The Luxembourg financial ecosystem and the European monetary innovation. Case study on KBL, LuxSE and EIB (1957-1990) (improved version of the paper)

The Luxembourg international financial centre developed considerably during the 1960s, propelled by several factors including concerted government policy, flexible regulation and a willingness to harness opportunities at international level. The decision to establish various Community institutions (the ECSC High Authority) and European funding institutions (EIB) in the country also had a decisive impact. The currency union with Belgium and the absence of a Luxembourg Central Bank made these developments all the more significant. At the same time, Luxembourg stepped up its engagement in the European monetary integration, especially through the involvement of the Finance Minister and Prime Minister Pierre Werner in theoretical discussions on a common (single) European currency, and also through a number of “practical experiments” carried out by several financial institutions, including the LuxSE, EIB and KBL. Drawing on archives and oral history sources, this paper aims to illustrate the complexity and originality that characterised the development of the conceptual, political and regulatory context in Luxembourg in the 1960s-1990s, in what can be seen (via the EUA, ECU, and Eurco) as a sui generis experiment and preparation for EMU.