Exclusive: Luxembourg moving past 'fiscal paradise' to heart of European innovation

Deputy prime minister Etienne Schneider says the Grand Duchy is working to change its global image as it participates in Expo 2020 Dubai

Left to Right – Maggy Nagel , General Commissioner of the Luxembourg Pavilion and President of the Board of Management of Luxembourg at Expo 2020 Dubai, Najeeb Al Ali , Executive Director , Dubai Expo 2020 Bureau and Etienne Schneider , Deputy Prime Minister of Luxembourg during the ground breaking ceremony of the Luxembourg Pavilion at the Expo 2020 site in Dubai on Sunday. ( Pawan Singh / The National )Show less

Luxembourg is reshaping its global image as a "fiscal paradise", marked by secret tax deals with companies like Amazon and McDonald's, into one of a hub of innovation at the heart of Western Europe and the future as well.
Etienne Schneider, the Grand Duchy's charismatic deputy prime minister and economy minister, is keen to demonstrate, through different initiatives, including its participation in Expo 2020 Dubai, that Luxembourg is at the forefront of industries like space exploration, communications and sustainable development.

He did this both symbolically and physically in a ground-breaking ceremony in the UAE on Sunday to start construction on Luxembourg’s pavilion for Expo 2020.

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Expo 2020 Dubai: Luxembourg first to break-ground on construction of pavilion

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"We want to show people that Luxembourg is much more than a financial centre, that it is an innovation centre as well. We are trying to find the solutions to the problems of humanity in 20,30, or 40 years," says Mr Schneider.
However, people's perceptions of his homeland are tied to controversy in recent years, chiefly around the LuxLeaks scandal in 2014, Amazon's tax deal deemed illegal by the European Commission and criticism of its financial opacity.

Luxembourg has been labelled the ‘Death Star’ of financial secrecy by the Tax Justice Network. Although it’s worth noting that since then, it’s fallen down a few places on the Network’s financial secrecy index following “significant improvements in its financial transparency”.

Mr Schneider acknowledges the realities that these past criticisms still present today but also makes clear that perception doesn’t necessary match the current scenario.

“This government gave up everything related to tax secrecy. We’re not a fiscal paradise anymore, that you can say for sure. It takes ages to change your image. By the time of LuxLeaks it wasn’t possible to do these kinds of [tax] businesses, these kind of affairs.

"We stopped it but all these stories dated back to ten years ago. So you always have to fight with this old image that we don’t want to have anymore.”

He says that what is important now going forward is that Luxembourg is able to show people that “we’re not only interested in making short-term money because we are investing huge amounts in new activities in space, where there is no money to be had for the moment”.

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Watch: Expo 2020 pavilions begin to rise from the desert

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In the long term, however this will be to the benefit of all mankind, he says. It is in this spirit, he says, that Luxembourg has signed co-operation agreements with countries like the UAE, China, Russia and Japan with regards to the commercial space sector.

“We want to do this as a project of humanity. How are we going to develop and shape our future of using outer space? If we learn from the mistakes we did on earth we can really do something great in space together,” says Mr Schneider.

This is a message that could be at the heart of his bid to become prime minster when Luxembourg holds elections for its Chamber of Deputies late next year.

His Socialist Workers’ Party may seem an incongruous fit in a state that has the second highest GDP per capita in the world but Mr Schneider believes that the left is ready to shape the future despite the seeming dominance of a populist right wing across much of Europe.

“Socialism is always linked in public opinion to old fashioned or ‘stay where you are’ [ideas] and I really want to show new ways and show there is a bright future. People are getting a little bit frightened about their future.

Now you see that these right wing parties are gaining ground and left wing parties are losing ground, you need a new project, you need to show people that they should have confidence in their future and that there are ways for a bright future. That’s a little bit of what I am trying to do in my small country.”

Mr Schneider does believe that small countries can shape the world, which was an important factor behind the Grand Duchy’s decision to participate in Expo 2020 Dubai, having decided not to take part in Milan’s world’s fair in 2015 because its overall theme was not a good fit.

“Connectivity, which is one of the themes of the [Dubai] expo, was already important during in the 1920s for us and gave us a very positive image with other countries,” says Mr Schneider.

While Luxembourg is both geographically and population-wise among the smallest countries in the world, it has a long history of thinking bigger, having been founder members of both the European Economic Community, the precursor to the European Union, and of military alliance Nato.

So does Mr Schneider worry about the effects that the current polarised political landscape is having on the belief in the strengths of multilateralism?

“The UAE is playing a very important role in that, because with the Expo 2020 where all these countries are to participate, you can send this image and this message to everyone [of the strength of multilateralism],” says Mr Schneider.

Following the Brexit vote in the UK, he also says that the European project will endure, because “there is no other choice”, but it will need “new ideas” if it is to not break apart.

“We have to think about the leadership in Europe, the way the Commission is working. I sometimes feel they are a little bit fazed with what people would like them to do and regulate and care about,” he says, highlighting European parliamentary elections next year as an opportunity to fight for a stronger Europe.

“We really have to work hard at it and we have to give new dreams to our people.”