BRUSSELS, March 27 Luxembourg, home to several
European Union institutions, has rebuffed calls from some of its
partners to reduce the size of its powerful banking sector in
response to the crisis in Cyprus.
Luxembourg has a banking sector more than 20 times the size
of its economy. The industry has helped make the small country
the richest in the bloc in terms of economic output per person.
Its foreign minister Jean Asselborn has already accused
Germany of "striving for hegemony" in the euro zone by telling
Cyprus what business model it should pursue.
On Wednesday Luxembourg joined the tiny Mediterranean
country of Malta in rejecting comparisons between its economy
and Cyprus, whose heavy reliance on banking and exposure to the
Greek sovereign debt crisis forced it into a 10 billion euro
($13 billion) rescue this month.
Leading politicians in Germany and Brussels and the head of
the euro zone's finance ministers this week told such countries
their banking sectors had to shrink.
But Luxembourg, a country of just half a million people,
said it was not Cyprus, and emphasised the importance of sound
"Luxembourg is concerned about recent statements and
declarations that were made since the crisis in Cyprus," the
government said in a statement.
"The proportionality of a financial sector cannot be
determined by relating the size of a financial sector to the
gross domestic product of a country."
Luxembourg is host to about 140 subsidiaries of banks and
insurers from more than 20 countries.
The government of Prime Minister Jean-Claude Juncker, who
stepped down as chairman of the Eurogroup of finance ministers
at the start of this year, said it viewed the Cypriot rescue as
"an exceptional measure".
In return for the bailout money, Cyprus agreed on Sunday to
shut down its second largest bank and reduce its banking sector
to the EU average of about 3-1/2 times gross domestic product by
Luxembourg said the principle of a single European market
was essential, including in financial services, and opposed the
kind of capital controls that Cyprus was finalising on Wednesday
to avert a run on the banks by depositors.