said was the second largest investment fund centre after the United States, has €2.4 trillion (Dh11.54tn) in assets under management.
Mr Frieden ruled out the possibility of Luxembourg facing the same problems as Cyprus, which required a bailout of €10 billion.
"We have a very diversified banking sector with the banks, both the owners and clients of the banks coming from so many countries so geographically. We are much more diversified, our products are much more diversified and the stability of our financial sector is much stronger to the extent there's 140 banks belonging to all the big financial names. The stability is assured both by the mother companies and both by the rules and supervision we have put in place."
Flows of investment between the GCC and Luxembourg had picked up in recent years since the intensification of the crisis in the single currency area, said Mr Frieden. In late 2011 Qatar's royal family purchased a 90 per cent stake in the bailed-out financial group Dexia's Luxembourg unit, Banque Internationale Luxembourg. The rest was purchased by the Luxembourg government. Precision Capital, a Qatari-backed firm based in Luxembourg, had the same year bought KBL, the Luxembourg unit of Belgian bank KBC, for €1.05bn.
"We as the Luxembourg government hope to support and put the right instruments in place but it is for private sector to choose investments," said Mr Frieden.