Crisis Management in Luxembourg (1975-1985). The Dynamics Between State, Companies and Towns

The steel crisis of the 1970s threatened the economic foundations of Luxembourg, where steel dominated both employment and GDP. Despite the loss of around 15,000 steel jobs, unemployment remained unexpectedly low. This paper examines how unemployment was managed during the early phase of the crisis (1975-1977) and questions the common view that this outcome was primarily the result of welfare state intervention.
Focusing on unemployment prevention rather than broader economic policy, the paper shows that crisis management relied on a hybrid system involving the state, municipalities, and the steel company. While measures such as partial unemployment schemes and extraordinary public works were important, the paper argues that company-led initiatives played a decisive role. In particular, the steel company’s Anti-Crisis Division functioned as the main mechanism for absorbing displaced workers during the most critical years. The Luxembourg case highlights how, in small economies dominated by a single employer, the boundaries between public and private crisis management become blurred.